The Complete Liberalization – 1 October , 2004

As of 1 October 2004, the Government of Cyprus (GOC) has lifted all restrictions on foreign direct investment from non-EU countries in order to attract more foreign direct investment and further promote Cyprus as an International Financial Business Centre. All restrictions concerning maximum allowable percentage participation, as well as minimum monetary level of foreign investment in any enterprise (entity) in Cyprus, were lifted from 1 October 2004 for all non-EU citizens (and from January, 2000 for EU citizens) for most sectors of the economy.

The State Investment Policy now allows 100% foreign participation in Cyprus Entities in most sectors of the economy, not only for EU citizens, but also for investors from third countries.

Thus, entities and individuals from all over the world can establish Cyprus Companies or other legal entities to invest and do business in or out of Cyprus without restrictions whatsoever.
A further significant boost to foreign investment is expected in view of this latest development.

Tax Incentives

In July 2002 (with effect from 1 January 2003), the House of Parliament passed a tax reform legislation abolishing tax discrimination afforded to offshore companies by the end of 2005, in line with Cyprus’ commitments to the EU and OECD. Under the new regime, corporate tax on profits has been set at 10% – the same as for local companies.

Having amended its tax legislation in anticipation to EU Accession, Cyprus has set up a tax system that is ideally suited both to inbound and outbound EU investors.

The new tax climate offers to the investors:

• Low taxation
• Non offshore – EU – status
• Possibilities for tax planning in order to legally lower taxes even further (in some cases to 0%)
• Extensive double tax treaty network
• Exemption from tax on dividends received
• Exemption from tax of profit generated from transactions in securities
• Exemption from withholding tax on the repatriation of income either of dividends, interest and royalties.
• Access to EU directives

For comprehensive details of Cyprus’ Tax Incentives and other tax information please refer to the sections “Why Cyprus?” and “Tax Law – Tax Facts”.

Cyprus Double Tax Treaties (DTT)

A constructive use of the Cyprus Treaties’ Network has rendered considerable advantages to businesses and individuals who have chosen to establish legal entities in Cyprus.

Tax Treaties legally supersede local tax legislation and for this reason they are a useful tax-planning tool to protect businesses and individuals against double taxation of income earned in other countries.

Cyprus has concluded double tax treaties with the following countries:

• The main purpose of these treaties is the avoidance of double taxation of income earned in any of these countries. Under these agreements, a credit is usually allowed against the tax levied by the country in which the tax payer resides for taxes levied in the other treaty country, and as a result the tax payer pays no more than the higher of the two rates (a number of the treaties also contain very beneficial “tax-sparing credits”).
• Refer to section “Tax Law – Tax Facts” for the treaty withholding tax rates for payments of dividends, interest and royalties.
• The EU Parent Subsidiary and the Interest & Royalties Directives can be used to eliminate withholding taxes on payments of dividends, interest and royalties from or to EU Group Companies and the EU Merger Directive to eliminate the tax effects of EU Group reorganizations

* Azerbaijan, Armenia, Kyrgyzstan, Moldova, Tajikistan, Uzbekistan and Ukraine apply the USSR/Cyprus treaty.

** Slovenia and Serbia/Montenegro have also adopted the double taxation convention concluded by the former Socialist Federal Republic of Yugoslavia.

DTT Table (Received in Cyprus)
DTT Table (Paid from Cyprus)