• Posted By : Admin
  • Tax havens
  • 22-03-2018
Index [Hide] [Show]

Cyprus is a member country of the European Union in Basin of the Mediterranean Sea; Turkey, Syria, Lebanon and Israel surround it. Cyprus is divided in six regions and only two thirds of the island belongs to the country, the rest is a Turkish territory. Cyprus is considered a modern and economically very stable jurisdiction, being the preferred one for investors located in the European Union due to its low tax rates.

General information

Official language
Greek / Turkish / English
9,250 km2
Form of government
Presidential Republic
Euro (EUR)
UTC time zone
UTC + 2
Legal system
Roman law with great influence of English Common law

Taxes for non-residents in Cyprus

Cyprus maintains unique programs for foreign investment and European Union residence permits. The Cypriot authorities offer favorable tax regime for natural or legal persons with deposits in Cypriot banks, provided that they do not carry out commercial activities with natural and legal persons in Cyprus. Investors who decide to register a company in Cyprus will see that the annual corporate tax rate is one of the lowest in the European Union, 12.5%, with Bulgaria being the country with the lowest corporate tax rate of 10%. The obligatory taxes that a company will have to assume will be the corporate tax and VAT, there are no taxes for the repatriation of dividends, inheritances, donations and neither will it support any type of tax withholdings for subsequent years. Cyprus offers very simple solutions for tax savings as it has numerous tax treaties on double taxation.

Characteristics of Cypriot Companies

Types of companies
Limited liability companies, Company limited by shares, Exempt private company, Company limited by guarantee, Foreign company branch, Collective society, Trusts.
Share capital
The minimum share capital is 1,000 Euros. Depending on the type of company that the client wants to register, this amount may vary. Not paid up share capital.
Constitution time
10-15 days
Cyprus has one of the lowest corporate tax rates in the European Union with only 12.5%.
1 director minimum. The director can be individuals or companies with residence in any country.
1 shareholder minimum. The shareholders can be individuals or companies with residence in any country.
Legal address
It is obligatory to have a legal address on the territory of the country. When the director of the company is a foreigner, a registered resident agent must be appointed, whose function will be to receive communications from governmental authorities and represent the company.
The Commercial registry is public, that is, information about the directors and shareholders of the Cypriot company is available to the public. However, usage of nominees will allow you to cover the identity of the final beneficiary.
Board meetings
Meetings of directors or shareholders are not mandatory and can be held anywhere in the world.
Accounting / annual audit
The Cypriot companies have to present the accounts annually, keep the VAT records every 3 months and depending on the turnover of the company audit will be mandatory or not.

Financial system in Cyprus

Financial services
Banks in Cyprus are specialized in e-commerce, stock exchange investments, currency exchange; also the customer may request any type of financial services: checking accounts, savings accounts, virtual pos, credit cards, foreign currency accounts, investment accounts in Stock market, credits and Mortgages.
Limitations of cash payment
There are no limitations on cash payments nor there is exchange control. Banks in Cyprus can open accounts in numerous currencies Euros, US $, GBP, AUD, CAD, CNY, JPY.
Deposit guarantee
Cypriot banks cover 100.000 EUR of client´s deposits.

Automatic information exchange in Cyprus

Cyprus has signed the automatic exchange of information treaty that has entered into force on January 1 of 2017 and it has also signed 52 bilateral agreements of automatic exchange of information.

The signatory countries of the agreement

Year 2017
Anguilla, Argentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Groelandia, Guernsey, Hungary , Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Holland, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovakia, Slovenia, South Africa, Spain, Sweden, Turks and Caicos Islands, United Kingdom.
Year 2018
Andorra, Antigua and Barbuda, Aruba, Australia, Austria, Bahamas, Barein, Belize, Brazil, Brunei, Canada, Chile, China, Cook Islands, Costa Rica, Curaçao, Dominica, Ghana, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Kuwait, Lebanon, Marshal Islands, Macao (China), Malaysia, Mauritius, Monaco, Nauru, New Zealand, Panama, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, San Maarten, Switzerland, Trinidad and Tobago, Turkey, United Arab Emirates, Uruguay and Vanuatu.

Automatic exchange of banking information agreement does not affect the fiscal status of the country, that is, Cyprus has programs to encourage foreign investment and considers that natural persons and companies not resident in Cyprus are not obliged to pay taxes or to submit any type of tax declaration. As we have mentioned before, the companies and the individuals residents in Cyprus would be the ones obliged to pay the tax. The treaty of automatic exchange of information is causing many problems between countries since it is NOT a treaty in which automatic information will be reported to each other or all to all, that is, each country will have to sign a bilateral information agreement automatically with another country. What does this mean? If, for example, Anguilla is interested in exchanging information with Cyprus but Cyprus is not interested in reporting information to Anguilla, there will be NO information exchange and clients privacy will be protected. Currently, 22-03-2018 Cyprus has signed 52 bilateral agreements on the automatic exchange of information, mainly with all European Union countries. You can see the updated list of countries that have signed bilateral agreements to exchange information automatically with each other.

The bilateral agreements with Cyprus

Year 2017
Andorra, Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Colombia, Croatia, Czech Republic, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Japan, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Mexico, Monaco, Holland, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, United Kingdom, Uruguay.
Year 2018
No bilateral agreement has been signed for this year.

The countries most affected by the signature of the automatic exchange of information treaties are going to be the countries of high taxation and not the offshore jurisdictions. It is expected that high tax countries sign bilateral agreements with each other with the corresponding problem that these have: competition in investments, tax competition and abandonment of investments in other jurisdictions by countries with lower or no taxation allowing legal repatriation of them to the country of fiscal residence.

Using offshore jurisdictions what can be achieved is a reduction and postponement of tax payments. As a general rule high-tax countries force natural and legal persons to declare all the world's income. But what happens when you have an offshore company and you do not divide dividends or have gone bankrupt? For example, an individual has a company and bank account in Cyprus, the company has generated annual benefits and the final beneficiary doesn’t want to repatriate them to his country of residence. So what happens? The answer is very simple: there will not be any kind of tax payment until the benefits obtained from Cyprus reach the territory of a tax residence of the final beneficiary. Therefore, if you are required to report benefits obtained from abroad, it is advisable to inform your tax agency so when you will be offered a tax advantage in your country of residence to repatriate them.

Advantages of Cyprus

Cyprus is one of the best offshore jurisdictions to invest for the following reasons: 

  • Low tax rate comparing to other EU countries and no tax obligations for non-residents.
  • Legal security guaranteed by law. 
  • Jurisdiction specialized in asset protection and tax planning.
  • Little bureaucracy when it comes to obtaining commercial licenses, company formation and bank account opening.
  • No restriction by nationality. 
  • Excellent geographical location. 
  • Economically stable financial center
  • Attractive residence programms.