Cyprus Tax advantages

Cyprus Tax advantages

By: Aspen Trust group

The use of a Cyprus entity in International tax planning can mitigate or eliminate completely the overall tax liability arising from an international activity. Specifically, proper structuring of a Cyprus entity in an international tax plan can:

  • Reduce the tax burden in the country where the income is earned
  • Reduce the withholding tax on getting the money earned out of the country where the income is earned
  • Reduce or defer the tax burden of the ultimate shareholder of the tax planning structure
  • Reduce the overall tax burden of an international activity increasing in this way the overall return on investment of the project.

The Cyprus fiscal legislation offers a number of incentives that give rise to these advantages.

  • The incentives include:Introduction of the concept of tax resident and non-resident companies
  • Taxation of worldwide income for tax residents and Cyprus sourced income for non-residents
  • Lowest corporate tax rate in the Europe union of 10%
  • Tax-exempt business profits of non-resident companies
  • Tax-exempt gains on the trading and disposal of securities
  • Tax-exempt gains on the disposal of subsidiaries
  • Tax-exempt dividend income (subject to applicable criteria)
  • Exemption of 50% of interest income (subject to applicable criteria)
  • Tax-neutral group reorganizations
  • Tax-relief for group losses
  • Full adoption of the EU Parent-Subsidiary Directive
  • Full adoption of the EU Mergers Directive
  • Full adoption of the EU Directive on Mutual Assistance and Cooperation
  • Full adoption of the EU Royalty and Interest Directive
  • Transitional rules for existing IBC’s to 2005


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