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Cyprus Company, The

Cyprus Companies | How corporations can take advantage (Part 1)

Cyprus Companies - How corporations can take advantage (Part 1)

Cyprus Companies: How corporations can take advantage (Part 1)

There are many ways a corporation can take advantage of the benefits of a Cyprus company:

  • Investments: an investment structure that includes Cyprus, has a very minimal tax leakage. A Cyprus investment vehicle can collect income (with reduced tax), has limited or non existent withholding tax under double tax treaties or EU Directives. With regards to foreign dividends that are exempt, and capital gains (subject to conditions) tax in Cyprus is low or at 0%.  Another benefit is that income can be repatriated in any form the investor chooses without withholding tax using income conversion or transformation methods). Cyprus investment companies are great for finance companies royalties, head office operations for Southern Europe, Russia, Middle East, and central Europe.
  • Financial Services: after obtaining specific approvals according to financial regulations, a Cyprus international business company may provide financial services. To be eligible, normally companies with a good reputation internationally and established in non black listed countries will be accepted to provide international financial services from Cyprus
  • Shipping and Ship Management companies: Cyprus has strategic positioning and companies operating under the Cyprus flag are exempt from income tax derived on operating those ships on international waters.
  • International Trading, Commission Agent & Service Companies: profits made by Cyprus company are taxed at a low corporate tax rate of 12.5% therefore by using an appropriate tax structure that includes Cyprus, a company benefits greatly.
  • Captive and General Insurance:  Cyprus is beneficial as there are special insurance law exemptions, tax incentives, quick registration procedures, low running costs, and local expertise.
  • Holding company: In brief, a Cyprus company provides for participation exemption (foreign dividends are tax exempt, and there are no capital gains tax payable on the sale or transfer of securities and the gains are exempt from Income Tax except in real estate). There are simple rules, no complicated provisions, low or no withholding taxes on outgoing dividends, interest and royalties, no capital gains or income tax on liquidation of holding company itself, no net worth taxes, tax losses are carried forward, no tax consequence for mergers, takeovers…etc., interest deduction for borrowing costs is provided, no obligation for holding company for VAT registration and compliance, low duties, low expense for financial fees.
  • International Banking Units (IBU): The Cyprus Government encouraged establishment of IBUs in Cyprus making Cyprus recognizable as an international banking centre. An IBU can be a local incorporated company, branch overseas, representative office, or an administrative banking unit.
  • Group Finance Companies: These companies can take advantage of Cyprus Double Tax Treaties by providing loans in treaty countries or where withholding tax on interest is low or nil. Overall corporation tax liability is reduced as interest payments to the Cyprus financing company is tax deductible in the country of borrower. There is a lower tax burden, possibility of deducting interest expenses from taxable income, absence of interest withholding tax in connection with interest paid on loan financing.
  • Executive Recruitment and Employment: In order to reduce tax payable by executives and social contributions payable by the employing company, a high tax country can set up a Cyprus company to employ its executives that work internationally (depending on local legislation in actual place of work country). This concept of a payroll company can be stretched to cover hiring of workers for international contracts.

These are just half of the possibilities available with a Cyprus company. Click here to view the second part of the publication on how corporations can take advantage of Cyprus Companies.