tax

Nasos A. Kyriakides & Partners, LLC expert team of attorneys and tax specialists will provide you with corporate tax planning advice to reduce tax liability in effective and feasible ways. We have extensive experience in all aspects of business taxation including tax structuring, international tax planning, value added tax, customs duties and tax finance.

We provide a comprehensive range of services including corporate tax planning and restructuring to achieve the best results; preparation and filing of corporate income tax returns; negotiation and handling of tax disputes; international tax planning and advice on bilateral conventions to avoid double taxation; tax-efficient royalty holding and finance structures; tax advice on international business development.

The Cyprus legal system is founded on English law, and is therefore familiar to most international financiers. Cyprus’s legislation was aligned with EU norms in the period leading up to EU accession in 2004. Restrictions on foreign direct investment were removed, permitting 100% foreign ownership in many cases. Foreign portfolio investment in the Cyprus Stock Exchange was also liberalized. In 2002 a modern, business-friendly tax system was put in place with a 12.5% corporate tax rate, the lowest in the EU. Cyprus has concluded treaties on double taxation with more than 43 countries, and, as a member of the Eurozone, has no exchange control restrictions. Non-residents and foreign investors may freely repatriate proceeds from investments in Cyprus.

In addition to the lowest corporate tax rate in the European Union Cyprus has a number of beneficial tax advantages:

  • A network of favourable double tax treaties
  • Access to EU Directives
  • No withholding tax on dividends and interest paid (non-tax residents of Cyprus
  • No withholding tax on almost all royalties
  • No capital gains on profits from the sale of shares, securities, bonds and units
  • No tax on foreign dividends and interest received
  • No tax on foreign Permanent Establishments (PE)
  • No thin capitalization rules
  • Absence of Controlled Foreign Company

Cyprus’ tax system is in full compliance with EU requirements and also within the OECD requirement against harmful tax practices. The main features of the Cyprus Corporation tax are as follows:

Under the new Income Tax Law, all distinctions between local and international business companies have been removed. The taxation of companies is now based on residence. All companies that are tax resident in Cyprus are taxed on their worldwide income accrued or arising from sources both within and outside Cyprus. Non-resident companies are taxed in Cyprus only on income derived from a permanent establishment or immovable property in Cyprus. A company is resident of Cyprus if it is managed and controlled in Cyprus. Registration or incorporation in Cyprus is not sufficient to render a company liable to tax in Cyprus.

Nasos A. Kyriakides & Partners LLC with more than 10 years of experience can give the proper legal advice on the variety of tax solutions to individuals and/or global entities.  We have advised numerous billion Euro companies with the greatest success.

In addition to expertise in the local taxation legislation in countries where we provide services (either directly or via our associates) our tax consultants have specialist knowledge on International Tax matters, including the benefits from the use of Double Tax Treaty provisions. Through the planning of the optimal group structure for the client and the use of companies registered in several tax jurisdictions, we provide our specialised services to our clients offering to them the most favourable and beneficial structures.

Our Cyprus tax planning services include the following:

  • Advising on the use of the network of favourable double tax treaties.
  • Efficient tax planning to ensure minimization of global tax burden.
  • The tax efficient repatriation of profits
  • International taxation structuring and restructuring
  • Setting up of a foreign branch and/or subsidiary
  • Obtaining tax rulings from the tax authorities
  • Tax efficient financing of the company’s/group’s activities
  • Tailor-made solutions through International Tax Planning Structures

Investment Structures

Private International Collective Investment Structures (“ICIS”) enjoy the status of a regulated fund by the Central Bank of Cyprus, whilst enjoying minimum regulatory supervision.

The purpose of a private ICIS is the collective investment of funds of investors and whose constitutional documents:

  • Restrict the right of transfer of shares
  • Limit the number of investors to 100
  • Prohibit the offering of shares to the public
  • Prohibit the issue of bearer shares

Structure

The most common vehicle for a private ICIS is a company (private or public) with variable capital.  A private company can have up to fifty shareholders.

Formality

A private ICIS must have at least 2 directors, who must be physical persons.  Prior approval of directors must be obtained from the Central Bank of Cyprus who will consider whether a person is “fit and proper” by taking into account relevant educational and professional qualifications, experience and reputation.

There is no obligation to appoint a manager or a trustee.  The appointment of a custodian (which can be a bank in Cyprus, the EU or other recognised jurisdiction), an administrator and an auditor is obligatory.  A fund manager is usually appointed but is not a requirement.  However, the Central Bank also reserves the right to require a fund manager be appointed.

Main Facts

  • The Cyprus Fund receives dividends from an EU subsidiary without the deduction of any foreign taxes, as a result of the EU Parent-Subsidiary Directive;
  • None or reduced foreign taxes are suffered on dividends paid to the Cyprus Fund from a subsidiary in a jurisdiction with a Cyprus double tax treaty
  • The Cyprus Fund is not liable to any taxes on dividends received (subject to easily met conditions)
  • The disposal of shares is unconditionally exempt from all taxes in Cyprus
  • There is no withholding tax on dividends paid by the Cyprus Fund to non-resident unit holders
  • The redemption of units by non-residents does not give rise to any taxes
  • No minimum subscription
  • No minimum capital requirements
  • No investment restrictions

Holding Companies                 

A Cyprus Holding Company is widely used as an ultimate or intermediate holding company to minimise or eliminate taxes arising on dividend income or gains from the disposal of shares.

It is usually used:

  • by groups to hold overseas subsidiaries which generate dividend income streams.  In most cases, the dividends will be tax exempt when the shares are held by a Cyprus Holding Company;
  • to hold subsidiary companies that might be sold in the future.  The gain on disposal will not be taxable in the Cyprus Holding Company;
  • to harness the benefits of the withholding tax provisions found in Cyprus’ extensive double tax treaty network and the EU Parent-Subsidiary Directive;
  • to enjoy the benefits of no taxation over the payment of dividends, interest and royalties;
  • where it may be important to achieve a tax free unwind of the holding company at some stage in the future.

Main Features

  • The Cyprus Holding Company receives dividends from an EU subsidiary without the deduction of any foreign taxes, as a result of the EU Parent-Subsidiary Directive
  • Nil or reduced foreign taxes are suffered on dividends paid to the Cyprus Holding Company from a subsidiary in a jurisdiction with a Cyprus double tax treaty
  • The Cyprus Holding Company is not liable to any taxes on dividends received (subject to easily met conditions)
  • There is no withholding tax on dividends paid by the Cyprus Holding Company to non-resident shareholders
  • The disposal of shares is unconditionally exempt from all taxes in Cyprus

Holding Companies Chart