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Cyprus Tax Law Advantages

Cyprus is a legitimate low tax jurisdiction (and not a tax haven) offering significant tax incentives for the attraction of International Business Companies and foreign investments.

The most important tax advantages of the Cyprus jurisdiction are the following:

  • One of the lowest corporate tax rates in the European Union – 12,5 % (10% upto year 2012)
  • Zero withholding tax on dividends when the shareholder (or beneficial shareholder) is not tax resident in Cyprus
  • Dividends received from Cyprus companies are exempt from tax
  • Dividends received by a Cyprus company from abroad are also exempt from tax provided that:
    a) At least 50% of the direct or indirect activities of the company paying the dividend are attributable to non-investment income or
    b) The tax burden on the dividend paying company’s income is not lower than 5% )
  • Zero Capital Gains Tax on the Sale of Shares

    Capital gains and income tax exemption for real estate Cypriot companies can be used to hold real estate or other assets outside Cyprus with no Cypriot capital gains tax implications on disposal of the assets as capital gains tax only applies to gains on the disposal of immovable property which is situated in Cyprus or unlisted shares in a company which owns immovable property situated in Cyprus.
  • Profits from permanent establishment abroad generally exempt from tax
  • Highest number of signed Double Tax Treaties (DTA) in Europe ( DTA agreements iwith countries all around the world including Russia, Romania, UK, India and others.)

    Most treaties provide for reduced or nil rates of withholding tax on dividends, interest and royalties paid from the treaty country and the avoidance of double taxation in the case where a resident in one of the treaty countries derives income from the other treaty country.
  • Unilateral foreign tax credit relief
    If the respective income is subject to Cyprus tax, relief for taxes paid abroad is offered in the form of a tax credit. The relief is given unilaterally irrespective of the existence of a double tax treaty. Where a double tax treaty exists, the treaty provisions apply if more beneficial.
  • Carry forward of trade losses for five years.
  • Substantial Tax Relief for non-residents taking up employment in Cyprus, during the first years of their employment.