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Cyprus is one of the most favoured jurisdictions for international tax planning offering invaluable tools to reduce or even eliminate the total tax burden of the company structure.

General Tax Advantages:
  • The lowest tax regime in Europe
  • 12.5% corporation tax on net profits
  • Dividend income received from abroad is tax exempt
  • Profits earned from a permanent establishment abroad are exempt from corporation tax
  • Profit from the disposal of shares and other securities is tax exempt
  • Interest received not arising from the ordinary activities of the company is exempt from corporation tax
  • No tax withheld on payment of dividends and interest to non-resident individuals or companies
  • Tax losses can be carried forward for up to 5 years to be set-off against future profits
  • Losses from a company can be set off against profits of other companies in the same group during the same financial year
  • Group reorganizations are possible without any tax implications
  • Over 40 double tax treaties
General non-tax advantages:
  • A prestigious low tax jurisdiction
  • The possibility to combine with companies based in Tax Havens to optimize tax reduction
  • Confidentiality and anonymity of beneficial owners
  • No exchange control restrictions
  • Easy migration of legal entities into and out of Cyprus from and to other jurisdictions
  • Excellent infrastructure, banking and legal systems
  • Access to EU directives
  • Work permits granted for staff of Cyprus companies with foreign shareholders
  • Residence permits and/or citizenship is granted to investors under certain conditions
Double Tax Treaty Provisions:

The most significant provisions of the double tax treaty between Cyprus and Russia are:

  • Withholding tax rate (WHT) on dividends: – 5% if the dividend receiving entity has invested at least €100,000 in the capital of the dividend paying company – 10% in all other cases
  • WHT on interest: 0% (thin capitalization rules apply)
  • WHT on royalties: 0%
  • Disposal of Shares / Capital Gains: – In general the taxing of the capital gains arising from a disposal of shares or any other movable property is granted to the State in which the person making the disposal is tax resident – Starting from 2017 income of Cypriot companies from sale of shares of property rich Russian companies will be taxed in Russia (exceptions apply)

 

Some tax facts about Russia:
  • Corporation Tax Rate: 20% (in most cases)
  • Capital Gains:
    • In general treated as income and are subject to Corporation Tax and the normal rate
    • Gains from the disposal of shares of non listed Russian companies and listed high tech Russian companies acquired after 1/1/11 and held for more than 5 years are tax exempt
  • Dividend income:
    • In general subject to 9% tax for dividend received from both Russian and foreign entities
    • Dividend income is tax exempt if the Russian dividend receiving entity holds at least 50% of the dividend paying entity for more than one year and provided that the dividend paying company is not a “black list” tax resident

 

For examples of tax efficient corporate structures utilising the double tax treaty between Russia and Cyprus please open the publication in PDF format. The relevant link is at the top of this page.