International Tax Planning

The tax regulations are designed to fulfil your international business needs!

01

The use of Cyprus International Tax Planning

Cyprus is a low tax jurisdiction with a wide network of double tax treaties. This combination is the reason for its success as an international business centre. 

Cyprus currently has over 50 double tax treaties. The existing wide network of treaties is invaluable to international businesses, and the Cyprus Government is negotiating additional treaties to extend it still further.

Liability to Cyprus tax is based on residency. An individual is resident if he lives in Cyprus for one or more periods that together exceed 183 days per fiscal year. A company is resident if its management and control is in Cyprus. Incorporation in Cyprus is no longer sufficient to establish residence in Cyprus. Companies not having management and control in Cyprus will only be taxed on Cyprus sourced income and will not be able to take advantage of the Cyprus Double Tax Treaties. They can, however, take advantage of the exemption of foreign dividends, of income from permanent establishments abroad, and from offset of losses from abroad.

Losses can be carried forward for 5 years and losses of a company can be set off against the profits of another company of the same group (group of Cyprus tax-resident companies and a companies within the group in another EU countries) and world-wide losses can be set off against taxable income of the same year, or carried forward. 

Reorganisations and European Cross-Border Mergers - Cyprus Law adopted the Merger Directives of the European Union, while taking into account emerging EU policies, and covers domestic and foreign reorganizations, and reorganizations abroad that have effect in Cyprus; these are exempted from all taxes including Capital Gains Tax, VAT, Stamp Duties and Land Transfer Fees. 

Cyprus is a member of the European Union (EU). As a result, Cyprus holding companies can now receive tax-free dividends from their EU subsidiaries in cases where the Parent - Subsidiary Directive applies, subject to any anti-avoidance provisions in the jurisdiction of the paying company. Interest and Royalties can also be free of withholding taxes through the appliance of the Interest and Royalties Directive.

Taxation of intellectual property ship-owning and ship management companies is very favourable. 

The tax regime offers excellent opportunities for tax planning. The principle benefits are outlined in the foregoing paragraphs, but there are others: 

  • There is no general Controlled Foreign Corporation (CFC) legislation. 

  • Interest paid to non-resident group companies is tax deductible. 

  • There are no thin capitalisation rules.

  • Cyprus holding companies will, in the majority of cases, pay no taxes in Cyprus as there is no tax on gains from the sale of titles and, for the most part, there is no tax on dividends income received from overseas.

02

Cyprus Double Tax Treaties (Incoming Income)

Income received in Cyprus

The following table and accompanying notes list the maximum withholding tax rates that may be deducted from income received by

a Cyprus tax resident from a resident of a country that has signed a tax treaty with Cyprus.

                                                                                          Received in Cyprus

        Paid from                                                         Dividends      Interest           Royalties

                                                                                      %                     %                     %

  1. Armenia                                                      0 (32)                5 (33)               5

  2. Austria                                                        10                      0                      0

  3. Bahrain (31)                                                0                       0                       0

  4. Belarus                                                       5 (4)                  5                       5

  5. Belgium                                                      10 (1)                10 (16)              0

  6. Bulgaria                                                       5 (19)               7 (25)                10 (20)

  7. Canada                                                       15                    15 (7)                 10 (11)

  8. China                                                          10                     10                      10

  9. Czech Republic                                            0 (30)                0                      10

  10. Denmark                                                       0 (34)                0                       0

  11. Egypt                                                           15                     15                      10

  12. Ethiopia(31)                                                   5                       5                      5

  13. Estonia                                                          0                       0                       0

  14. Finland                                                          5 (37)                0                       0

  15. France                                                          10 (2)                10 (9)                0 (26)

  16. Georgia (31)                                                  0                       0                       0

  17. Germany                                                       5 (2)                  0                       0

  18. Greece                                                          25                     10                      0 (12)

  19. Guernsey                                                      0                        0                       0

  20. Hungary                                                        5 (1)                  10 (8)                0

  21. Iceland                                                          5 (39)                 0                       5

  22. India                                                              10 (2)                10 (8)                15 (15)

  23. Iran (31)                                                         5 (19)                5                       6

  24. Ireland                                                            0                       0                       0 (12)

  25. Italy                                                                15                     10                     0

  26. Kuwait                                                            10                     10 (8)                5 (14)

  27. Kyrgyzstan (27)                                              0                       0                       0

  28. Lebanon                                                         5                       5 (16)                0

  29. Lithuania                                                        0 (40)                0                       5

  30. Malta                                                              0 (22)               10 (8)                10

  31. Mauritius                                                        0                       0                        0

  32. Moldova                                                         5 (19)               5                         5

  33. Montenegro (28)                                            10                    10                       10

  34. Norway                                                           0 (3)                0                          0

  35. Poland                                                            0 (36)              5 (8)                     5

  36. Portugal                                                         10                    10                        10

  37. Qatar                                                              0                      0                          5

  38. Romania                                                        10                    10 (8)                   5 (14)

  39. Russia                                                            5 (6)                 0                          0

  40. San Marino                                                     0                      0                          0

  41. Serbia (28)                                                     10                    10                        10

  42. Seychelles                                                      0                      0                          5

  43. Singapore                                                       0                      10 (23)                10

  44. Slovakia (29)                                                  10                     10 (8)                  5 (14)

  45. Slovenia                                                          5                       5 (33)                 5

  46. South Africa                                                   10 (41)               0                        0

  47. Spain                                                              0 (35)                0                        0

  48. Sweden                                                          5 (1)                 10 (8)                  0

  49. Switzerland                                                    0 (38)                0                         0

  50. Syria                                                              0 (1)                  10 (8)                 15 (13)

  51. Tajikistan (27)                                                0                        0                         0

  52. Thailand                                                        10                       15 (17)                5 (18)

  53. Ukraine                                                          5 (21)                  2                         5

  54. United Arab Emirates                                    0                          0                         0

  55. United Kingdom                                             0 (24)                 10                        0 (26)

  56. USA                                                               5 (5)                   10 (10)                 0

  57. Uzbekistan (27)                                             0                         0                          0​

03

Cyprus Double Tax Treaties (Payments)

Payments from Cyprus

Payments of dividends and interest by Cyprus tax residents to non Cyprus tax residents are exempt from withholding tax in Cyprus according to the Cyprus tax legislation. Royalties granted for use outside of Cyprus are also free of withholding tax in Cyprus.

 

The following table and accompanying notes list the maximum withholding tax rates provided in the relevant tax treaties.

                                                                                            Paid from Cyprus

          Paid to                                                               Dividends        Interest         Royalties

                   

                                                                                            %                   %                    %

  1. Non-treaty countries                                            0                    0                     0*

  2. Armenia                                                               0 (32)             5 (33)             5

  3. Austria                                                                 10                   0                    0

  4. Bahrain (31)                                                         0                    0                    0

  5. Belarus                                                                5 (4)               5                    5

  6. Belgium                                                               10 (1)             10                  0

  7. Bulgaria                                                               5 (19)             7 (25)           10

  8. Canada                                                               15                  15 (7)            10 (11)

  9. China                                                                  10                  10                  10

  10. Czech Republic                                                  0 (30)             0                    10

  11. Denmark                                                             0 (34)             0                     0

  12. Egypt                                                                  15                  15                   10

  13. Ethiopia (31)                                                        5                    5                     5

  14. Estonia                                                                 0                    0                     0

  15. Finland                                                                 5 (37)            0                      0

  16. France                                                                10 (2)             10 (9)               0 (26)

  17. Georgia (31)                                                         0                   0                      0

  18. Germany                                                              5 (2)              0                      0

  19. Greece                                                                 25                 10                    0 (12)

  20. Guernsey                                                              0                   0                      0

  21. Hungary                                                                0                 10 (8)                0

  22. Iceland                                                                  5 (39)           0                      5

  23. India                                                                     10 (2)           10 (8)              15 (15)

  24. Iran (31)                                                                5 (19)           5                       6

  25. Ireland                                                                   0                  0                       0 (12)

  26. Italy                                                                       0                  10                      0

  27. Kuwait                                                                  10                 10 (8)                5 (14)

  28. Kyrgyzstan (27)                                                    0                   0                       0

  29. Lebanon                                                               5                   5 (16)                0

  30. Lithuania                                                              0 (40)            0                        5

  31. Malta                                                                   15                  10 (8)                 10

  32. Mauritius                                                              0                    0                        0

  33. Moldova                                                               5 (19)             5                        5

  34. Montenegro (28)                                                  10                  10                      10

  35. Norway                                                                 0                    0                         0

  36. Poland                                                                  0 (36)             5 (8)                    5

  37. Portugal                                                               10                   10                      10

  38. Qatar                                                                    0                      0                        5

  39. Romania                                                              10                   10 (8)                  5 (14)

  40. Russia                                                                   5 (6)                0                         0

  41. San Marino                                                            0                     0                         0

  42. Serbia (28)                                                            10                  10                       10

  43. Seychelles                                                             0                     0                         5

  44. Singapore                                                              0                    10 (23)               10

  45. Slovakia (29)                                                         10                   10 (8)                 5 (14)

  46. Slovenia                                                                 5                     5 (33)                5

  47. South Africa                                                           10 (41)            0                        0

  48. Spain                                                                      0                     0                        0

  49. Sweden                                                                  5 (1)               10 (8)                  0

  50. Switzerland                                                            0 (38)               0                        0

  51. Syria                                                                      0 (1)                10 (8)                15 (13)

  52. Tajikistan (27)                                                        0                        0                       0

  53. Thailand                                                                10                     15 (17)              5 (18)

  54. Ukraine                                                                  5 (21)                2                       5

  55. United Arab Emirates                                            0                       0                        0

  56. United Kingdom                                                     0                      10                       0 (26)

  57. USA                                                                       0                      10 (10)                0

  58. Uzbekistan (27)                                                     0                       0                         0

Notes

* 10% in the case of royalties granted for use within the Republic.

5% on film and TV rights.

(1) 15% if received by a company controlling less than 25% of the voting power.

(2) 10% if received by a company controlling more than or equal to 10% of the capital. 15% in all other cases.

(3) NIL if the beneficial owner is a company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividend. 15% in all other cases.

(4) 5% if the amount invested by the beneficial owner is over €200.000 irrespective of the % of voting power acquired. 10% is imposed if received by a holder of at least 25% of the share capital of the paying company. Otherwise the rate is 15%.

(5) 5% if received by a company controlling at least 10% of the voting power. 15% in all other cases.

(6) 10% if received by company, which has invested less than €100.000.

(7) NIL if paid to the Government or for export guarantee.

(8) NIL if paid to the Government of the other State or to a financial institution.

(9) NIL if paid to the Government of the other State or in connection with the sale on credit of any industrial, commercial or scientific equipment or any merchandise by one enterprise to another or in relation to any form of loan granted by a bank or is guaranteed from government or other governmental organisation.

(10) NIL if paid to the Government of the other State, to a bank or a financial institution or in respect to debt obligations arising in connection with sale of property or the provision of services.

(11) NIL on literary, dramatic, musical or artistic work with the exception of films used for television programs.

(12) 5% on film royalties (except films shown on TV).

(13) 10% on literary, musical, artistic work, films and TV royalties.

(14) NIL on literary, artistic or scientific work including films.

(15) Treaty rate restricted to Cyprus legislation rate of 10%. 10% also applies to payment of technical fees, management fees and consultancy fees.

(16) NIL if paid to the Government of the other State, a political subdivision or a local authority, the National Bank or any institution the capital of which is wholly owned by 

the State or a political subdivision or a local authority or in the form ofinterest income from bank deposits.

(17) 10% on interest received by financial institutions, on interest paid in connection with industrial, commercial, scientific equipment or the sale or merchandise between two companies.

(18) 10% on right to use industrial, commercial or scientific equipment or for information concerning industrial, commercialor scientific experience and 15% for patents, trademarks,designs, models, plans, secret formulas or processes.

(19) 5% if the dividend is received by a company owning directly at

least 25% of the capital of the company paying divided. 10% in all other cases.

(20) This rate does not apply, where 25% or more of the capital of the Cypriot resident is owned directly or indirectly by the Bulgarian resident paying the royalties and the Cyprus company pays less than the normal rate of tax.

(21) 5% is applicable if the dividend is received by a company owning at least 20% of the capital of the dividend paying company or has invested in the acquisition of shares or other rights of the dividend paying company of at least €100.000. 15% in all other cases.

(22) The treaty provides that the tax on the gross amount of the dividends shall not exceed that chargeable on the profits out of which the dividends are paid.

(23) 7% if paid to a bank or similar financial institution. NIL if paid to the government.

(24) The treaty provides for 15% withholding tax but the local taxation provides for 0% withholding tax.

(25) NIL if paid to or is guaranteed by the Government, statutory body, the Central Bank.

(26) 5% on film royalties, including films used for television programs.

(27) The treaty between the Republic of Cyprus and the United Soviet Socialist Republic still applies.

(28) The treaty between the Republic of Cyprus and the Socialist Federal Republic of Yugoslavia still applies.

(29) The treaty between the Republic of Cyprus and the Czechoslovak Socialist Republic still applies.

(30) NIL if the beneficial owner is a company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividends where such holding is being possessed for an uninterrupted period of not less than one year.

5% in all other cases.

(31) The treaty has been published in the Gazette but has not come into effect until the time of publication.

(32) 5% if the beneficial owner has invested in the capital of the company less than the equivalent of €150.000 at the time of he investment.

(33) NIL if paid to the Government or to a local authority, or to the Central Bank.

(34) NIL if the beneficial owner is a company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividends, where such holding is being possessed for an uninterrupted period of no less than 12 months.

NIL if the beneficial owner is the other Contracting State or the Central Bank of that other State, or any national agency or any other agency (including a financial institution) owned or controlled by the Government of that other State. 

NIL if the beneficial owner is a pension fund or other similar institution providing pension schemes in which individuals may participate in order to secure retirement benefits, where such pension fund or other similar institution is established, recognized for tax purposes and controlled in accordance with the laws of that other State. 15% in all other cases.

(35) NIL if the dividend is received by a company (other than a partnership) holding at least 10% of the capital of the dividend paying company. 5% in all other cases.

(36) NIL if the beneficial owner is a company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividends, where such holding is being possessed for an uninterrupted period of no less than 24months. 5% in all other cases.

(37) 5% if the dividend is received by a company (other than a partnership) which controls directly at least 10% of the voting power in the company paying the dividends. 15% in all other cases.

(38) NIL if the beneficial owner is:

(i) a company (other than a partnership) the capital of which is wholly or partly divided into shares and which holds directly at least 10% of the capital of the company payingthe dividend for an uninterrupted period of at least one year.

(ii) a pension fund or other similar institution recognised as such for tax purposes, or

(iii) the Government, a political subdivision, local authority or central bank of one of the two contracting states. 15% in all other cases.

(39) 5% if the beneficial owner is a company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividends. 10% in all other cases.

(40) NIL if the beneficial owner is a company (other than a partnership) which holds directly at leat 10% on the capital ofthe company paying the dividends. 5% in all other cases.

(41) 5% if the dividend is received by a company which holds at least 10% of the capital of the company paying the dividend. 10% in all other cases.

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