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
