TAXATION OF INTERNATIONAL BUSINESS COMPANIES
International business companies have lost their preferential tax treatment. No specific rules and relief are available nor will they have to restrict to offshore business any more. The old system has been supplemented by the general tax system, which combines rules favourable to domestic and international business as well. In various situations the new regime will be even more attractive than the old one and is expected to greatly enhance Cyprus’s competitiveness and make it even more attractive jurisdiction through which to conduct international business.
The new legislation introduces a uniform corporate tax rate of 10% for all companies, which is the lowest in the EU but more importantly however, various types of income can escape taxation altogether.
Exemption of dividend income coupled with Cyprus’s treaty network makes Cyprus an attractive holding Company jurisdiction.
The new legislation exempts dividend income from Cyprus and from abroad from taxation, provided that a minimum 1% holding in the company paying the dividend is maintained. The paying company must not carry on more that 50% investment activities which give rise to investment income and the foreign tax burden must not be significantly lower that the Cyprus tax burden, for the exemption to apply.
Income from trading in securities is completely exempt from tax.
The new legislation exempts from taxation, any profit from the disposal of securities irrespective of whether this profit forms part of its trading activity or is of a capital nature.
Profits from a permanent establishment abroad are exempt from tax
Profits from a permanent establishment maintained by a Cyprus company abroad will be exempt from taxation in Cyprus. This, in conjunction with the use of a Cyprus extensive treaty network, can result in such profits escaping taxation in the operating location as well.
Non withholding tax on dividends, interest, royalties
There is no withholding tax on dividends, paid to non-resident shareholders irrespective of the existence of a double tax treaty with the country of residence. In addition no withholding tax applies to interest derived from Cyprus as well as royalties derived from sources outside the Republic.
Exemptions of capital gains
No capital gains tax arises except on the disposal of immovable property which is situated in the Republic, or shares in a company which owns immovable property in Cyprus, therefore, Cyprus companies can be used to hold real estate outside Cyprus with no capital gains tax payable on their disposal.
BRANCH
A branch of a foreign company may be registered in Cyprus with the Company Registrar of Cyprus under the relevant section of the Companies Law. A branch does not constitute a legal entity different from that of its founding overseas company.
There are two types of branches:
• Local branch of a foreign company
• International business branch of a foreign company
A local branch of a foreign company is a branch carrying out operations in Cyprus and offering services to locals.
An international business branch is a branch carrying on business outside Cyprus and offering services to non-residents. It is subject to no exchange control.
The new legislation introduces a uniform corporate tax rate of 10% for all companies, which is the lowest in the EU but more importantly however, various types of income can escape taxation altogether.
Exemption of dividend income coupled with Cyprus’s treaty network makes Cyprus an attractive holding Company jurisdiction.
The new legislation exempts dividend income from Cyprus and from abroad from taxation, provided that a minimum 1% holding in the company paying the dividend is maintained. The paying company must not carry on more that 50% investment activities which give rise to investment income and the foreign tax burden must not be significantly lower that the Cyprus tax burden, for the exemption to apply.
Income from trading in securities is completely exempt from tax.
The new legislation exempts from taxation, any profit from the disposal of securities irrespective of whether this profit forms part of its trading activity or is of a capital nature.
Profits from a permanent establishment abroad are exempt from tax
Profits from a permanent establishment maintained by a Cyprus company abroad will be exempt from taxation in Cyprus. This, in conjunction with the use of a Cyprus extensive treaty network, can result in such profits escaping taxation in the operating location as well.
Non withholding tax on dividends, interest, royalties
There is no withholding tax on dividends, paid to non-resident shareholders irrespective of the existence of a double tax treaty with the country of residence. In addition no withholding tax applies to interest derived from Cyprus as well as royalties derived from sources outside the Republic.
Exemptions of capital gains
No capital gains tax arises except on the disposal of immovable property which is situated in the Republic, or shares in a company which owns immovable property in Cyprus, therefore, Cyprus companies can be used to hold real estate outside Cyprus with no capital gains tax payable on their disposal.
BRANCH
A branch of a foreign company may be registered in Cyprus with the Company Registrar of Cyprus under the relevant section of the Companies Law. A branch does not constitute a legal entity different from that of its founding overseas company.
There are two types of branches:
• Local branch of a foreign company
• International business branch of a foreign company
A local branch of a foreign company is a branch carrying out operations in Cyprus and offering services to locals.
An international business branch is a branch carrying on business outside Cyprus and offering services to non-residents. It is subject to no exchange control.
posted by Prosperous Consultants at
02:22
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