BUSINESS IN CYPRUS
1.CYPRUS INTERNATIONAL TRUST
A Cyprus International Trust is used for Asset protection, Estate planning and as a vehicle of International Tax planning and business. A Trust qualifies as a Cyprus International Trust where:
- The settlor is not a permanent resident in Cyprus
- At least one trustee is a permanent resident in Cyprus
- No beneficiaries are permanent residents in Cyprus, and
- The Trust property does not include any immovable property in Cyprus
The Fiscal and other Advantages of a Cyprus International Trust:
- All income whether trading or otherwise of an International Trust, is not taxable in Cyprus
- Dividends, interest or other income received by a Trust from a Cyprus International Business Company are also neither taxable nor subject to withholding Tax
- Gains on the disposal of the assets of an International Trust are not subject to Capital Gains Tax in Cyprus
- Use of a large number of double tax treaties : Double Tax Treaty
- Favourable legal system
- No exchange control
- International Trusts Law prohibits any of the trustees or any other person including government officials and officers from disclosing any information regarding the Trust unless there is a disclosure order by a Cyprus court in cases of suspicion of criminal activities TRUSTEE SERVICES
- An alien who creates an International Trust in Cyprus and retires in Cyprus is still exempt from Tax if all the property settled and the income earned is abroad, even if he is a beneficiary
The major fiscal advantages for the International Business Companies (IBCs) are as follows:
- No distinction between local companies and IBCs. Profits before tax of IBCs and any branches managed and controlled from Cyprus are taxed at the flat rate of 12,5% as from the year 2013, which is one of the lowest tax rates in the EU.
- Profits from the sale or transfer of securities are exempt from Corporation tax, and the gains are exempt from Income Tax (except gains from disposal of shares in companies owning Real Estate situated in Cyprus).
- Dividend income is also exempt from Corporation tax under certain conditions. This exemption will not apply if more than 50% of the paying company’s activities result directly or indirectly in investment income and the foreign tax burden is substantially lower than that in Cyprus (practically interpreted by the Tax Authorities meaning less than 5% “headline tax” – not effective tax burden).
- Interest earned from trading or closely connected activities is only taxed under corporation tax.
- An extensive network of double tax treaties have been concluded with other countries (currently with more than 40 countries) and can be used to their benefit.
- Profits from a Permanent Establishment abroad are exempt from Corporation tax, and its losses can be set-off against Cyprus Income, given that less than 50% of their activities result in investment income and that the foreign tax burden is significantly lower than the Cyprus tax burden.
- No withholding tax on dividend distribution to non-tax-residents, irrespective of whether the recipient is a body corporate or individual, its country of residence or the existence of a DTT.
- Tax losses may be carried forward for 5 years and may be utilized by way of group relief.
- Capital gains tax is only charged in the case of sale of immovable property situated in Cyprus, or sale of shares in companies owning Real Estate situated in Cyprus.
- Beneficial owners assure their anonymity as they do not have to disclose their details to the local tax authorities.
- Mergers, Takeovers and other Re-Organizations can take place within groups with no tax consequences.
- The standard VAT rate is 18% (19% as from 13 January 2014) which is one of the lowest VAT rates in the EU and depending on the IBC’s activities, VAT suffered can be recovered.
3.CYPRUS SHIPPING COMPANIES
Cyprus Shipping Companies and the Cyprus flag have always been of great essence to the world of shipping. Cyprus currently has the 3rd largest fleet in the world. The shipping industry plays a vital role in the economy of the country and because of that special incentives have been given by the government to make Cyprus one of the largest shipping centres in the world. Some of those incentives and advantages that a Cyprus Shipping Company can enjoy are:
- No Tax on profits from the operation or management of a Cyprus – registered vessel.
- Under certain requirements ship owners of third country flag ships may opt to be taxed under the tonnage system or pay corporate tax at 4,25% on taxable profits.
- No Tax on dividends received from a vessel owning Company.
- No Capital Gains Tax on the sale or transfer of a Cyprus – registered vessel or the shares of a vessel owning Company.
- No Income Tax on the wages of officers and crew.
- No estate duty on the inheritance of shares.
- No stamp duty on ship mortgage deeds or other security documents.
- Double tax treaties with more than 40 countries.
- Ship registration costs and annual tonnage Taxes at competitive rates.
- Full protection for financiers and mortgages.
- Low set up and operating costs.