Benefits from forming an Offshore Company in Cyprus
The main attribute of Cyprus is of being one of the very few offshore jurisdictions that is not vilified as a tax paradise because offshore companies registered there are not completely exempted from taxation. Cyprus resident companies are subjected to a corporate income tax rate of 10% on their profits and nonresident company are taxed up to 4.5% of their profits.
Why would i go offshore to pay taxes?
What then can be the attraction of Cyprus if you have to pay taxes? I mean offshore company incorporation is a tool of taxes avoidance after all. So the question many people are asking is “I’m not shooting myself in the foot going offshore in Cyprus?
No you are not, especially if you are a legitimate businessman. Tax avoidance is one thing, Tax optimization another. Trying to avoid taxes at all costs when you are running a legitimate business may not be the right thing to do as it might earn you the undue attraction of the tax authorities in your own country. Taxes optimization is another matter.
And as already stated above because Cyprus has made efforts to attract legitimate companies to its shores and to open up bona fide offices it is not considered a tax haven.
Double Tax Treaties Network
Another interesting factor in setting up an offshore company in Cyprus is that this country has a large double tax treaties network (nearly 50 to date). It has especially many favorable double tax treaties with Eastern Europe country and Cyprus is one of the best jurisdictions to consider when doing business in East Europa. Not however that to benefit of the tax treaty network the offshore company will have to be a resident company (liable to 10% corporate income tax)
Other uses of Cyprus Jurisdiction
Cyprus is also a good jurisdiction to register ships or to create offshore banking units the creation of offshore banking units, the carrying out of international commercial arbitration and the establishment of offshore trusts.
Unique features that Cyprus offers to businessmen are:
- Free movements of profits derived from operation on non resident investments
- No withholding tax is payable on dividends, interest and royalty payments
- Full capital gains tax exemption is given on capital gains.
- Salaries of foreign employees of offshore entities employed outside Cyprus are completely tax exempt.
- Numerous Double Taxation Treaties
- Low Tax Rate
- Political Stability
- Excellent communications and bank networks
The disadvantages of Cyprus.
- It is more costly to incorporate an offshore company there especially due to the fact that all the fees are quoted in Euro
- Companies in Cyprus need to be audited yearly and have to maintain accounting documents adding to maintenance costs
- Cyprus is not 100% tax free
Why we still recommend Cyprus
Despite those disadvantages Cyprus is the destination for those who are running legitimate businesses but are looking to optimize their taxes.
Also while costs of incorporations and maintenances are higher in Cyprus than in other offshore jurisdiction they are not prohibitive. A resident company would cost all included (incorporation+ one year registered address, one year agent address, nominee director and bank account) around 3,500 Euro all included. As to maintenance fees there would be 3,200 Euro including accounting, audit and all tax filling.
Sometimes the best solutions are not always the cheapest
Do not hesitate to contact us for more information in registering a Cyprus Offshore company