Investment through Cyprus

Cyprus is a European Union member state with advanced legislation. Registration and maintenance costs of Cyprus companies are not high compared to other European Union countries. Nominee directors and shareholders services are actively being used in Cyprus.

Corporate income tax rate is one of the lowest in the European Union and amounts to 12.5%. This makes Cyprus a more favourable jurisdiction for doing business in comparison with many other “onshore” jurisdictions. In addition, Cyprus legislation provides for a number of legal mechanisms to optimise a tax base. Optimisation of a tax base is possible through the use of the IP-box regime or “notional interest deduction” (“NID”). You may find our article regarding the NID at the following link.

The income tax does not apply to profits received by Cyprus companies from the sale of securities. This means that a company can trade in securities without giving rise to any tax implications in Cyprus.

Under Cyprus law securities mean shares, bonds, debentures, founders’ shares and other securities of Cypriot or overseas legal entities.

In addition, securities include options on securities, short positions on securities, futures/forwards and swaps on securities, depositary receipts on securities (ADRs, GDRs), the right of claim on bonds and debentures (except for the right on interest on these instruments), index participation (provided that they result on securities), repurchase agreements, Repos on securities, units in open-end or close-end collective investment schemes.

As a general rule, dividends received by a Cyprus company are not subject to income tax. However, the income tax applies if the paid dividends are deducted from the taxable income of the company distributing them.

It is worth noting that in certain cases dividend income is subject to special contribution for defence at the rate of 17%.

In case of dividends from companies – tax residents of Cyprus, the contribution is paid in case of non-compliance with certain antiavoidance provisions.

In the case of dividends received from companies that are not tax residents of Cyprus, the contribution is paid where:

1. more than 50% of the distributing company’s activities result directly or indirectly from investment income; and
2. the effective tax rate of the company that distributes the dividends is significantly lower than the Cyprus’ tax rate, i.e. such rate is less than 6.25% of the distributed profits.

Cyprus legislation is loyal and flexible, which makes it easier to run your business and optimise costs.

Taking into account the relatively low corporate income tax rate, various legal mechanisms to optimise a tax burden, as well as the absence of taxation on the sale of securities and received dividends, Cyprus appears as an attractive jurisdiction for investment activities.