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Cyprus, an ideal business center The Real Return on Investment

Republic of Cyprus (“Cyprus”), is an island country in the Eastern Mediterranean and is the third largest and third most populous island in the Mediterranean. The total area of Cyprus is 9.251 square km with population 946.000. The island enjoys the best type of Mediterranean climate with about 300 days of sunshine per year.

Cyprus is one of most recognized business centers in the world. The main pillars of the development of Cyprus as an international business center are the tax, legal and regulatory frameworks and the quality of professional services. Furthermore, the strategic geographic location as a European gateway to the East and the excellent living conditions.

Cyprus is a modern, cosmopolitan, transparent business center offering opportunities for investment across a wide range of sectors.

Invest in Cyprus for the real competitive advantage

Cyprus Tax System

The efficient tax system established in Cyprus can be considered as the major reason to call the Cyprus as an ideal business center.

Corporation Tax:

As per the Cypriot tax law, all companies which are tax resident in Cyprus are taxed at 12.5% on taxable income accrued or derived from all sources both in Cyprus and abroad. A company is considered to be tax resident in Cyprus if it is managed and controlled from Cyprus.

“Management and control” means that (non exhaustive list):

  • The majority of the board of directors resides in Cyprus
  • The board meetings take place in Cyprus
  • The general policy of the company is formulated in Cyprus

(Please note that at PICCO we could advise you how your company will be in compliance with the “management and control” requirements)

Income Tax (Individuals):

In respect of Individuals, all Cyprus tax resident individuals are taxed on all taxable income derived or accrued from all sources in Cyprus and abroad. Individuals who are non-tax residents of Cyprus are taxed only on income derived or accrued from sources in Cyprus.

Taxable income Taxable Amount Tax rate (%) Tax Amount Cumulative Tax
0-19.500 19.500
19.501-28.000 8.500 20 1.700 1.700
28.001-36.300 8.300 25 2.075 3.775
36.301-60.000 23.700 30 7.110 10.885
60.001 < 35

“Resident in the Republic” means an individual who stays in the Republic for a period or periods exceeding in aggregate 183 days in the year of assessment (the year of assessment is the period of 12 months starting 1st January and ending 31 December – fiscal year)

In case an individual who does not remain in any other state for one or more periods exceeding in aggregate 183 days within the same tax year and which is not a tax resident in any other state the same tax year, shall be deemed to be a resident of the Republic in question tax year, if it meet all the following conditions:

(i) stays in the Republic for at least 60 days in the tax year,

(ii) carries on any business in the Republic and / or is employed in the Republic and / or holds a position in person a tax resident of the Republic at any time during the tax year and

(iii) he has a permanent home which belongs to him or rented by in the Republic.

Key provisions of the Corporation/Income tax law:

  • One of the lowest corporate income tax rates in the EU at 12.5%.
  • Dividend Income exemption (subject to conditions).
  • Profit from the sale of securities (e.g. shares, bonds, debentures, options) exemption.
  • Interest Income exemption (e.g. bank deposit) – unless, it arises from the ordinary activities of the company or closely related to the ordinary activities of the company.
  • No withholding taxes on dividend, interest and royalty payments abroad.
  • No capital gains tax (except for disposal of real estate in Cyprus or shares of company holding real estate in Cyprus to the extent gains are attributable to the real estate holding).
  • Attractive IP (Intellectual Property) regime (old regime-2021 2.25% effective tax rate, new regime up to 5%-8% effective tax rate).
  • Beneficial tax schemes for shipping companies – Tonnage Tax scheme.
  • Notional interest deduction for investments into Cyprus companies through equity –> reduced effective tax rate (up to 2.5%).
  • Foreign Exchange gains or losses are tax neutral
  • No immovable property taxes
  • No succession or inheritance taxes
  • Tailor-made provisions for the investment funds industry
  • Personal tax exemptions for new residents (up to 50% exemption for ten years) and non-domiciled individuals (SDC-Special Defense Contribution exemption).
  • Tax deductions for investment into start-ups
  • More than 60 double tax treaties.
  • Credit can be claimed in respect of any foreign tax paid.
  • One of the lowest value added tax rates in the EU at 19% / 9% / 5%.
  • Tax losses incurred during the tax year can be carried forward for relief over the next 5 year period or surrendered to other companies, members of the same group of companies.
  • Under reorganization scheme, assets and liabilities can be transferred without any tax implications.

Also, Cyprus has become a popular trust jurisdiction. Some of the Cyprus International Trust benefits:

  • Complete tax exemptions (income from non-Cyprus sources are exempt).
  • Short limitation period (two years) for challenging a trust.
  • No need for any kind of registration.
  • Complete confidentiality.
  • Low cost of establishment and administration.
  • Availability of competent professional trustees.
  • Flexibility in adopting foreign law.
  • Lower labour costs for technical and professional talents than in other major EU capitals
  • Among the lowest office rental rates in Europe
  • Highly affordable critical business support services

Access to markets – Strategic Location

Cyprus is Europe’s eastern outpost at the crossroads of three continents – Europe, Africa and Asia – The island is an ideal investment gateway to the European Union, as well as a portal for investment outside the EU, particularly into the Middle East, India and China. The country’s geographical location has been considered of strategic importance in global trade for thousands of years. Recently, the discovery of natural gas resources and possibly oil, has further upgraded the strategic importance of the island, which is also considered to be a stabilising factor in the region’s political developments.

 

  • Full access to European markets
  • Access to 40+ EU trade agreements
  • A member of the Eurozone since 2008
  • Geostrategic position
  • Proximity & easy access to major markets

Strong business support services – Professional Services
Cyprus is a dynamic business centre that offers relatively lower operating costs while also providing high level and top quality professional services, including accounting, auditing, tax, business administration, legal, investment and funds management. Various law firms specialize in international work and assist foreign investors with both set-up and contractual formalities, while the world’s leading accountancy and consultancy firms are present on the island. International recognition of Cyprus’ high level of professional services is reflected in the decision of the Institute of Chartered Accountants in England and Wales (ICAEW) and the Chartered Institute of Management Accountants (CIMA) to select Cyprus as the first country outside the United Kingdom to train ICAEW and CIMA accountants.

  • Wide range of services make starting & running a business easy
  • 700+ registered accounting firms including all major global firms
  • 2,700+ registered lawyers and 160 law firms
  • A range of serviced offices & co-working spaces
  • High availability of modern and affordable office space in all cities

Legal and Regulatory framework

Based on English Common Law principles, Cyprus’ comprehensive and robust legal and regulatory framework, is widely recognised as a business-friendly and effective system that ensures transparency and reliability in business practices.

Offering foreign businesses a familiar and reliable framework within which to operate, Cyprus’ legal system is also fully compliant with the EU law and regulations.

The government and other relevant organisations have a leading role in constantly developing and modernizing the country’s legal framework by promoting new and improved legislation in a number of areas, always aiming at further improving the overall investment environment.

Positive economic outlook

  • Robust GDP growth
  • One of the fastest growing EU economies
  • Consecutive upgrades by credit rating agencies
  • Positive macroeconomic forecasts

Access to talent

  • The youngest population & workforce in the EU
  • 55% of the workforce has a tertiary degree
  • Businesses in Cyprus operate in English and 73% of Cypriots speak English
  • Booming private education sector with English taught programs
  • Visa-free access to European talent
  • Easy access to global talent

Advance Infrastructure

With a constantly evolving system of advanced and modern infrastructure, Cyprus offers sophisticated road, air and sea transport solutions and services, which are widely recognised as an important competitive advantage in attracting foreign direct investment.

Cyprus’ two multi-purpose deep sea ports are located in the coastal cities of Limassol and Larnaca. The Limassol port handles both passenger and freight cargo while offering logistics solutions through advanced facilities for cost-effective transport and processing. In addition, the Limassol port is a renowned cruise liner hub and a popular “stop-over” for international cruise ships.

Two modern international airports in Larnaca and Paphos, offer their services to approximately 10 million visitors per year, connecting the island to the most popular transit hubs throughout the world. Larnaca is the larger of the two airports.

Considerable investment has also been made to transform the island into a major telecommunications hub in the region, connecting Cyprus via submarine fibre optic cable and satellite to other networks in the Eastern Mediterranean basin and beyond.

High Quality of life

Cyprus offers an enviable lifestyle in a clean and healthy environment with a high standard of living. Living and working in Cyprus are directly related to fabulous weather, beautiful nature, art and culture, safety, security, and above all, hospitable and warm people. It is the combination of all these factors that makes the experience of living on the island extremely desirable and attractive. The balance between work and family part of everyday life, is unique and truly difficult to match.
Cyprus combines an international competitive business environment with a pleasurable and balanced way of life. Low crime levels, year-round sunshine, centuries of art and culture, and a delicious gastronomy all contribute to a high quality of life. Safety is amongst the biggest advantages of Cyprus.

  • One of the best climates worldwide
  • Top 5 safest country in the world (Value Penguin 2015)
  • Top 4 best retirement destination globally (Knight Frank 2016)
  • Most blue flag beaches per capita in the EU (Eurostat)
  • Best island economy 2017/2018 lifestyle & human capital (fDi magazine)