In this article, we will consider what are the main advantages of the tax system of Cyprus and why the registration of companies in this jurisdiction has a positive effect on the development of your international business.
The main aspect that entrepreneurs take into account when they choosing a relevant jurisdiction to conduct their business abroad is taxation policy in the country. Over the past few years, we can observe how the country’s legislation seeks to develop a regulatory framework in the field of taxation of companies. The state has enshrined the rules according to which resident individuals and legal entities pay income tax received both in Cyprus and abroad. However, if we speak about the income of non-residents of Cyprus, only income accrued or received from sources in Cyprus is subject to income tax.
The presence of such international legal acts as double taxation treaties have a positive influence for doing business with minimal taxation. According to the official website of the Ministry of Finance of Cyprus, currently, Cyprus has concluded a Double Taxation Treaty with 65 countries all over the world. The provisions of these agreements fix a low tax rate, and also exclude the prospect of paying the same tax in two countries.
Corporate Income Tax
Corporate tax in Cyprus is 12.5%. We should also state that many types of income (dividends, interest income, income from the sale of securities and credit restructuring, profits from a permanent establishment, etc.) are generally exempt from taxation.
Every businessperson pays attention to the presence of a source tax in the country. According to Cyprus tax law, tax benefits and interest provided by tax residents of Cyprus are not tax residents of Cyprus, exemption from tax on income from the source of payments. We also want to note that in Cyprus there is no income tax on the sale of shares and tax on capital gains.
Types of VAT rates in Cyprus
- Normal rate – 19%
- Reduced rate – 9% or 5%
Your business cannot be subject to the above-mentioned rates if your annual income, taking into account the taxable supply of goods and/or services, does not exceed EUR 15,600.
IP box mode
In Cyprus, there is a preferential regime for the use of intellectual property as the “IP box mode”. First, it is associated with expenses incurred by the taxpayer for the research and development of intellectual property, and provides that when calculating taxable profit, a conditional deduction of 80% is applied to the qualified profit from the use and / or disposal of such assets. In addition, capital gains arising from the disposal of an asset are fully exempt from income tax.
We draw your attention to the fact that this article is for informational purposes only. The specialists of our company are ready to explain more details about the advantages of the tax system of Cyprus. For more advice, contact us at the contacts listed on the site.