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Cyprus Company Formations to Rise with Latest Double Tax Treaty Network Update

Cyprus Company Formations to Rise with Latest Double Tax Treaty

July 2017

Cyprus has significantly expanded its double tax treaty network over the past 3 to 4 years and there are continuous efforts to increase it even more.

Its network now consists of 57 countries, a very significant amount for the island of Cyprus.

Cyprus’ Tax Treaty partners today are shown below:

In addition, on 8th May 2017, Cyprus and Luxembourg signed an income and capital tax treaty that is expected to come into force as from 1st January 2018 upon ratification by both parties. Cyprus has also negotiated and agreed double tax treaties with Monaco, Oman and Barbados (only the signing of these is pending).

Cyprus is currently negotiating the signing of double tax treaties with Netherlands, Sri Lanka, Israel, Jordan, Malaysia, Panama and Vietnam. In addition, it will soon start negotiations with Kazakhstan, Tajikistan, Nigeria and Pakistan.

Given the above, individuals and investors can choose Cyprus to set up their companies and take advantage of this extensive network of double tax treaties as well as the many other tax advantages that Cyprus offers.

Contact Us NOW to Start the Cyprus Company Set Up Process

Tax treaties in Cyprus and most countries legally supersede local tax legislation and, for this reason, they are a useful tax-planning tool to protect businesses and individuals against double taxation of income earned in other countries.

Many of the tax treaties that Cyprus has signed eliminate or significantly reduce the withholding tax on dividends, interest and royalties. In addition, some of them do not include the clause that gains from the alienation of shares in property-rich companies are taxed in the State where the property is situated. Therefore, any gains arising from the alienation of shares in such companies will be taxed only in the state where the alienator is situated. If the alienator is a Cyprus company, the gains from the sale of such shares are exempt from taxation in Cyprus.

Other features of the Cyprus tax system:

• 12.5% corporate tax rate
• Dividend participation exemption
• Profits from the trading and disposal of securities (e.g. shares, bonds, debentures) are tax exempt
• No succession taxes
• No withholding taxes
• Individuals who take up residence in Cyprus can apply for non-domicile status which offers significant tax advantages
• No tax on worldwide dividends and interest income for a period of 17 years for non-domiciled individuals
• 50% exemption on income from employment in Cyprus for a person who was not previously resident in Cyprus. The exemption applies for ten years, if the income from employment in Cyprus exceeds €100.000 per annum.
• 20% exemption with a maximum amount of €8.550 annually on income from employment in Cyprus of a person who was not previously resident in Cyprus. For employments commencing during or after 2012, the exemption applies for a period of 5 years starting from the tax year following the year of commencement of the employment with the last eligible tax year being 2020.
• Low social insurance contributions (7.8% of gross salary) – total employer contributions to various funds amount to 11.5% of gross salaries and total employee contributions to 7.8%.
• Tonnage Tax for shipping companies
• Attractive IP regime
• Notional interest deduction scheme

Contact one of our officers NOW to get more detailed information about the double tax treaties and their uses, the benefits of the Cyprus Tax system or to initiate the incorporation of a Cyprus registered company and start reaping the full benefits of an onshore, low-tax, EU jurisdiction.

Simply fill in the contact box below or contact us by email on [email protected]

Cyprus Tax Residence Status by Staying in Cyprus for 60 Days a Year

Cyprus Tax Residence

The Parliament of Cyprus has unanimously approved a bill that amends the rules for determining how an individual can acquire Cyprus Tax Residency.

The new Cyprus Tax Residency law is expected to strongly increase the demand and interest of investors and other parties for tax residency in Cyprus, Cyprus company formations and investments in Cyprus.

Click Here to Speak to One of Our Professionals about Cyprus Company Formation and Cyprus Tax Residence

The Income Tax Law is effectively amended so that an individual, who does not remain in any other country for a period or periods exceeding 183 days in the same tax year and who is not a tax resident in any other country for the same tax year, is considered to be a tax resident of Cyprus, provided that he / she satisfies the following:

• He / she remains in Cyprus for at least 60 days during the tax year.
• He / she conducts any business in Cyprus and / or is employed in Cyprus and / or is a director in a company that is tax resident in Cyprus at any time during the tax year.
• He / she maintains a permanent residence in Cyprus, which can be owned or rented by the individual.

Contact Us for More Information or Further Explanation

Click Here for More Detail on the Cyprus Citizenship by Investment Program

It is important to note that, under the 60 days Tax Residency Scheme, the individual will not be considered as Tax Resident of Cyprus if, in that year, the conducting of a business and / or employment in Cyprus and / or the holding of a directorship in Cyprus have been terminated.

For the purposes of calculating the days of stay in Cyprus please note that:

• The day of departure from Cyprus is considered as one day outside Cyprus.
• The day of arrival in Cyprus is considered as one day in Cyprus.
• Arrival in Cyprus and departure from Cyprus on the same day is counted as one day in Cyprus.
• Departure from Cyprus and return to Cyprus on the same day is counted as one day outside Cyprus.

Thus, under the new provisions, an incentive is given to an individual who is not a tax resident in any other country for the same tax year to transfer his tax residence to Cyprus and be taxed only on income from the activities the individual exercises in Cyprus.

Find Out if You Should Become a Cyprus Tax Resident – Get in Touch

What are the Benefits for an Individual who Acquires Cyprus Tax Residency?

There are many benefits for an individual who acquires Cyprus Tax Residency, some of the most important ones being:

• If the individual is considered as non-domiciled then he will be granted an exemption from income tax and special defense contribution tax on dividends and interest received either in Cyprus or abroad for the next 17 years.

Please Click Here for More Details for the Non-Domicile Status

• 50% exemption on income from employment in Cyprus for a person who was not previously resident in Cyprus. The exemption applies for ten years if the income from employment in Cyprus exceeds €100.000 per annum.
• 20% exemption with a maximum amount of €8.550 annually on income from employment in Cyprus of a person who was not previously resident in Cyprus. For employments commencing during or after 2012, the exemption applies for a period of 5 years starting from the tax year following the year of commencement of the employment with the last eligible tax year being 2020.
• Low social insurance contributions (7.8% of gross salary) – total employer contributions to various funds amount to 11.5% of gross salaries and total employee contributions to 7.8%.
• Profits from the trading and disposal of securities (e.g. shares, bonds, debentures) are tax exempt
• No succession taxes
• No withholding taxes

There are additional advantages that a Cyprus Tax Resident individual can enjoy:

• The individual and his / her family can take advantage of an excellent quality of life
• Cyprus (the “Jewel” of the Mediterranean) has one of the best climates in the world – guaranteed sunshine for most of the year with mild winters
• Beautiful, unique natural scenery
• Some of the best beaches in the world
• Modern airports and seaports
• Modern roads
• Good supply of quality housing
• Relatively low cost of living
• Low taxation
• Superb dining
• Rich cultural, historical and archeological heritage
• Friendly and warm Cypriot people
• Huge percentage of Cypriot people speak English
• Modern shopping malls, water parks, world-class hotels, spas, fine dining, cafes, modern hospitals, excellent schools and more
• Low crime rate
• A more relaxed pace of life