CYPRUS

INTERNATIONAL COMPANIES

CONTENTS

1.

International Tax Planning

2.

What is an International company. How you can benefit with an

International Company and how it fits into your Tax Planning.

3.

Registration and management of an International Company.

4.

Cyprus as the biggest International Companies Centre.

5.

Appendix I Double Taxation Agreements

1)

International Tax Planning

Tax planning is the arrangement of ones financial and business affairs in such a
Manner as to attract either locally or abroad the minimum tax, without the
contravention of any law or without defrauding the revenue by not declaring profits or by
other deceitful means. Cyprus holds an important position in international tax planning
due to its wide network of double tax treaties.
The main purpose of these treaties is the
avoidance of double taxation of income
earned in any of the two contracting
States. Under these agreements either a
credit is allowed in a contracting State in
respect of tax levied by the other State
on the same income or such income is
exempt from tax. Thus the taxpayer
does not pay more than the higher of the
two rates or he is not taxed twice on the
same income.
Treaties signed and
ratified by Cyprus follow the OECD
model.
Provisions are changed to
reflect the different tax systems and
economic priorities of the treaty
partners.
Cyprus has concluded an impressive
number of treaties for the avoidance of
double taxation. These are currently 34
treaties in force. The existence of these
treaties, combined with the low tax paid
by International enterprises, as well as
their beneficial owners and expatriate
employees, offer significant possibilities
for international tax planning through the
island.
In contrast to Cyprus, tax

havens lack, in almost all cases, double

tax treaties.
Income and other Earnings from
Shipping: Practically in all Cyprus
treaties it is provided, either directly or
indirectly, that shipping profits are only
taxable in the place of the effective
management of
the
enterprise
concerned.
Cyprus offers favourable
incentives and tax relieves to shipping
companies which own and operate ships
under the Cypriot flag in international
waters. By virtue of these relieves, the
profits of shipping companies managed
and controlled in Cyprus are exempt
from taxation.
Thus, substantial
advantages may be available to such
companies through the operation of
Cyprus double tax treaties.
Companies which are engaged in ship
management
or render
maritime
services
from
within Cyprus are
classified as offshore enterprises and
they, as well as their beneficial owners
and expatriate employees, enjoy the
whole spectrum of tax advantages
afforded to this category.

2)

What is an International Company.

How you can benefit with an International Company and
how it fits into your Tax planning.

Definition
International enterprises are businesses registered in Cyprus and whose business activities
lie outside Cyprus. These International enterprises enjoy special taxation privileges.
Also it is important to note that for these International Companies
1.
2.

all their shareholders must be aliens; and

all their profits or income must derive from business activities outside
Cyprus.

Tax Incentives
It is the policy of the Government to
promote Cyprus as an important
International Centre.
In this
connection the Government introduced

tax and other incentives extended

exclusively to International entities.
Some of the more significant tax
incentives available exclusively to
International entities are the following:

1. Exemption or reduced income tax rate for International entities:

a.

Branches of overseas companies, whose management and control are

abroad, and partnerships are fully exempt from income tax.

b.

Branches of overseas companies, whose management and control are in

Cyprus, and companies incorporated in Cyprus are liable to income tax at
the reduced rate of 10 percent.

2. Wide increasing network of double taxation treaties.

3)

Registration and Management of an International

Company

Reporting conditions.
1.

Annual audited financial statements:

The International Company is required to submit to the Registrar of Companies
its annual audited financial statements.

Registration procedure.
A company can be registered with the Registrar of companies as follows:
a.

Approval of the name of the company by the Registrar of Companies.

b.

Preparation and printing of memorandum and articles of association of the company

in Greek and English.

c.

Filing with the Registrar of Companies the memorandum and articles of

association of the company in Greek duly singed by the subscribers together with
prescribed forms giving details of the registered address of the company and the
appointment of the first directors and the secretary.

Information needed for registration.

The information needed for the registration of an international
as follows:
1.

limited company is

Name of the proposed company:

The Registrar is unlikely to accept a name for reason such as too similar to the name
of an existing company, considered misleading, etc. It is therefore advisable to
submit for approval two or three alternatives to the first choice of name so as to save
time and unnecessary exchange of correspondence.

2.

Bank or other references:

The main objects of the company should be given.

3.

Shareholders:
There must be at least one shareholder who can be either individual or company.
The information required for each one is full name, nationality, address, occupation
and number of shares to be held.
Where the proposed company is to be a wholly owned subsidiary of another, it its
usual that all the shares, are held by the parent company. Should anonymity be
required, trustee companies in Cyprus can hold the share in trust for the beneficial
owner.

5.

Share capital:
There is no legal requirement for a minimum share capital either authorized or
issued and paid up.

6.

Directors:
Minimum of one directors is required and there is no maximum. However, it is
advisable to appoint at least two directors. There is no necessity to have local
directors although in most cases it is advisable. The particulars required for each
director are full name, occupation, residential address and nationality.

7.

Secretary:
The secretary may be local or foreign but a local secretary is advisable. The
particulars required are the same as for directors.

8.

Registered office:
The address of the registered office should be given. This is the place where writs,
summonses, notices, orders and other official documents can be served upon the
company.

Corporate documents.
It is advisable to ensure that upon the incorporation of the company its owners or other
appropriate officials are provided with copies of all corporate documents, properly
legalized and translated where appropriate, from Greek into English or any other
language. Such corporate documents normally comprise:

the certificate of incorporation

the memorandum and articles of association
the address of the companys registered office
the names of directors, secretary and shareholders

4)

Cyprus as the biggest International Companies Centre

Government policy.
The Cyprus Governments positive
attitude towards international business in
Cyprus and its liberal and constructive
approach, have contributed significantly

to the development of Cyprus as a

commercial, financial and business
center.

Suitability of Cyprus.
A combination of a number of favorable factors have made Cyprus one of the most
attractive places in the world for the registration of international entities.
Among these factors are a high standard of living and the hospitality, friendliness and the
enterprising spirit and competence of the Cypriot people themselves. Other factors may
be summarized as follows:
Tax Planning & treaties.
Cyprus has concluded an impressive and expanding number of treaties for the avoidance
of double taxation.
The existence of these treaties combined with the low tax paid by international entities
offer tremendous possibilities for international tax planning through Cyprus bearing in
mind that:

Any tax paid in a country with which Cyprus has a treaty is deducted
from the Cyprus tax payable on the same income;
International entities are not required to withhold tax on payments made in
respect of dividends, interest and royalties; and
Cyprus is not considered as a tax haven by most tax jurisdictions and is thus
free from suspicion usually associated with tax haven operations. Cyprus, in
contrast to tax havens, is a tax incentive country which offers incentives aimed
at attracting foreign enterprises and individuals that wish to conduct their
business activities from Cyprus.
Cyprus is one of the few countries in the world which has concluded tax
treaties with almost all East European countries. As a result of the recent
political and economic developments in Eastern Europe, which have
opened up the gates of the East to the businessmen of the West , the
importance if these treaties in international tax planning has been enhanced.

International relations.

independent and sovereign Republic

Member of the European Union
friendly relations with developing and other countries

Geographic location.

cross-roads of Europe, Asia and Africa

proximity to the oil-rich Arab countries
less than three hours flying time from important centers of Europe, the Middle
East
and North Africa
convenient time zone in relation to Europe
good climate

Infrastructure.

low cost both initial and running

European standard of living and relatively low cost of living
crime free environment
frequent air connections in all directions and excellent telecommunications
system
favourable legal system and highly developed banking system
freedom of international entities from exchange controls
excellent professional services and satisfactory availability of people with
managerial capabilities
good industrial relations
availability of foreign schools
availability of shipping services

5)

Appendix I Double Taxation Agreements

TREATIES FOR THE AVOIDANCE OF DOUBLE TAXATION*

Tax Treatment of Dividends, Interest and Royalties
Paid from countries shown
below to residents of Cyprus
Country
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34

Dividend

Austria
Belarus
Belgium
Bulgaria
Canada
China
CIS***
Czech Republic
Denmark
Egypt
France
Germany
Greece
Hungary
India
Ireland
Italy
Kuwait
Malta
Mauritius
Norway
Poland
Romania
Russia
Singapore
Slovakia
Slovenia
South Africa
Sweden
Syria
Thailand
UK
USA
Yugoslavia
All other
countries

10%
5%(1)
10%(2)
5% (4)
15%
10%
nil
10%
10% (2)
15%
10% (9)
15% (11)
25% 10%
5% (13)
10% (9)
nil
15%
10%
nil
nil
5% (14)
10%
10%
5% (17)
nil
10%
10%
nil
5% (13)
15% (19)
10%
15% (23)
5% (24)
10%
(12)

Interest

Royalties

nil
5%
10%(3)
7% (5) (6)
15% (3)
10%
nil
10% (3)
10% (3)
15%
10% (3)
10% (3)
nil (12)
10% (3)
10% (3)
nil
10%
10% (3)
10% (3)
nil
nil (15)
10% (3)
10% (3)
nil
7% (18)
10% (3)
10%
nil
10% (3)
10% (3)
10% (21)
10%
10% (3)
10%
(12)

Paid from Cyprus to residents

of the countries shown below
Dividends**

nil
5%
nil
10%(6)
10% (7)
10%
nil
5% (8)
nil
10%
nil (10)
nil (10)
25%
nil
15%
nil (12)
nil
5% (8)
10%
nil
nil
5%
5% (8)
nil
10%
5% (8)
10%
nil
nil
10% (20)
5% (22)
nil (10)
nil
10%
(12)

Interest

Royalties

10%
5% (1)
10% (2)
5% (4)
nil
10%
nil
nil
10% (2)
15%
nil
nil
10%
nil
10% (9)
nil
nil
nil
15%
nil
nil
10%
10%
5% (17)
nil
nil
nil
nil
5% (13)
15% (19)
10%
nil
nil
nil

nil
5%
10% (3)
7% (5)
15% (3)
10%
nil
10% (3)
10% (3)
15%
10% (3)
10% (3)
nil (12)
10% (3)
10% (3)
nil
10%
10% (3)
10% (3)
nil
25% (16)
10% (3)
10% (3)
nil
7% (18)
10% (3)
10%
nil
10% (3)
10% (3)
10% (21)
10%
10% (3)
10%

nil
5%
nil
10%
10% (7)
10%
nil
5% (8)
nil
10%
nil (10)
nil(10)

0-40% (16)

0-40% (16)

10% (25)

nil
15%
nil (12)
nil
5% (8)
10%
nil
nil
5%
5% (8)
nil
10%
5% (8)
10%
nil
nil
10% (20)
5% (22)
nil (10)
nil
10%

* All the treaties refer to those which have been ratified. There are 32 treaties covering 40
countries The numbers in the brackets refer to the explanatory notes here below.
** Under Cyprus tax law, dividends paid to non-resident companies are not subject to
withholding tax.
*** Includes Armenia, Azerbaijan, Kyrgyzstan, Moldova, Tajikistan, Ukraine, Uzbekistan but
excludes Belarus, Kazakhstan, Russia and Turkmenistan.

Explanatory Notes
(1) 5% of the gross amount
if the beneficial owner has a
holding in the share capital
of the paying company of at
least ECU200.000; 10% if
the beneficial owner holds
directly at least 25% of the
share capital of the paying
company;15% in all other
cases.
(2) 10% of the gross amount
if recipient is a company
with at least 25% direct (also
indirect in the case of
Belgium) share interest;
15% in all other cases.
(3) Subject to certain
exemptions.
(4) 5% if beneficial owner is
a company which holds
directly at least 25% of the
capital of the company
paying the dividends; 10% in
all other cases.
(5) Nil if interest is paid or
guaranteed
by
the
government of the other
state or a statutory body
thereof or to the central
bank of the other state.
(6) These rates shall not
apply if at least 25% of the
capital of the Cypriot
resident is owned directly or
indirectly by the Bulgarian
resident (either alone or with
other related persons) that is
paying the interest or
royalties, except when the
resident of Cyprus is not
liable to tax which is lower
than the usual tax rate.
(7) Nil if royalties are
copyright and other literary,
dramatic, musical or artistic
work not including film or
videotape royalties.
(8) Nil if royalties are on
literary, artistic or scientific
work
including
cinematographic films and
films or tapes for television
or radio broadcasting.
(9) 10% if recipient is a

company with at least 10%

direct share interest; 15% in
all other cases.
(10) 5% on cinematographic
films including television
films.
(11) 10% if recipient is a
company with at least 25%
direct share interest; 27% if
recipient is a company with
more than 25% direct or
indirect share interest as
long
as
the
German
corporate tax on distributed
profits is lower than that on
undistributed profits and the
difference between the two
rates is 15% or more; 15%
in all other cases.
(12) 5% on cinematographic
films
not
including
television films.
(13) 5% if recipient is a
company with at least 25%
direct share interest; 15% in
all other cases.
(14) Nil if received by a
company which controls,
directly or indirectly, at least
50% of the voting power.
(15) At the rate applicable in
accordance with domestic
law.
(16) There is a withholding
tax of 20% on dividends and
25% on interest. The final
tax liability is determined as
follows :
(a) Companies : in respect of
dividends, no withholding
tax, subject to Directors
approval. For interest, on
application in accordance
with corporate tax rates.
(b)
Individuals
:
on
objection, in accordance
with personal tax rates.
In both cases any excess tax
withheld is refunded.
N.B.
The
agents
or
recipients of interest or
dividends are liable for the
payment of the due amount
of tax on such income.

(17)5% if the beneficial

owner has directly invested
in the capital of the
company less than the
equivalent
of
US$100.000:10% in all
other cases.
(18) 7% if it is received by a
bank or a similar financial
institution; 10% in all other
cases. Interest paid to the
government of the other
state, as defined, is exempt
from tax.
(19) Nil if shareholder is a
company that holds directly
at least 25% of the capital of
the company paying the
dividends; 15% in all other
cases.
(20) 15% for any patent,
trade mark, design or model,
plan, secret formula or
process or any industrial,
commercial, or scientific
equipment
or
for
information
concerning
industrial, commercial or
scientific experience.
(21) 10% of the gross
amount if it is received by
any financial institution
(including an insurance
company) or in connection
with the sale on credit of any
industrial, commercial or
scientific equipment, or
merchandise; 15% in all
other cases. Interest paid to
the government of the other
state is exempt from tax.
(22) 5% of the gross amount
of the royalties for the use of
or the right to use any
copyright
of
literary,
dramatic, musical, artistic or
scientific work, including
software, cinematographic
films, or films or tapes used
for television or radio
broadcasting; 10% of the
gross amount of the royalties
received as consideration for
the use of, or the right to use

industrial, commercial or
scientific equipment or for
information
concerning
industrial, commercial or
scientific experience; 15% of
the gross amount of the
royalties
received
as
consideration for the use of,
or the right to use, any
patent, trade mark, design or
model, plan, secret formula
or process.
(23) A resident of Cyprus,
other than a company which

either alone or together with

one or more associated
companies controls directly
or indirectly at least 10% of
the voting power, is entitled
to a tax credit in respect of
the dividend. Where a
resident of Cyprus is entitled
to a tax credit, tax may also
be charged on he aggregate
of the cash dividend and the
tax credit at a rate not
exceeding 15%. In this case

any excess tax credit is

repayable.
Where
the
recipient is not entitled to a
tax credit, the cash dividend
is exempt from any tax.
(24) 5% if recipient is a
company with at least 10%
direct share interest; 15% in
all other cases.

(25)
5%
on
cinematographic films.