Cyprus has developed into a dynamic and competitive international business center with focus on providing professional services including accounting, auditing, tax, business administration, legal, investment and funds management, in addition to being considered one of the top global hubs for ship owning and shipmanagement services – Cyprus is the largest third-party shipmanagement center in Europe and the largest crew management center in the world, while the island’s
international ship register is the 3rd largest merchant in Europe and the 11th largest worldwide. With a liberalized Foreign Direct Investment Policy as the biggest advantage, enabling foreign companies to invest and establish business in Cyprus on equal terms with local investors and gain access to the EU market, international investors are welcomed with a pro-business stance and legal system based on the UK Common Law, as well as accounting and legal transparency.
Cyprus has joined the European Union in 2004 and the Eurozone on 1st January 2008. When compared with similar international business centers, Cyprus has to offer the following advantages and opportunities:
Personal Income Tax:
€0 – €19,500 0%
€19,501 – €28,000 20%
€28,001 – €36,300 25%
€36.301 – €60,000 30%
€60,001 and over 35%
Value Added Tax: 19%
Capital Gain Tax: 20%
Contributions relating to the implementation of the General Health System (GHS) started from 1 March 2019, and will increase from 1 March 2020 as per the table below:
|(v)||Persons holding office||Officers’ Remuneration||1,70%||2,65%|
|(vi)||Persons earning rental, interest,
dividend and other income
|Rental, Interest, Dividend
Apart from the ideal geographical position and established trade routes throughout the island, Cyprus also has to offer one of the most beneficial and versatile holding company tax regimes in the world. The favorable withholding tax provisions of the Double Tax Treaties (DTT) network and the EU Parent-Subsidiary Directive, among other directives, have been designed and implemented to ensure successful business growth. Various global companies have chosen Cyprus for the maximization and optimum use of capital and financial resources.
In most cases, income from dividends is exempt from tax. This makes Cyprus holding companies a very attractive proposition for international groups or individuals investing abroad, aiming at dividend income streams. This is also very favorable as a repatriation vehicle where the investor’s jurisdiction does not have a favorable treaty with the country in which they wish to invest. Because capital gains on investments are not taxable, Cyprus is the perfect location for holding companies with subsidiaries that have potential for high capital appreciation that may be spun off or sold in the future.
The only exceptions that are eligible for Special Contribution for Defense Tax to be applied on dividends received from non-Cypriot companies at the rate of 17% will be in the following cases:
In Cyprus, profits from the sales of securities (defined as “shares, bonds, debentures, founders’ shares and other securities of companies or other legal person, incorporated under a law In Cyprus or abroad, including options thereon”) are generally exempt from tax, even if this is the only trading activity of the company.
There is one exception of 20% capital gain tax, for the profit earned from the sales of shares in certain non-listed companies, owning real estate in Cyprus.
All of the above three points combined can help in reducing labor costs for the companies that choose to transfer their domicile to Cyprus.