Fiduciary Services
Offered services include:
* Advising and assisting in the formation of an appropriate business entity in the most advantageous jurisdictions including: Limited companies, International Trusts, International collective investment schemes, International banking units, International financial services companies, International trustee services companies, Shipping companies, Providing nominee shareholders
* Providing local directors to meet the requirements of management and control from Cyprus.
* Acting as trustees of international trusts.
* Acting as escrow agents.
* Providing a company secretary.
* Providing a registered office address together with any required facilities.
* Advising on tax issues relating to: Corporate and personal tax planning, Opting for an appropriate legal structure, Forming an International Tax Strategy, Integrating International Tax Strategy with Corporate Strategy, Tax Treaties, The use of International Trusts, Inheritance and Estate Planning, International tax issues related to the use of Cyprus Companies and other Cyprus Entities in international tax structures
Tax Incentives
* In summary, Cyprus is the “lowest-tax EU Jurisdiction” that is not offshore. The standard corporate tax rate of 10% (0% for shipping companies, 4.25% for maritime management companies) is the lowest in the European Union, and the lowest “non-offshore jurisdiction corporate tax rate” in the world. Cyprus is now a premier holding, finance, royalty and trading company jurisdiction.
* However, Cyprus’ biggest asset is its friendly and investor-friendly Tax Authorities who achieved a long and stable history of always being keen to help foreign investors.
* Invoices from offshore companies are acceptable in Cyprus Companies’ books and payments to offshore companies bear no withholding tax (tax planning point).
* Possibility to obtain Advance Tax Rulings.
* Absence of strict transfer pricing rules.
* No specific substance requirements.
* There is added commercial value and monetary benefits due to the ability to register for EU VAT in Cyprus.
* Trading in securities is essentially a tax-exempt activity as any profit from the disposal of any type of security, irrespective of whether this profit forms part of a company’s trading activity or is of a capital nature.
* The foreign beneficial owners of Cyprus Companies, Branches and Partnerships are not liable to additional tax on dividends or profits over and above the amount paid or payable by the respective legal entities.
* The “out-of-Cyprus profits” of Cyprus Non-Resident Companies are not taxable - escape tax altogether in Cyprus - (Cyprus Companies with management & control exercised outside Cyprus) - in other words an “EU Offshore Vehicle”
* Maritime Management Companies are taxed at 4.25% and shipping income is tax-exempt.
Low personal tax rates that reach a maximum of 30% for income over 20.000 CYP (35.000 EURO) and substantial relief for overseas employment and for non-residents taking up employment in Cyprus for the first time.
* No capital gains tax or net worth taxes except with respect to Real Estate situated in Cyprus.
* Beneficial use of EU Directives that have been transposed into the Cyprus Tax Legislation.
* Wide and exceptionally beneficial Double Tax Treaty Network.
* Attractive Permanent Establishment (PE) rules and generous PE provisions available in the DTT Network.
* Mergers, Takeovers and other Re-Organizations can take place within groups without tax consequence.
* Unilateral tax-relief is granted to all Cyprus Companies for foreign tax suffered irrespective of the absence of a double tax treaty.
* Tax losses are carried forward indefinitely and can also be surrendered as group relief.
* Interest deduction for borrowing costs provided.
* Low duties - taxes on the establishment of companies.
* Very low expense level (fees) for financial and professional service provision compared to other EU Jurisdictions. The difference is more evident in the case of professional service recurring costs (administration, accounting & tax compliance) are estimated to be at 35- 40% of Western European rates!
EU Directives, Cyprus’ Double Tax Treaty Network
* Beneficial use of EU Directives enacted into Cyprus Law (effectively “copied” - transposed into Cyprus Law and their benefits extended to residents of Third Countries):
1. Parent / Subsidiary Directive (no withholding tax on payment of dividends, no transitional period [immediate effect], no minimum participation [shareholding limits], no minimum holding period, dividend exempt subject to conditions, tax credit for tax withheld abroad).
2. Interest / Royalties Directive (no withholding tax on interest paid to non-residents, no transitional period [immediate effect], 25% minimum participation [shareholding] required only in the case of royalties, no minimum holding period, interest taxed depending on nature, royalties subject to corporation tax, tax credit for tax withheld abroad).
3. Merger Directive (involves resident and Non-Resident Companies, leads to elimination of the tax consequence of any reorganization, merger, division, transfer of assets, and exchange of shares).
* Cyprus has a wide and beneficial Double-Tax Treaty (DTT) Network. There are currently 40 DTTs in force and 39 others being negotiated. It has to be noted here that Cyprus has fewer DTTs than some competing EU Jurisdictions, but in many cases more beneficial than its competitors’ treaties such as those with Russia, Romania, Yugoslavia and the whole of Eastern Europe; and the Middle East. The existence of these treaties, combined with the low overall tax paid by Cyprus Companies, offer significant possibilities for international tax planning through the island.
* A significant number of double tax treaties concluded by Cyprus, lowers or eliminates foreign withholding taxes on dividends, interest and royalties or capital gains paid out from or arising in the contracting states, some also include particularly beneficial tax sparing credit provisions for dividends, interest and royalties. A "tax sparing credit" is a tax credit available to the recipient, which is higher than the actual tax paid in Cyprus. Tax Sparing Credit provisions can be found in the treaties concluded with Canada, China, Czech and Slovak Republics, Denmark, Egypt, Germany, Greece, India, Ireland, Italy, Malta, Mauritius, Poland, Romania, Russia, Syria, Thailand, UK and former Yugoslavia.
Cyprus Holding Companies
Apart from the generic features of the tax system, the DTT Network and the adoption of EU Directives, other important features of the tax system beneficial to Cyprus Holding Companies are the following:
* Participation Exemption:
1. Foreign dividends are tax-exempt (provided that a minimum 1% holding in the company paying the dividend is maintained. Also note that this exemption does not apply if the non-resident company paying the dividend carries on, directly or indirectly, more than 50% of investment activities - passive income - AND the overseas tax burden is significantly lower than the Cyprus Tax Burden [(practically interpreted by the Tax Authorities to mean less than 5% “headline tax”] and NO other rules, minimum holding period, minimum investment thresholds etc.).
2. No capital gains tax is payable on the sale or transfer of securities and the gains are exempt from Income Tax (except gains from disposal of shares in companies owning Real Estate situated in Cyprus - only to the extent that the gain relates to the particular Cyprus Real Estate). Also, profits from a Permanent Establishment (PE) outside Cyprus are tax-exempt and its losses can be set-off against Cyprus Income (this exemption also does not apply if the PE carries on more than 50% of investment activities - passive income - AND the overseas tax burden is significantly lower than the Cyprus tax burden). This exemption (PE) in conjunction with the use of some of Cyprus’ DTTs can result in PE profits avoiding tax altogether.
In conclusion, the Cyprus Tax System Enables:
* The extraction of foreign sourced dividends, at mitigated or zero rates of foreign withholding tax (owing to the use of the Parent Subsidiary Directive or the Use of Double Tax Treaties if the Directive is not applicable).
* The receipt of foreign dividends at zero rates of corporation tax or special defense contribution (local withholding tax) or any other local taxes (subject to conditions - anti avoidance provisions that are easy to satisfy), i.e. “an EU Holding Company with no domestic tax leakage on holding activities”.
* The distribution of available profits to non-resident shareholders at zero rates of dividend withholding tax, irrespective of jurisdiction or the absence of a DTT (even to offshore jurisdictions).
* Allows for the realization of capital gains from the disposal of shares in foreign companies at zero rates of corporation and capital gains tax on the gains”, irrespective of holding period and shareholder percentage and no capital gains tax on the liquidation of the Holding Company itself.
For more details contact:
cypruscompanies@gmail.com