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RELOCATION OF BUSINESSES TO CYPRUS

HEADQUARTERING AND SETTING UP GROUP OPERATIONS

CYPRUS

IN A NUTSHELL
  • Area: 9,251 km2
  • Population: 1,207,359 (2020)
  • Time zone: GMT + 2
  • Currency: Euro
  • EU and Eurozone Member
  • Ethnic Groups: Greek Cypriot, Turkish Cypriot, Armenian, Maronite and others
  • Political System: Presidential Democratic Republic
  • Official Languages: Greek, Turkish (English widely used and spoken)

CYPRUS

IN A NUTSHELL
  • Area: 9,251 km2
  • Population: 1,207,359 (2020)
  • Time zone: GMT + 2
  • Currency: Euro
  • EU and Eurozone Member
  • Ethnic Groups: Greek Cypriot, Turkish Cypriot, Armenian, Maronite and others
  • Political System: Presidential Democratic Republic
  • Official Languages: Greek, Turkish (English widely used and spoken)

CYPRUS – MAIN INDUSTRIES

CURRENTLY

  • Financial Services
  • Construction & Real Estate
  • Tourism
  • Shipping

NEW INDUSTRIES

  • Medical services
  • Investment Funds
  • Oil & Gas / Energy
  • Education
  • Telecommunications
  • Filming
  • Startups & Fintech

LEGAL AND TAX

THE LEGAL SYSTEM
THE TAX SYSTEM
CORPORATE TAXATION
Common Law systemInvestor friendly tax system12,5% corporate tax on trading profits
Principles of Equity applyTaxation based on Residency statusNo tax on dividend income (subject to conditions)
Cyprus Companies’ Law based on 1948 UK Companies’ Act (updated)One of the most favorable tax systems in EU, both for companies as well as for individualsNotional Interest Deduction (NID) available for new capital introduced
English case law closely followed – cases have persuasive effectTax base for hundreds of thousands of individuals and their companiesIntangible Property (IP) Regime in line with OECD’s “nexus” principle
European Court of Justice decisions bindingTax legislation EU & OECD compliantCorporate tax on sale of securities: 100% exemption
Capital markets legislation harmonised with EU Directives and RegulationsEU Tax Directives applyNo withholding tax on outgoing payments (dividends, interest, royalties)
Extensive double tax treaty networkForeign exchange differences are tax neutral
Group relief availability (for 75% holdings)
Tax exempt re-organisations
Advanced tax ruling practice offers safety and predictability for investments

EXAMPLE STRUCTURES

Cyprus Holding Company
B E N E F I T S
  • No withholding tax on dividends paid to non-residents shareholders
  • No withholding tax on interest paid from Cyprus
  • No tax on dividend income received from another Cyprus tax resident company;
  • No tax on dividend income received from a foreign subsidiary or a permanent establishment (PE) of a Cyprus holding company (under conditions)
  • No withholding tax on royalties paid from Cyprus in respect of intellectual property exploited outside Cyprus
  • No tax on disposal or trading of securities
  • Notional interest deduction upon the introduction of new equit
Cyprus Company may be:
B E N E F I T S
  • Acting as head office of international group
  • Acting as agent of foreign company
  • Acting as backoffice of international group operations
  • Acting as trading company
  • CyCo taxed at 12,5% on trading profits or on markup of cost of operations
Cyprus Intellectual Property holding Company
B E N E F I T S
  • 80% of worldwide royalty income generated from IP owned by Cypriot resident companies (net of any direct expenses*) is exempt from tax
  • 80% of profit generated from the disposal of IP owned by Cypriot resident companies (net of any direct expenses*) is exempt from tax
  • any expenditure of a capital nature for the acquisition or development of IP is claimed as a tax deduction in the year in which it was incurred and the immediate four following years on a straight-line
Cyprus Intellectual Property holding Company
B E N E F I T S
  • No capital gains tax on sale of shares of Cyprus company
  • Beneficial Capital Gains provision in several Cyprus double tax treaties whereby when the Cyprus company sells the shares of a property rich foreign company, the taxing right of this transaction is with Cyprus ONLY, and in Cyprus such gain is tax exempt!
Double Cypriot Company Structure
B E N E F I T S
  • CyFinCo not thinly capitalised
  • Interest expense in CyHoldCo tax deductible
  • Group relief to utlilise tax losses from interest expense in CyHoldCo against interest income in CyFinCo
  • Notional interest deduction in CyFinCo
  • “Margin” taxed in Cyprus at 12,5%
  • Tax as low as 2,5%
Securitization Structure
B E N E F I T S
  • No inheritance and gift taxes
  • No direct holding of assets
  • Maintenance of total
  • Anonymity
  • The investment model used in a bond process gives the option to sell without being subject to capital gain tax (if in Cyprus)
  • Possible to optimize the taxation of the income generated by the investments (i.e., property, interest, capital gains etc.)

TAXATION

INDIVIDUAL TAXATION
  • Tax charged on worldwide income
  • Based on tax residency i.e. 183 days in Cyprus (or 60 days – see slide 15)
  • Personal tax rates:
Renumeration
Tax Rate
In between €19.500 and €28.00020%
In between €28.000 and €36.30025%
In between €36.300 and €60.00030%
In excess of €60.00035%
Tax Incentives for:
  • Physical persons who were non-resident and are taking their first employment in Cyprus (50% exemption for 10 years if salary over €100.000)
  • Physical persons who were non-resident and are taking their first employment in Cyprus (20% exemption or €8.550 for 5 years)
  • Overseas pensions exempt from tax up to €3.420 and taxed at 5% thereafter
  • Non-domiciled status
NON-DOMICILED TAX RESIDENT STATUS
  • Possible with 60 days in Cyprus
  • Exemption from “Special Defence Contribution” which is:
    ▪ 30% on “passive” interest income;
    ▪ 17% on dividend income;
    ▪ 3% on 75% of rental income.
Careful tax planning – zero or nearly zero tax

RELOCATION

OF EMPLOYEES OF FOREIGN COMPANIES IN CYPRUS
  • Fast-track process of obtaining employment permits for third country nationals who are employed by foreign companies (companies 51% owned by non-EU individuals)
  • Up to 5 directors, 10 managers and number of specialists and support staff.
  • Ability to relocate also family members
  • Individuals' relocation to benefit from tax breaks.
  • If resident in Cyprus for 7 years, ability to apply for naturalisation and grant of Cyprus (EU) passport!