In 1975, the introduction of a new regime for offshore companies made Cyprus a popular location for forming offshore companies, legal entities and holding companies. Tax measures implemented by Cyprus are evidence of the country’s efforts to build not necessarily a ‘tax haven’ but a country that is investment enabling by making tax incentives available. As such, Cyprus fiscal regime has been mended over time to uphold standards established under the EU Acquis Communautaire (set of EU laws acquired by all EU member states).
With respect to its offshore business sector, Cyprus makes no distinction between onshore and offshore business entities where taxation is concerned. In 2002, onshore and offshore companies were made subject to a flat 10% corporate tax rate, considered the lowest in the EU. Under the Income Tax (2000) a levy was placed on wage bills at 2% as a means of subsidizing pensioners, while offshore business entities incorporated before 2002 were given a grace period of up to 2006 to be taxed at 4.5%. Cypriot companies stand to benefit from corporate tax exemptions with regard to special tax treatment and exemptions for losses incurred, capital gains acquired from disposing securities, monies spent for foreign tax, dividends obtained from other companies, profits generated from overseas organisations subject to specific conditions and profits generated from company reorganizations.
Vessels registered in Cyprus are not liable to tax on dividends obtained from a company owning a ship and on profits received from operations as a Cypriot shipping company. Ship management companies can opt to pay tax equivalent to 25% of tonnage tax rates for managed vessels or income tax at the rate of 4.25%.
Given the broad scope of investment interests in Cyprus, offshore trusts continue to be a vital element in asset management and tax planning. Offshore trusts in Cyprus enjoy tax exemption on offshore income and capital gains (subject to special conditions), as well as on withholding and other taxes on interest and dividends. Subject to special conditions, special tax treatment is also meted out to the legal non-resident owner of a Cyprus offshore trust who retires in Cyprus.
The range of offshore or international business operations that can be undertaken makes Cyprus a welcoming and favorable location for international business and minimizing taxes. Cyprus offshore business companies are used for diverse functions which include royalty, holding and investment, finance, invoicing, manufacturing, headquarters, trust, employment, insurance and real estate.
Company formation in Cyprus is not very demanding and restrictive, to the extent that companies are no longer tied to a limited investment amount and participation percentage. All international and offshore business companies basically go through the same incorporation and registration procedure, re presenting a company name and name approval, filing the Memorandum and Articles of Association with the Registry. International businessmen seeking to do business in Cyprus can also count on individual attention by the relevant personnel in Cyprus, usually a lawyer or representative, for company licensing and start up assistance. Cyprus has anti-double tax agreements with several countries in the Middle East, China, South Africa and India, including Eastern Europe, the CIS (Commonwealth Independent States) and Russia. Value Added Tax in Cyprus is set at the lowest possible rate of 15%, while reduced rates of 8, 5 and 0% are levied on certain products
Cyprus trusts can be used for local or offshore trust activities based on the residence of the person(s) setting up the trust and the location of the trust property. Offshore income and gains are exempt from Cypriot taxation while dividends and interest are not liable to withholding tax. Assets of a Cyprus offshore trust which have been disposed are not subject to capital gains tax. Offshore trusts established in Cyprus are efficient estate and tax planning vehicles, help to protect wealth and secure financial wealth in the short term or distant future.
As an offshore jurisdiction, Cyprus has attracted many companies engaged in shipping and maritime activities. Cyprus’ legal framework for shipping operations was introduced in 1962, making the country a long standing center for international ship registration. According to statistics, Cyprus’ shipping sector ranks 6th internationally given the number of ships registered to operate using the country’s flag, which accounts for over 2600. Cyprus facilitates the registration of ships of numerous nationalities by recognizing Competence certificates issued by several countries. Fiscal incentives implemented for ships registered Cyprus include the exemption from stamp duty for foreign crew, exemption from capital gains, estate duty and income tax, the possibility of appointing trustee or nominee shareholders and easy removal of ship names from the ship registry.
More and more engineering and construction offshore companies are being used by large engineering firms for international operations and projects. Cyprus’ has offered an ideal location for many of these corporations to register offshore construction companies for the expansion of their operations into Europe and other parts of the world. The jurisdiction’s economic stability, growth and low tax rates provide favorable conditions for offshore company formation in the construction industry.
The transfer of technology and intellectual property for royalty payments, franchise and licence has become a major aspect in international trade and business as people become more conscious of the importance of protecting their work through copyright. The advanced network of double tax treaties developed by Cyprus over time makes it a suitable location for setting up intermediary companies for conducting licensing, franchising and royalty offshore businesses through which payments for such services are managed and channeled, thereby reducing the chances of paying high taxes.
Companies established in Cyprus can be used as any of the following for activities offshore:
Main Features o Captive insurance companies in Cyprus are governed by the Insurance Companies Law o A captive insurance company can obtain registration in Cyprus as an international business company according to provisions set by the Central Bank o The minimum paid-up share capital is CYP 10,000 o All expenses incurred locally must be paid for with cash generated outside Cyprus o The necessary documents and accounts must be filed with the relevant authorities o Captive insurance companies must show proof of not having received any financing within Cyprus o The reserves kept for third party claims must be approved by the Superintendant of Insurances.
Cyprus trusts can be used for local or offshore trust activities based on the residence of the person(s) setting up the trust and the location of the trust property. Offshore income and gains are exempt from Cypriot taxation while dividends and interest are not liable to withholding tax. Assets of a Cyprus offshore trust which have been disposed are not subject to capital gains tax. Offshore trusts established in Cyprus are efficient estate and tax planning vehicles, help to protect wealth and secure financial wealth in the short term or distant future.
|
Copyright © TaxHaven.org |