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Save Money on Taxes: Guide to Cyprus Income Tax Rates

By Edited May 14, 2015 1 0

Why are businessmen attracted to this country?

Cyprus Tax Advantages

Time to save money
Cyprus is one of the most attractive places in the world, not only to tourists, but as well to businessmen. Cyprus is able to offer a great way for companies and corporations to reduce their tax payments and it also facilitates a great method of gaining very attractive returns as well.

For a businessman or legal entity (company), Cyprus can be considered as a tax haven. This means that Cyprus offers means to be able to get better tax rates than say if the said businessman uses the rates in his current location.

 

Since in the world of business, tax is quite a big burden, finding means to reduce this is quite a blessing. 

By looking at the Cyprus income tax rates, you will see just why Cyprus is a standout when it comes to providing a tax haven.

Cyprus tax rates follow a progressive system. This means that the rate of taxation is directly proportional to the amount of income which an individual or a company has. In the case of corporate tax, Cyprus implements a 10% rate. This rate is definitely lower than what other areas have to offer, and this is one of the biggest reasons why Cyprus can immediately be considered a great tax haven.

What means of tax reduction can Cyprus offer to a businessman or an entiny?

Cyprus has the lowest corporate tax rate in the European Union (10%)

International Tax Planning Strategies
Credit: Google Images

10 Top Reasons To Invest In Cyprus

Cyprus Investment Promotion Agency - CIPA

Cyprus Taxation Benefits for Companies and Individuals

Cyprus Tax Benefits
Here are other points to consider about the Cyprus income tax rates
 
  1. While residents are required to pay a defense contribution, non-residents of Cyprus (or companies, in this specific case) are exempted from this. 
  2. Companies can avail of a full exemption from capital gains tax as long as it involves the disposal of immovable property outside Cyprus, or shares in a company which involves such immovable property.
  3. There is no withholding tax involved in the profit distribution of a Cyprus based company to individuals and shareholders who are not residents of Cyprus.
  4. The dividends from a foreign source which are received by a Cyprus tax resident company are exempted from corporation taxes.
  5. In the disposal of securities, a private or public Cyprus based company is exempt from taxes.
  6. All the expenses which were incurred for the production of the income of a Cyprus based company is deducted before the taxable income is computed. 
  7. There is a lower withholding tax rates on the dividends remitted to Cyprus from an external subsidiary. This is because of the terms in the Double Tax Treaty (DTT). The purpose of a DTT is to avoid the Double Taxation when the same profits of a legal entity (i.e company) or of a physical entity (i.e an individual) are taxed in two or more countries. Cyprus has established 45 DTTs so far.
  8. If the income of a Cyprus based company is affected by a withholding tax on the country of origin, and this income is again liable to tax in Cyprus, then the tax which was paid abroad can be used as credit against the payable tax in Cyprus. In short, there will be no need to doubly pay for the tax.
  9. There is a very generous rule on losses and how it can be carried forward against future profits indefinitely. This can also be applied to a group of companies in that the losses of one company can, in effect, be consolidated and carried forward against the profits of another company, thus reducing or cancelling the losses. 

As you can see, there are indeed a lot of reasons why Cyprus is considered as one of the best tax havens in the world.

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