CYPRIOT INTERNATIONAL BUSINESS COMPANIES (I.B.C)-Offshore Companies

1.    ADVANTAGES OF CYPRIOT INTERNATIONAL BUSINESS COMPANIES

• The net profits of the Cypriot International Business Companies are subject to a corporate tax at the flat rate of only 10% and if such profits are derived from dividends received from another Cyprus company, then no further tax is payable other than the flat rate of 10% paid only by the distributing company;
• No withholding of tax on dividends, interests or royalties and no other kind of tax (e.g. defence tax) when the recipient is not resident in Cyprus; In other words, non-resident shareholders (individuals or corporations) are not liable to an additional tax on dividends over and above the amount of the 10% corporate tax paid by the company;
• No capital gains tax (except on sale of immovable property situated in Cyprus);
• Freely transferable accounts of any currency may be kept either in Cyprus or anywhere abroad without any exchange control restrictions;
• No other exchange control restrictions;
• All expenses incurred for the earning of income as well as annual allowance on fixed assets are allowed as deductions;
• Company’s foreign employees working  abroad are not liable to personal income tax  in Cyprus;
• No estate duty on the inheritance of the shares provided the deceased was not domiciled in Cyprus.

2.    TYPES OF CYPRIOT INTERNATIONAL BUSINESS COMPANIES

The most common type of company used for local or international activities by non-residents is the private limited company.

Due to the low tax corporate rate (10%) and many other tax benefits, as well as due to the geographical position of Cyprus, its infrastructure and other advantages many foreign enterprises consider the island as an ideal place for business in Europe, the Middle East and the Arab Gulf but also in Africa and West Asia.  The following categories of international companies are currently operating in Cyprus:

Advertising & Marketing
Architecture & Engineering
Captive Insurance Companies
Construction & Drilling
Employment                
Finance           
Holding Companies                                 
Investment funds
Leasing
Magazines & Newspapers
Management
Real Estate & Land Development and land/house acquisition
Royalties Companies
Sales
Shipping & Ship management
Trading
Trusts

International companies may be formed for the management and control of the affairs of any other company. They may also buy land in Cyprus and use their own premises such as offices, stores, flats and houses for accommodation of their directors, employees, etc. They can also store goods in transit or in bonded stores, and proceed with repacking and crating processes etc. They can open documentary credit, obtain certificates of origin of the goods from the Chamber of Commerce, receive legalisation of  documents and employ any type of employees, clerical, technical, either local or foreign.

Cyprus after becoming a full member of the EU (2004) brought its tax system in line with EU requirements and also within the OECD standards against harmful tax practises. Cyprus is considered to be an ideal location for the formation and operation of all types of companies in particular when dealing with countries with which Cyprus has a double tax treaty (Cyprus has over 43 double tax treaties) for the following reasons:

• A company is considered as tax resident in Cyprus when its management and control is exercised in Cyprus. This can be achieved when a company’s registered office is that of a Cypriot law office and the company secretary is a Cypriot lawyer.

• All Cypriot residents (individuals or corporations) are taxed on their worldwide income.  An individual is considered as tax resident if he/she spends more than 183 days per calendar year in Cyprus.

• The corporate tax rate is 10% (the lowest in the EU)

• No withholding tax on dividends, interest and royalty payments made to non-residents (individuals or corporations)

• There is no tax on dividends received from other Cyprus resident companies.

Dividends received by Cyprus resident corporations from foreign corporations are exempt from tax when the following requirements are met.  The dividend receiving company must own at least 1% of the share capital of the paying company. The exemption will not be granted if:

(1) Directly or indirectly more than 50% of the activities of the paying company result in investment income and

(2) The paying Company is subject to tax at a rate substantially lower than the Cyprus tax rate.

• Losses are carried forward indefinitely;
• Group companies can consolidate their accounts allowing losses of one company to be set off against profits of another company;
• No tax costs on mergers, acquisitions and spin offs;
• No tax on the disposal of shares of a Cyprus International Business Company;