There are many factors that contribute to making Cyprus an attractive environment for doing business. These include the following:
Perfect location that allows investors to reach new, highly promising markets
Cyprus as it lies at the crossroads of Europe, Asia and Africa is close to the busy shipping and air routes linking Europe with the Arab world and the Far East, representing a strategic hub for business activities in the region. The island is two hours ahead of Greenwich meantime, seven hours ahead of New York, seven hours behind Tokyo and in the same time zone as Athens.
Substantial growth potential and a business friendly environment
Cyprus has an outstanding infrastructure for businesses with good telecommunications; this together with the widespread use of the English language and a legal system mainly based on English law makes the island a very suitable and effective business base.
Nicosia, the administrative capital, is also the principle business centre, even though Limassol, with its port, and Larnaca, with the main airport, are also important in business terms.
Highly educated workforce
Cyprus human talent comprises by a well-trained and resourceful labour force. Skilled professional, technical and clerical staff, with extensive experience and fluency in English and other languages are available for employment at reasonable remuneration.
The high education level of the population is proved by the fact that Cypurs exhibits the highest percentage among the EU of people between the ages 25-35 possessing tertiary education qualifications.
Favourable tax system
Tax System in Cyprus
Corporate Tax
Cyprus offers a range of tax advantages to companies conducting business on the island. Such advantages derive from the country’s favourable legislation compliant with OECD and EU requirements, as well as from the wide network of double taxation treaties. In brief, the main provisions of corporate taxation are:
uniform corporate tax rate of 12.5%, one of the lowest in the EU;
no tax on dividends or interest payments to non-residents;
no withholding taxes on royalty payments relating to the use of rights outside Cyprus;
favourable tax treatment of losses;
no tax on profits from permanent establishment outside Cyprus, subject to conditions;
double taxation treaties with over 40 countries;
no tax on capital gains from disposal of securities listed on a recognised Stock Exchange;
no tax on profits from reorganisations;
tax free repatriation of profits and capital.
Personal Income Tax
Individual tax resident of Cyprus is an individual who stays in the Republic for 183 days in the year of assessment. Cyprus tax residents are taxed on income earned both in Cyprus and abroad. In contrast, non-tax residents are taxed on income earned only from Cyprus sources.
The top statutory personal income tax rate is 35%, and tax free income for each tax year is €19500.
The following income tax provisions apply to individuals:
low income tax;
no tax on dividends and interest, subject to certain conditions;
no tax on profits of a permanent establishment abroad and on salary earned abroad, under certain conditions;
profits gained from the sale of securities are exempt from tax;
loss of current year and previous years are deducted from the taxable income, subject to certain conditions;
income received in the form of retiring gratuity, compensation for death or injuries, provident fund, pension fund, or other approved funds, is exempt from tax.
Special Tax Treatments
International Trusts
Cyprus international trusts enjoy important tax advantages, providing significant tax planning possibilities:
income and gains of a Cyprus international trust, derived from sources outside Cyprus are exempt from any tax imposed in Cyprus;
dividends, interest or other income received by a trust from a Cyprus international business company are not subject to tax nor are they subject to withholding tax;
no capital gains tax is charged on the disposal of assets of an international trust;
exemption from taxation in the case of an alien who creates an international trust in Cyprus and retires in the country, on condition that all the property settled and the income earned is abroad, even if the individual is a beneficiary.
Taxation of Shipping Companies
Profits from the operation of Cypriot registered vessels or on dividends received from a ship-owning company are subject to zero corporation tax. Naval enterprises that fall within the provisions of the Merchant Shipping (Fees and Taxing Provisions) Law of 2010 N.44(E)/2010 may chose to be taxed under the provisions of that law or under the provisions of Income Tax Laws.
Value Added Tax
The standard rate of VAT is set to 19%. Reduced VAT rates of 8% and 5% also apply, as well as the zero-rate of VAT on specific goods and services. Visitors from non-EU countries can claim a refund of VAT paid on their purchases of goods in Cyprus upon their departure from the country, provided that the purchased goods are transported outside Cyprus (and the EU) in their personal luggage.
Holding Companies
A Cyprus holding company can be effectively utilized for international tax planning purposes, and at the same time enjoy the status of being located at a reputable business centre. In summary, a Cyprus holding company offers the following advantages in relation to the major tax considerations:
no withholding tax on dividend income received from subsidiary companies abroad;
double tax treaties with over 40 countries, enabling lower withholding tax rates on dividend or other income received from subsidiaries abroad;
being an EU member state, holding companies registered in Cyprus may also enjoy no withholding tax on dividends received from EU subsidiaries;
no withholding tax on capital gains and income on the disposal of neither the shares of the subsidiary’s share capital nor the shares of the Cyprus holding company;
no tax on capital gains or income on the liquidation of the Cyprus holding company;
no withholding tax on distribution of profits, subject to conditions;
outward dividends by the Cyprus holding company to its non-resident shareholders are exempt from any withholding taxes;
profits earned from a permanent establishment abroad are fully exempt from Cypriot tax, subject to certain conditions;
a diversified group of Cyprus companies belonging to a Cyprus holding company can set off Group relief for the utilisation of tax losses;
no minimum holding period.
Modern banking and insurance networks
The country offers a complete range of integrated professional services, capable to contribute in any field of legal entity including the areas of Accounting, Banking & Financial Services, Business Consulting, Computing & IT, Design, Education, Engineering, Legal Services, etc.
Moreover, substantial investment has been made into adjusting the island into a major telecommunications hub in the region by structuring a technologically advanced infrastructure, in terms of cable and satellite.
Comparatively low operating costs
Since Cyprus entered the EU Zone, it has implemented the European Union’s legislative framework as regards to labour relations. Nevertheless, labour costs are considerably lower in Cyprus in comparison with the EU average. Correspondingly, office and living accommodation is relatively inexpensive with substantial choice, whilst the overall standard of living is high.
High standard of living
Cyprus boasts a moderately high standard of living by European standards. The overall cost of living is around the 1/3 to 2/3 of most sections of Europe or the USA. Surveys show that Cyprus towns possess one of the lowest costs of living within a developed nation. The high quality of life, combined with the low cost of living in Cyprus, have transformed the island the Mediterranean’s third most well-linked destination for European property buyers.