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Article by: Chris Constantinides & Associates
Good to know: “Located Cyprus Business or at the crossroads of three Leisure. continents” - The island of Cyprus is on average 3 to 4 hours flight from Europe’s capitals (Athens 1.5hrs, Rome
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2.5hrs, Berlin 3hrs, Paris & Madrid 4hrs and London 4.5hrs), 3 hrs away from Kyiv and Moscow, around 3 hours from distant Arab countries (Tehran 2hrs, Doha 2.5hrs and Dubai 3hrs) and maximum one hour away from Israel, Egypt, Lebanon, Syria and Jordan.
Legal System.
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The Republic of Cyprus is a common law jurisdiction. At the proclamation of the Republic, Cyprus adopted the English Common law and the English principles of Equity, as modified since 1st of May 2004 when the Republic of Cyprus became a full member of European Union, by the adoption of European Laws, Regulations and Directives.
Tax System.
Located In the eastern-most corner of the European Union, Cyprus is the third largest island in the Mediterranean Sea. The Republic of Cyprus was established in 1960. Cyprus has always been a popular commercial and economic centre due to its privileged geographical position. The name of the island is attributed as a result of overseas trade through the phrase Cyprium (the Latin word Cuprum - Copper), i.e. the metal of Cyprus. Since modern times the Republic of Cyprus has always been a traditional agricultural export country. Post 1974, the Republic began to shape its reputation as a reliable trade and
investment centre. The 1980s were a milestone in shaping the modern economic model of the island, with the real estate and service sectors, especially tourism being the h i g h est contributors towards GDP. Cyprus soon became a well-known tourist and retirement location setting the country firmly as one of the most popular destinations in the Mediterranean. Early 2000 was the final step which irreversibly established Cyprus as a
reliable and reputable International Business Centre. On 1st January 2003 new tax legislation was effectively adopted introducing the lowest corporation tax rate in Europe (Today only 12.5%) and one year later on 1st May 2004 Cyprus became a full member of the European Union. January 2008 Cyprus became a Monetary Union Member and adopted the Euro as the official currency.
The tax legislation that came into effect 1st January 2003, aimed to conform to European Union law and the EU code of conduct and to eliminate harmful tax practices. This new tax system enabled Cyprus to claim its position as a non-offshore European business centre, a suitable location for local and worldwide investments. 2003 legislation evolved into one of the most comprehensive legislations in the EU having one of the most competitive corporate tax systems and the only EU approved “Open Registry” regime with a very wide and legally endorsed Tonnage Tax System (introduced in 2010) for ship owning, management and chartering.
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The island of Aphrodite - not an ordinary work place. Cyprus provides the opportunity to enjoy life. There is a truly welcoming environment with more than 300 days of sunshine a year, the highest percentage of suitable waters for swimming in the EU and many attractions for all interests and ages. During the last decade Cyprus has become one of the most popular International Business Centres of the EU. This was due to beneficial tax and regulations for higher standards of services and living. Since becoming an international investment centre, the country has offered many investment opportunities, covering different sectors of the economy from FOREX to Oil and Gas. Moreover, as a member state, Cyprus expanded funding possibilities that led to a new era of business mind-set, resulting in investment opportunities meant to support the development of business activities in areas such as manufacturing, agriculture and agro-tourism.
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Forms of Businesses
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• Sole Proprietorships - Business names Individuals trading under their own names or under a trading name.
• Branches Branches are Companies’ representatives. There are two types of branches. o Local company’s branch o Foreign company’s branch • Companies There are two Company types Limited by shares or by guarantee. The most popular is Limited Liability Company by shares that is divided into two categories. o Private companies (1 to 50 shareholders) o Public companies (over 7 shareholders) • Partnerships Partnership is a legal entity that takes substance when two or more individuals
or companies form a common business. o General partnership (all partners share liability equally) o Limited partnership (some partners are investors and have no liability)
Simple Taxation
The Tax framework was formed in such a way that it is beneficial for residents and non-residents alike. Corporation tax is one of the lowest flat tax rates in the EU at just 12.5%. Dividends from Cyprus corporations paid to nonresident shareholders are exempt from any with-holding tax. Residents pay Special Defence Contribution of 17% (2014) on dividends. Personal income tax is based on residency status and tax residents are taxed on their worldwide income (exemptions apply). Cyprus offers a tax allowance of €19500. Income above that threshold is taxed at ratios beginning 20% and maximum 35% for income over €60000. Dividends and interest are exempt from personal tax (taxed under Special Defence Contribution). Company’s net income from holding Royalties and Rights is 80% exempt from Corporation Tax. Capital Gains Tax (CGT) on sale of immovable property is 20%. There is no CGT on sale of shares (except shares of a company holding immovable property). The Cyprus Tonnage Tax System is the only EU approved (compatible with the requirements of the EU acquis) shipping taxation. TTS taxes ships based on their tonnage and covers profits from shipping activities, profits on sale of vessels, interest of funds used (not for investment) and dividends paid related to shipping profits (directly or indirectly). Some people think “Why Cyprus?” considering the facts it is clearly “Why not?” -
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Valentinos Constantinides
For, Chris Constantinides & Associates www.CorporationCyprus.com Tel: +357 26 100510 | Fax: +357 26 100710 Email: info@CorporationCyprus.com