Ierotheou & Kamperis Advocates – Legal Consultants 2 Rizokarpasou str.,1107, Nicosia, Cyprus Tel.: 0035722 878187, Fax: 00035722 878378, e-mail: corporate@iklawfirm.com www.iklawfirm.com
We are members of the Cyprus Bar Association. Since 2001, we provide the following services : Legal, Tax Planning, Incorporation and Management of Cyprus and offshore companies, Nominee directors, shareholders, secretary, registered office, Shipping, Trustees, Fully fledged offices.
Cyprus is the third largest island in the Mediterranean Sea (population approx. 850.000) Cyprus is strategically located in the crossroads of three Continents: Europe, Asia and Africa It is an independent, sovereign republic with a presidential system of government and a written constitution Cyprus is a member of the EU, the Commonwealth, the Council of Europe, the IMF, UN, World Bank and WTO.
1. Excellent Business Environment 2. Beneficial low-tax regime 3. The Cypriot limited liability company, a corporate entity easily established and managed 4. Favorable Double Tax Treaty between China and Cyprus
Cyprus is a full member of the European Union since 2004. It has adopted the Euro as its currency on 1 st of January 2008. GDP per capita in purchasing power standards is approx. Euro 22.000 (ranks among the top half of EU Member States) It has an advanced telecommunications and transport system. The legal system in Cyprus is based on the English Common Law. Cyprus has a well-educated, experienced and versatile work force. The island ranks among the leading countries in the world in terms of university graduates. Exchange controls were abolished and foreign direct investment was liberalized as from 2004.
Cyprus has been established since 1977 as an international business, financial and commercial centre. Up until now 300.000 Cypriot Companies have been registered. Cyprus ship owning industry ranks 10 th in the world. More than 1/3 of all capital investment into Russia flows through Cyprus. Cyprus is not a “tax heaven” but a low tax country with an extensive double taxation treaty network (45 double tax treaties) and a beneficial tax regime. Cyprus has the lowest corporate tax rate (12,5%) amongst all EU Member States . Unlike Hong-Kong and other offshore companies, Cypriot companies are EU companies operating without obstacles across the European Union.
The Corporate Tax Rate is 12,5% Dividend income in most cases is exempt from tax Profit on sale of shares and securities is tax free Repatriation of profits from Cyprus companies – dividends, royalties, interest- to non-residents is tax free Cyprus implements the EU Parent-Subsidiary directive for payments from other EU countries to Cyprus – no withholding tax on dividends paid to Cypriot companies form related companies Exemption from capital gains tax of gains arising from the disposal of immovable property situated outside Cyprus No time restriction on carry forward losses. No thin capitalization and controlled foreign company rules. Cypriot VAT rate is 19%, the lowest in the EU 48 double tax treaties (Greece, Italy, UK, Russia, Ukraine, India)
A Memorandum and Articles of Association is submitted to the Registrar of Companies The company is established within five days. No licensing requirements. No minimum share capital. The registered office and secretary must be in Cyprus. The majority of directors are recommended to be Cypriot residents. The company is a tax resident of Cyprus and thus benefits from the double tax treaties, only if it is managed and controlled in Cyprus, meaning that the majority of directors resides in Cyprus and the important decisions are taken in Cyprus. Our office may appear in the public records as nominee shareholders, directors and secretary. The Cypriot company must submit annual audited financial statements.
Dividend nd Dividend nd Interest rest Interest rest Royalti ties Royalti ties Rece ceived ived Paid Rece ceive ived Paid Rece ceived ived Paid In Cypr prus us from In Cypr prus us from In Cypr prus us from Cyprus us Cyprus us Cyprus us 10% 10% 10% 10% 10% 10%
Holding company for investment to Europe Finance company Investment Company trading in Securities Holding Company for direct investment to China Shipping companies Royalty company
EXAMPLE A Cypriot holding company, owned by Chinese, holds 100% of the share capital of a Greek company and receives dividends of USD 1 mil. Dividend collectable ……………………………… …………… ........... 1mil. Minus tax 10% withheld in Greece as per dt treaty ……… ..... (100.000) Net dividend received in Cyprus …………………………………… 900.000 Corporate tax in Cyprus ………………………………………………… - Net dividend for distribution ………………………………………… .. 900.000 If the shares in the Greek entity are sold, no Cyprus tax on the profit realized No withholding tax for payment of dividends from the Cyprus company to its Chinese/non-resident shareholders No minimum holding requirement
EXAMPLE A Cypriot investment company, owned by Chinese, is trading in shares and other securities (bonds, repos etc.) in the Stock Markets and makes profit USD 5 mil. Profit from trading of securities ………… …………… ........... 5 mil. Tax withheld in Cyprus …………………………………………… ..... - Corporate tax in Cyprus ………………………………………………… - Net amount for distribution ………………………………………… . 5 mil. Income and gains from disposal of securities are exempt from Cyprus tax.
EXAMPLE A Cypriot holding company, owned by Chinese, holds 40% of the share capital of a Chinese company and receives dividends of USD 1 mil. Dividend collectable ……………………………… …………… ........... 1mil. Minus tax 10% withheld in China as per dt treaty ……… ..... (100.000) Net dividend received in Cyprus …………………………………… 900.000 Corporate tax in Cyprus ………………………………………………… - Net dividend for distribution ………………………………………… .. 900.000 If the shares in the Chinese entity are sold, no Cyprus tax on the profit realized No withholding tax for payment of dividends from the Cyprus company to its Chinese/non-resident shareholders No minimum holding requirement
As from 1 st January 2010 a tonnage tax was introduced, exempting shipping and ship management activities from income tax. The tonnage tax system is mandatory for owners of Cyprus flag ships. Ship owners and charterers of third country flag ships may opt for the tonnage tax provided that- (i) at least 60% of their fleet in tonnage terms should be comprised of EU, Iceland, Liechtenstein and Norway flag ships, and (ii) they must remain in the tonnage tax system for 10 years. Example The annual tonnage tax imposed on owners or charterers for a vessel of 50.000 net tonnes amounts to Euro 8.816,70. The annual tonnage tax imposed on the ship manager for the same vessel amounts to ¼ of the above amount, meaning Euro 2.204,17.
Other tax incentives offered to the shipping industry include: No tax is payable on dividends received from a ship owning company No capital gains tax is payable on the sale or transfer of a Cyprus-registered vessel or the shares of a ship owning company No stamp duty is payable on ship mortgage deeds No inheritance tax is imposed following the death of a shareholder.
A Honk-Kong/offshore company is the holder of a patent and grants to a Cypriot Company a license to use the patent in France, Germany and Russia. The tax benefits include: The Cypriot Company receives royalties from France and Germany with zero withholding tax under the EU Interest- Royalty Directive The Cypriot Company receives royalties from Russia with zero withholding tax under the Russia-Cyprus double tax treaty If 90% of the royalties received by the Cypriot company are remitted to the Honk-Kong company/holder of the patent then the overall tax suffered on the royalty income is 10% Corporate tax on the remaining 10%, meaning only 1%.
Cyprus can be the portal of China to Europe through the use of the Cypriot Limited Liability Company, a corporate vehicle which enjoys low tax benefits and operating across the European Union without obstacles.
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