Cyprus Company Formations to Rise with Latest Double Tax Treaty Network Update
Cyprus has significantly expanded its double tax treaty network over the past 3 to 4 years and there are continuous efforts to increase it even more.
Its network now consists of 57 countries, a very significant amount for the island of Cyprus.
Cyprus’ Tax Treaty partners today are shown below:
In addition, on 8th May 2017, Cyprus and Luxembourg signed an income and capital tax treaty that is expected to come into force as from 1st January 2018 upon ratification by both parties. Cyprus has also negotiated and agreed double tax treaties with Monaco, Oman and Barbados (only the signing of these is pending).
Cyprus is currently negotiating the signing of double tax treaties with Netherlands, Sri Lanka, Israel, Jordan, Malaysia, Panama and Vietnam. In addition, it will soon start negotiations with Kazakhstan, Tajikistan, Nigeria and Pakistan.
Given the above, individuals and investors can choose Cyprus to set up their companies and take advantage of this extensive network of double tax treaties as well as the many other tax advantages that Cyprus offers.
Tax treaties in Cyprus and most countries legally supersede local tax legislation and, for this reason, they are a useful tax-planning tool to protect businesses and individuals against double taxation of income earned in other countries.
Many of the tax treaties that Cyprus has signed eliminate or significantly reduce the withholding tax on dividends, interest and royalties. In addition, some of them do not include the clause that gains from the alienation of shares in property-rich companies are taxed in the State where the property is situated. Therefore, any gains arising from the alienation of shares in such companies will be taxed only in the state where the alienator is situated. If the alienator is a Cyprus company, the gains from the sale of such shares are exempt from taxation in Cyprus.
Other features of the Cyprus tax system:
- 12.5% corporate tax rate
- Dividend participation exemption
- Profits from the trading and disposal of securities (e.g. shares, bonds, debentures) are tax exempt
- No succession taxes
- No withholding taxes
- Individuals who take up residence in Cyprus can apply for non-domicile status which offers significant tax advantages
- No tax on worldwide dividends and interest income for a period of 17 years for non-domiciled individuals
- 50% exemption on income from employment in Cyprus for a person who was not previously resident in Cyprus. The exemption applies for ten years, if the income from employment in Cyprus exceeds €100.000 per annum.
- 20% exemption with a maximum amount of €8.550 annually on income from employment in Cyprus of a person who was not previously resident in Cyprus. For employments commencing during or after 2012, the exemption applies for a period of 5 years starting from the tax year following the year of commencement of the employment with the last eligible tax year being 2020.
- Low social insurance contributions (7.8% of gross salary) – total employer contributions to various funds amount to 11.5% of gross salaries and total employee contributions to 7.8%.
- Tonnage Tax for shipping companies
- Attractive IP regime
- Notional interest deduction scheme
Contact one of our officers NOW to get more detailed information about the double tax treaties and their uses, the benefits of the Cyprus Tax system or to initiate the incorporation of a Cyprus registered company and start reaping the full benefits of an onshore, low-tax, EU jurisdiction.
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