Cyprus is at the crossroads of three continents Europe, Asia and Africa. The strategic location of Cyprus was the main driver that developed the region into an international trade hub since the Bronze age with neighboring areas (Egypt, Middle East, Aegean Sea and other Eastern Mediterranean regions).
Over the last decades and following 2004 when Cyprus became an EU member (Eurozone member since 2008), it became an international service centre benefiting from its highly educated people (one of the highest in Europe), the information and technology infrastructure as well as its attractive tax regime supported with its extensive double tax treaty network. The corporate tax rate is 12,5%, one of the lowest in the EU. It should be emphasized, however, Cyprus’ tax regime fully complies with EU and OECD requirements.
Characteristics of the tax regime
- Full compliance with EU Directives relating to direct and indirect taxation,
- Accepted by OECD,
- Tax treaty network with approximately 60 countries,
- Corporate tax rate is 12,5%,
- The effective tax rate of companies benefiting from the IP box regime can be as low as 2,5%,
- Dividends and interest paid by a Cyprus company to non-Cyprus tax residents is not subject to withholding taxes. The same will apply for royalties provided that they do not derive from Cyprus sources,
- Profit on disposal of titles (i.e. shares, bonds) is exempt unless the company whose shares are disposed owns immovable property situated in Cyprus,
- Dividend income generated by a Cyprus company is in the vast majority of the cases exempt from tax,
- Foreign taxes can be claimed as a relief against Cyprus tax even if no double tax treaty is in force with the foreign country (i.e. unilateral relief provisions),
- Non Cyprus domicile individuals who are Cyprus tax residents are not subject to tax on interest and dividend income. There is also a partial exemption on rents,
- High salaried employees relocating to Cyprus can benefit from tax exemptions of 20% or 50% of their emoluments