Our Law Firm advises on a broad range of corporate tax issues and transactions, including mergers and acquisitions, asset finance, investment funds, securities, projects and other indirect taxes, securities trading and lending and tax structured finance. Taxation is international and so when required members of the team can draw on their own experience or will involve appropriate tax advisers in Cyprus and other jurisdictions.
What is special about Cyprus?
- Lowest corporate tax rate in the European Union at 12.5 per cent.
- Highest personal income tax rate bracket at 30%.
- Extensive double tax avoidance treaties network with over 40 countries enabling lower withholding tax rates on dividend or other income received from the subsidiaries abroad.
- No withholding tax on dividend income received from subsidiary companies abroad under certain conditions.
- No withholding tax on dividends received from EU subsidiaries.
- No withholding tax on capital gains and income on the disposal of neither the shares of the subsidiary’s share capital nor the shares of the Cyprus holding company.
- No tax on capital gains or income on the liquidation of the Cyprus holding company.
- No withholding tax on distribution of dividends from income, royalties or interest.
- Outward dividends by the Cyprus Holding Company to its non-resident shareholders are exempt from any withholding taxes.
- Profits earned from a permanent establishment abroad are fully exempt from Cypriot tax, subject to certain conditions.
- A diversified group of Cyprus companies belonging to a Cyprus holding company can set off losses with profits.
- Group relief for the utilisation of tax losses.
- No minimum holding period.
There are one or two rules for dividends received to be tax–free. There must be at least 1% participation in the holding company. Additionally, more than 50% of the paying company’s activities should result from trading activities and not from investment income and at the same time the income must not be taxed substantially less than the tax rate of Cyprus.
Gains accruing from disposal of shares listed on any recognized Stock Exchange are exempted from tax. Gains accruing from disposal of immovable property held outside Cyprus and shares in companies, the property whereof consists of immovable property held outside Cyprus, are exempted from capital gains tax.
The concept of Double Tax treaties is that Cyprus registered Business Entities that have tax exemptions in Cyprus will have the same exemptions in the treaty country. These treaties follow closely the OECD model. The country of residence will give a credit for taxes paid in the other treaty country. The Cyprus international entity qualifies for treaty protection under all the extent treaties except those with Canada, France, the UK and the USA. Even in those cases the limitations apply only to flows of income to Cyprus and not to income flows from Cyprus to the countries.