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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 the 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 new treaty will, most likely, enter into effect on 1/1/2013 and its most significant provisions are:

  • Withholding tax rate (WHT) on dividends:
    • 5% if the beneficial owner holds at least 20% (or has invested at least €100,000 in the acquisition) of the capital of the dividend paying company
    • 15% in all other cases
  • WHT on interest: 2%
  • WHT on royalties:
    • 5% for any copyright of scientific work, any patent, trade mark, secret formula, process or information concerning industrial, commercial or scientific experience
    • 10% in all other cases
  • Disposal of Shares: 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 This is irrespective of the underlying assets of the company, therefore, it is also valid for property companies

Some tax facts about Ukraine:

  • Corporate Tax Rate:
    • 2012: 21%
    • 2013: 19%
    • 2014: 16%

Certain types of companies, such as insurance and agriculture, are taxed differently

  • Advance Corporate Income Tax on Dividends: 21% (exceptions apply)
  • Capital Gains: Treated as income and is subject to Corporate Income Tax rate
  • Dividend income is Corporate Income Tax exempt unless derived from non-controlled (less than 20%) nonresidents or nonresidents with offshore status
  • Personal Income Tax rate for dividends received is 5%

 

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