The general advantages offered by Cyprus are enhanced by the following tax incentives:
Low Corporation Tax. Net profits are taxed at the rate of only 20 percent for chargeable income up to CYP40.000 and 25 percent for chargeable income in excess of CYP40.000. These tax rates also apply to registered branches of foreign companies which have been permitted to operate in the island.
Low Income Tax. Expatriates employed in the Industrial Free Zone pay half the rates applicable to locals ie 0-20 percent.
No withholding Tax. Dividends paid by resident companies to foreign incorporated companies are exempt from withholding tax. If dividends are paid to shareholders (physical persons) then the tax withheld is credited against their own tax liability.
Ten Year Tax Holiday. Profits resulting from the operation of auxiliary tourist projects, such as golf courses, marinas, theme parks, health centers, etc are, subject to certain conditions, exempt from corporation tax for a period of ten years.
Generous Tax Allowances. There are generous investment allowances for machinery and equipment used in the manufacturing sector and considerable wear and tear allowances covering both machinery and certain categories of hotel buildings. Book losses may be carried forward for up to 5 years from the year in which they occur.
Zero Customs and Excise Charges for operations in the Industrial Free Zone.
Double Tax Treaties. Cyprus has ratified 27 double tax treaties, many with former Eastern European countries.
Other Tax Exemptions. 60 percent of repatriated profits resulting from the rendering of professional services abroad are exempt from tax. 90 percent of profits or dividends repatriated to Cyprus from a business based permanently abroad are exempt from tax. Such a business should be carried out by a Cypriot individual or a company in which Cypriots own at least 15 percent of the equity.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances from a local lawyer or accountant.