Why Cyprus
Creating substance in Cyprus has become a definitive solution for overseas companies seeking to solidify their tax status in Cyprus, to resolve any taxation discrepancies and in order to meet criteria for regulatory legislature in place, such as:
- Controlled Foreign Corporation (CFC) rules
- OECD model tax convention
- Double Tax Treaties (DTA’s) and
- OECD model tax convention
Due to continuous reforms and tougher requirements for transparency and reporting, businesses are increasingly looking to Cyprus to build real economic substance and settle their activities here due to the well-known attractive tax and legal system.
Substance in Cyprus can be obtained:
- Through real physical presence in Cyprus, with distinct offices, employment of qualified senior management and staff located in Cyprus in order to handle the daily operations/management of the company in Cyprus.
- By maintaining accounting records in Cyprus and with the operation of bank accounts having at least 1 Cypriot bank signatory.
- With the registration of the company as an employer with the social insurance authority and many more.
When a company complies with all the practical standards of substance and becomes tax resident in Cyprus, it will be taxed on its worldwide income accrued or rising from sources both within and outside Cyprus at a flat rate of 12.5%.
Cyprus Tax Residency establishes that the entity will be subject to Cyprus tax law and to tax benefits arising from the Cyprus double tax treaty network. The main benefit of a tax treaty is the avoidance of double taxation on income earned.
Other benefits include:
- Dividend income received from abroad is tax exempt (subject to conditions).
- No thin capitalization rules.
- Capital gains from the sale of immovable property situated outside Cyprus is tax exempt.
- Capital gains from the sale of immovable property situated outside Cyprus is tax exempt in Cyprus.
- No withholding tax on outward payments (Dividends-Interest-Royalties) to non-Cyprus Tax residents (companies or individuals).
Moreover, in order to support tax residency and thus economic substance of a Cyprus registered company, appropriate corporate governance procedures and indicators must be in place, such as:
- Strategic decisions should be taken by directors meetings in Cyprus.
- The board of directors should include suitable qualified Cypriot resident individuals.
- The company should maintain employees with a real distinct office in Cyprus through which day to day operations should be processed.
- Maintaining fully documented records of the decision making and administration of the company in Cyprus.
Office Space Solutions For Your Company
The services are aimed at creating business substance in Cyprus for international businesses and companies as well as start-ups
