International companies and investors around the world have a wide range of jurisdictions to choose from when it comes to establishing or expanding their businesses. Cyprus is an increasingly popular choice for these global expansion strategies, relocation plans or start-up launches. Especially over the past few decades and continuing today in 2022.
Why is Cyprus Good for Business?
There are multiple reasons why Cyprus ranks so high on the list of places to expand your business. Not least because English is spoken widely throughout, and the destination is in an ideal position at the crossroads between east and west. Easily accessible from Europe, Africa, the Middle East and Asia, the Mediterranean island also boasts a significant number of financial advantages. Many investors and businesses choose to expand in Cyprus due to the excellent financial infrastructure. However, it also has one of the most beneficial and stable tax systems in the region.
Cyprus already has a strong reputation as an international financial centre, offering a unique, investor friendly business climate. Here are some of the main advantages of expanding your business in Cyprus
- Respected EU jurisdiction with tax exemptions for dividend payments made by companies in other EU Member States
- One of the lowest corporate tax rates in the EU at 12.5%
- Attractive tax breaks
- English spoken widely
- Highly educated workforce with high rate of multi-lingual graduates
- Quick and easy to register and incorporate a company with minimum capital contribution requirements
- Strong reputation as an international financial centre
- Possible to buy a company 'off the shelf'
- Government has a pro-business approach
- Extremely stable unchanging tax system
- Business friendly time zones
- Strategic location between East and West
- Lowest crime rate in the EU
- High level of medical services
- Excellent education infrastructure
Tax advantages for companies in Cyprus
The first tax advantage for companies in Cyprus is that the island has a corporate income tax rate of only 12.5%. This is a flat-out rate, without any conditions to be met in terms of level of turnover or number of employees etc. This rate is also one of the lowest in the EU, making Cyprus a very attractive proposition for companies carrying out trading, servicing, group financing or other activities.
Income from the exploitation of qualifying intellectual property (IP) may, provided that certain conditions are met, be subject to an effective tax rate of only 2.5%, based upon a provision in the Cyprus income tax laws, allowing relevant companies a deduction equal to 80% of chargeable profits from exploitation of such IP.
Tax Exemptions for Businesses in Cyprus
In addition, profits derived by companies in Cyprus from activities overseas may qualify for full income tax exemption. Companies based in Cyprus also enjoy the benefit of a tax exemption system for holding company income, which is the broadest in the EU. After all, gains on the sale of shares in other companies are always exempt from income tax, without any conditions.
There is no other jurisdiction in the EU with such broad income tax exemption system for gains on the sale of shares. Furthermore, the tax exemption system for dividends from foreign companies received by companies in Cyprus is also very broad.
Cyprus does not normally withhold tax over dividend payments made by companies to foreign shareholders. So, there is full flexibility for repatriation of profits generated by a company in Cyprus. In the same way, Cyprus does not levy withholding tax on interest payments made by Cyprus companies to foreign creditors, or over royalty payments made by Cyprus companies, where the related intellectual property is used overseas. Foreign shareholders are not subject to income tax over any gains made on the sale of shares in Cyprus companies.
Further Advantages of Cyprus as a Respected EU base for Business
Another advantage to doing business in Cyprus, is that the destination is a member of the European Union (EU). This means companies in Cyprus may be eligible for tax exemptions for dividend payments made by companies in other EU Member States to these companies.
Furthermore, Cyprus does not have minimum capital contribution requirements for the incorporation of companies. The use of shelf companies is also allowed, and these companies are abundantly available. So, if you want to set up a company in Cyprus and you need the company urgently, it is possible to buy a company 'off the shelf'.
The incorporation procedure is also quick and easy, usually taking between one and two weeks. Incorporation is even easier when you work with a corporate services firm such as Equation. With the support of local experts, the registration of companies for VAT is also a relatively easy procedure in Cyprus.
The financial services industry is the biggest sector in Cyprus and the Government is committed to an investor friendly environment. And investors need skilled and educated people to manage their overseas operations. In response, Cyprus ranks third in the world in terms of number of graduates per capita who hold university degree. So, the country has a well-educated workforce.
Finally, with English being one of the country's official languages, relevant company documents, such as tax returns, articles of incorporation and agreements with the Inland Revenue are all available in English.