Tax planning involves the analysis of the operations of an organisation from the financial point of view to identify the most tax efficient way to achieve its financial goals. Tax planning, therefore, establishes the way that the various elements of an organisation should interact to organise tax treatment.
Tax planning should not be confused with tax avoidance. Any interaction between a corporate structure and the other structures or the general public may result in tax obligations and/or tax reporting obligations. In that respect careful tax planning has never been as important as it is today. In an increasingly complex and ever-changing tax environment, it is important to receive tax planning advice which is clear, creative, cost-effective and comprehensible.
Vaghan Partners, in cooperation with prominent tax advisors can help you design tax efficient international corporate structures taking into account your specific needs and requirements.
Jurisdiction of the Republic of Cyprus
Cyprus, being a low tax jurisdiction, as opposed to an offshore one, is one of the most popular choices for international tax planning. Its favourable tax regime, together with its extensive network of double tax treaties and its excellent infrastructure, offers invaluable tools for efficient tax planning and a reputable base for your international business.
Using Cyprus in your international tax planning will enable you to take advantage of the following benefits offered by the Cypriot tax regime:
- 12.5% corporation tax on net profits
- Dividend income received in Cyprus from abroad is exempt from corporation tax
- Profits earned in Cyprus from a permanent establishment abroad are exempt from corporation tax
- Profits earned in Cyprus from the disposal of shares and other securities are tax exempt
- Interest received in Cyprus not arising from ordinary activities is exempt from corporation tax
- Zero tax withheld on payment of dividends, interest and royalties from Cyprus to non-resident individuals or companies
- Tax losses can be carried forward for up to five years to be offset against future profits
- Losses from a company can be offset against the profits of other companies in the same group during the same financial year for tax purposes
- Group reorganisations are possible without any tax implications
- Over 40 double tax treaties
- Possibility to obtain a European VAT number for intra-European trading
- Full adoption of the EU directives (Parent-Subsidiary Directive, Mergers Directive, Directive on Mutual Assistance and Cooperation and Royalty and Interest Directive)
Utilising Cyprus in international tax planning can, therefore, reduce or even completely eliminate the overall tax liability of international corporate structures. In particular, tax planning through Cyprus can help:
- Reduce the tax liability where the income is earned
- Reduce the withholding tax on dividends paid from the country where the income is earned
- Reduce the tax liability of the beneficial shareholder of the corporate structure
- Reduce the overall tax liability of the international corporate structure