From a taxation point of view, Cyprus grants many advantages to foreign enterprisers which one of the main reasons the country’s economy is based on foreign investments. The Cypriot corporate tax rate of 12.5% is among the lowest in the European Union. The Government also allows different tax credits which lead to a reduction of all the taxes paid in the country. Taxation in Cyprus is based on tax residency, however the country also has an advantageous tax system applied to foreign companies, including when it comes to the repatriation of profits. The Government does not levy any withholding tax on incomes resulted from dividends and interests which is very important when deciding to set up a company in Cyprus.
Our lawyers in Cyprus can explain in detail the country’s taxation system to foreign investors seeking to start a business in the country.
The profits of foreign companies establishing branch offices or subsidiaries in Cyprus are exempt from taxation provided that certain conditions are met. Also, when taking into consideration Cyprus’ double taxation agreements, permanent establishments of foreign companies may distribute incomes based on the provisions of the agreement at significantly reduced rates or even exempt from any taxes. Additionally, the EU Parent-Subsidiary Directive which allows a Cypriot company to distribute tax- free dividends to foreign shareholder, natural or legal persons within the European Union provided that the shareholder owns different percentages in the shareholding structure of the company.
Cyprus-resident companies are allowed to repatriate profits to their foreign shareholders in the form of dividends at the end of two years following the tax year. The repatriation of profits in Cyprus is exempt from taxation if paid to foreign shareholders. The country of residence is not relevant when it comes to the distribution of profits. Cyprus also offers different tax credits against the taxes on incomes earned in the country and taxed in another state.
For complete information about paying taxes you may ask our law firm in Cyprus. You can also contact us if you want to start a business in Cyprus.
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