In today’s business environment where the world is becoming one community, the decision on where to setup a company’s head office becomes critical. The days when companies were incorporated in distant jurisdictions, with no substance, and were merely used to pass transactions through in order to avoid taxes are over. Governments internationally are becoming more aggressive in claiming taxes on profits made by their tax residents abroad and they are succeeding!!
The future of what is called “Tax Structuring” lies in setting up companies in strategic jurisdictions and arming those companies with substance so that their Tax Residency may not be disputed. This may be done by setting up the head office in a country of registration. Steps towards that direction include: –
– Having locally based director(s) (who are not a director in more than 5 other companies)
– Renting an office with exclusive access (i.e. not shared offices)
– Employ local employee(s) e.g. in administration or bookkeeping
Cyprus with its highly advanced infrastructure and professionals with long experience in the field offers a very credible solution worth investigating.
Due to Cyprus’s low cost structure the cost of setting up a head office in Cyprus as described above is not prohibitive, on the contrary it could result in massive savings in tax even for small or medium companies by international standards.
Some of benefits enjoyed by businesses in Cyprus are:
• One of the most attractive and tested tax system in EU.
• English language is widely spoken and used both in business and government sectors.
• Established International Business Centre with high level of professional services and advanced infrastructure.
• Primary hub to base operations for business in or through Cyprus.
• Competitive costs for setting up and maintaining business substance.
• Attractive and tested tax and legal systems for individuals and corporations.
• Modern banking system (Not a prerequisite. A business may choose to have its bank accounts elsewhere)
Some of the tax incentives that have made Cyprus a popular jurisdiction are:
• One of the lowest corporate tax rates in the European Union – 12.5 %.
• Zero withholding tax on dividends when the shareholder (or beneficial shareholder) is not a tax resident in Cyprus.
• Dividends received by a Cyprus company from abroad are conditionally exempt from tax.
• Zero Capital Gains Tax on the Sale of Shares (Excl. shares in companies owning Cyprus property)
• Highest number of signed Double Tax Treaties (DTA) in Europe.
• Substantial Tax Relief for non-residents taking up employment in Cyprus, during the first years of their employment.
• Substantial Tax Relief for income from Intellectual Property.