Increase Your Company’s Profits with an effective international tax planning strategy

| June 4, 2012

Cyprus – An attractive destination for businesses and individuals

Cyprus is located in the eastern Mediterranean Sea in the crossway of the Middle East, Europe, Africa and Asia. It’s the third biggest island of the Mediterranean, with hot summers and cool winters, providing the ideal place for summer vacations with more than 300 sunny days every year. The island’s physical location played an important role, transforming it into a worldwide corporate Centre.

Cyprus international business company in international tax planning

The island is a full member of the EU since 2004 and embraced the Euro as its official currency since 2008. With a corporate income tax of 10% (the lowest in the European Union) along with a well-organized and state of the art corporate, financial, banking and legal sector, Cyprus company incorporations distinguishes one of the best corporate tax systems in the EU. Double Taxation Treaties (DTT) form a vital instrument for international tax planning. Cyprus has over 45 Double Taxation Treaties (DTT) including almost all the comparatively high taxed European nations.

The most important reasons why Cyprus is an attractive location for company registrations and worldwide investments are:

  • Corporate tax: 10% – the lowest in the European Union
  • Tax on dividends received from a foreign country: 0%
  • Corporate tax on earnings from trading in securities: 0%
  • VAT: 17% – EU’s average standard VAT rate is 19.34%
  • Withholding tax on payments of dividends, royalties and interest to non-residents: 0%

The use of Cyprus company structures in international tax planning

In the recent years, Cyprus became a worldwide business platform with emerging financial and corporate activities for international business companies (Cyprus Limited Liability Companies with shares) mostly because of the tax inducements enjoyed by such incorporations through Cyprus.

Since 2003 a limited company established in Cyprus  is taken as being Cyprus tax resident if management and control is carried out locally. A company registered in Cyprus after 1 / 1 / 2003 is subject to a corporate income tax of 10%.  While the Cyprus legal framework has no definition for management and control, it is acknowledged as being the place at which main decisions are taken and where the directors most of the time reside.

The main features behind most of the company structures including a Cyprus International Business Company (Figure 1.) are the treatment of:

  • Investments
  • Funds
  • Trading
  • Debt / Loans
  • Intellectual Property
  •  Royalties
  • Services
  • Product Supply


Figure1: Cyprus Company Structure


In order to gain the full benefit of the prospects that Cyprus provides it’s essential to establish a local legal entity – a Cyprus Limited Liability Company (LTD) with shares. At present, there are over 100.000 international business companies incorporated in Cyprus, of which only 2,2% maintain staffed offices.

Category: Tax

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