There are currently more than 40,000 international business entities registered and operating out of Cyprus. A significant number of these international business entities have fully fledged offices in Cyprus.

An increasing number of foreign individuals work for international business entities registered in Cyprus. Also, more and more foreign professionals choose the island for residence in combination with their business activities.

The growth in the international community in Cyprus indicates the existence of clear advantages that attract both business entities and foreign private individuals.

Tax advantages

The tax advantages relate to incentives offered in Cyprus that can mitigate or eliminate completely the overall tax liability arising from international activity. The incentives available relate to:

  • International business entities

  • The foreign employees of international business entities

  • Both the international business entities and their foreign employees

The wide network of double tax treaties of Cyprus offers numerous opportunities for sophisticated tax planning structures.

Non-Tax advantages

The non-tax advantages of Cyprus offer the infrastructure for doing business internationally, of the highest professional standards, with significantly lower operating costs. These include:

  • Advantageous geographical location and time zone
  • English as a business language
  • Pleasant climate
  • European standard of living
  • Low set-up and maintenance costs of international business entities
  • Highly developed and efficient accounting, legal and banking sectors
  • Strict confidentiality with the local authorities and the banks
  • Excellent transport and telecommunication facilities
  • Exemption from foreign exchange control
  • Option for residence and work permits
  • Possibility for acquisition of immovable property
  • Incentives for listings and investment in the Cyprus Stock Exchange

A. Tax incentives for international business entities

  • A Cyprus international business company is subject to tax at the rate of 4.25% on its profits regardless of where the management and control of the company is exercised.
  • A Cyprus international branch is subject to tax at the rate of 4.25% on its profits if managed and controlled in Cyprus. If management and control is outside Cyprus the international business branch is exempt from tax.
  • International business partnerships as an entity as well as its partners are totally exempt from tax.
  • Ship owning companies with ships flying the Cyprus flag and operating in international waters are totally exempt.
  • International trusts are totally tax exempt.
  • All international business and shipping entities are not subject to any capital gains tax, except on the profit of the disposal of immovable property in Cyprus.

B. Tax incentives for foreign employees of international business entities

  • Foreign employees of international business entities, who are employed outside Cyprus and paid through Cyprus, are totally exempt from tax. If they are not paid through Cyprus they are liable to income tax at reduced rates varying from 0 to 4 percent, which are equal to one-tenth of the normal tax rates.
  • Foreign employees of international business entities, who are employed in Cyprus, are liable to income tax at reduced rates varying from 0 to 20 percent, which are equal to one-half of the normal tax rates.
  • If an employee works both in and outside Cyprus and the salary is paid in Cyprus, then the part of the salary attributable to the time spent outside Cyprus is exempt from tax. The part of the salary attributable to the time spent in Cyprus is taxed at half the normal tax rates.

C. Tax incentives for both international business entities and foreign employees

  • Wide network of double tax treaties
  • Full exemption from capital gains tax, except on sale of immovable property situated in Cyprus.
  • Full exemption from local social insurance schemes in respect of foreign employees.
  • Full exemption from special contribution for the defence of Cyprus.
  • Full exemption from income tax on income derived by way of interest on foreign capital imported into Cyprus and deposited with any bank operating in the island.
  • Entitlement to duty-free concessions

The content of this article is intended only to provide general guidelines related to this particular matter. For your specific circumstances, full specialist advice is recommended.

To receive more information on offshore services or to discuss the particulars of your international tax planning needs please contact the authors.