International Business Companies

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Cyprus is considered by major business organisations across Europe to be the most attractive place within the EU for the establishment and control of international businesses due to its favourable tax regime, combined with its excellent geographical position and of the highest quality services such as banking, legal, finance and others.

Cyprus International Business Companies (IBC) can enjoy some of the following major fiscal advantages:

  • No distinction between local companies and IBCs. Profits before tax of IBCs and any branches managed and controlled from Cyprus are taxed at the flat rate of 12,5% as from the year 2013, which is one of the lowest tax rates in the EU.

  • Profits from the sale or transfer of securities are exempt from Corporation tax, and the gains are exempt from Income Tax (except gains from disposal of shares in companies owning Real Estate situated in Cyprus).

  • Dividend income is also exempt from Corporation tax under certain conditions. This exemption will not apply if more than 50% of the paying company’s activities result directly or indirectly in investment income and the foreign tax burden is substantially lower than that in Cyprus (practically interpreted by the Tax Authorities meaning less than 5% “headline tax” – not effective tax burden).

  • Interest earned from trading or closely connected activities is only taxed under corporation tax.

  • An extensive network of double tax treaties have been concluded with other countries (currently with more than 40 countries) and can be used to their benefit.

  • Profits from a Permanent Establishment abroad are exempt from Corporation tax, and its losses can be set-off against Cyprus Income, given that less than 50% of their activities result in investment income and that the foreign tax burden is significantly lower than the Cyprus tax burden.

  • No withholding tax on dividend distribution to non-tax-residents, irrespective of whether the recipient is a body corporate or individual, its country of residence or the existence of a DTT.

  • Tax losses may be carried forward for 5 years and may be utilized by way of group relief.

  • Capital gains tax is only charged in the case of sale of immovable property situated in Cyprus, or sale of shares in companies owning Real Estate situated in Cyprus.

  • Beneficial owners assure their anonymity as they do not have to disclose their details to the local tax authorities.

  • Mergers, Takeovers and other Re-Organizations can take place within groups with no tax consequences.

  • The standard VAT rate is 18% (19% as from 13 January 2014) which is one of the lowest VAT rates in the EU and depending on the IBC’s activities, VAT suffered can be recovered.

  • Tax relief of foreign tax paid is granted in Cyprus even in the absence of a double tax treaty, provided sufficient evidence is submitted that foreign tax was indeed paid.   Hence Cyprus turns into a lucrative hub for establishing holding companies