INTERNATIONAL BUSINESS AND TAX PLANNING

A. ADVANTAGES OF ESTABLISHING CORPORATIONS AND OTHER LEGAL ENTITIES IN CYPRUS

A summary of the most important advantages is given below:

No withholding tax on dividends;

Profits of partnerships are fully tax exempt;

Profits of branches are fully tax exempt, where management and control are outside Cyprus;

Tax deductions include all operating expenses, as well as annual allowances on fixed assets;

No estate tax on inheritance of shares in a Cyprus company;

No capital gains tax, except on sale of immovable property situated in Cyprus;

No stamp duties on contracts entered into by entities;

Foreign employees of offshore companies are exempt from social insurance contributions;

Foreign employees of offshore entities providing services in Cyprus, are liable to Cyprus income tax at a rate equal to half the normal Cyprus tax rates;

Foreign employees of offshore entities working outside Cyprus but receiving their salaries out of foreign funds remitted through Cyprus are liable to Cyprus income tax at a rate equal to one-tenth of the normal Cyprus tax rates;

No import duty for the importation or purchase of cars, office and household equipment (except furniture and air-conditioning equipment) for the use of the offshore entity and its foreign employees;

Freely transferable currency accounts (in any currency) may be kept both in Cyprus and abroad;

No exchange control restrictions;

Work permits for foreign employees and residence permits for their families are readily obtained.

B. TYPES OF CYPRUS LEGAL ENTITIES

1. Cyprus offshore entities can operate under the following forms

Limited company
Limited or general partnership

2. Branch of a foreign business

The entity registered in Cyprus must belong, directly or indirectly, exclusively to aliens (the term alien here refers also to persons of Cypriot origin living abroad); and
The income of the entity must be derived from sources outside Cyprus.