Why Set-up Business in Cyprus?
The Cyprus tax system, combined with the island’s infrastructure, highly skilled workforce and membership of the European Union contributes to making Cyprus an attractive jurisdiction for setting-up business operations.
The aspects of Cyprus’s advantageous tax system worth highlighting include:
- Corporate income tax rate of 12.5%, one of the lowest in the European Union.
- Dividends paid to non-resident shareholders are exempt from tax in Cyprus.
- No tax arises on the liquidation of a Cypriot company owned by non-resident shareholders, despite the method of liquidation.
- Cyprus companies are entitled to a notional interest deduction (NID) upon the introduction of new equity.
- Dividend income received by a Company is exempt from tax irrespective of its source provided that the company paying the dividend either (i) engages directly or indirectly in more than 50% of activities that give rise to non-investment income or (ii) the tax burden on the dividend paying company’s income is not lower than 6.25%.
- Any gain derived from the disposal of securities is tax exempt. By securities we refer to shares, bonds and debentures.
Errors to Avoid
Despite all of the benefits, Companies in Cyprus can come unstuck, usually as a result of the the fact that they are not made aware on time that they are:
- Required to submit an annual corporate income tax return;
- Required to prepare annual financial statements in Greek and
- A Company annual return must be submitted to the Registrar of Companies.
Failing to submit the above on time leads to fines and penalties.
Another common issue is that private limited companies incorporated in Cyprus are not made aware on time that they can have one shareholder who can also be the manager or an employee of the Company. This lack of knowledge leads to unnecessary expenses as the Company may employ personnel to perform a duty which can be done by an existing personnel.