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Cyprus Tax System. Presented by Rutger Kriek. 1) Corporate income tax rate. 2) The different forms of using a Cyprus company. 3) I. The Cyprus holding company. 5) The subsidiary must not at the same time;

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cyprus tax system

Cyprus Tax System

Presented by Rutger Kriek

slide5

5) The subsidiary must not at the same time;

    • directly or indirectly engage more than 50% of its activities leading to investment income (the “activities test”), and
    • be liable to an effective tax burden over its income, which is substantially lower than the Cyprus tax burden (the “tax burden test”).
slide9

Cyprus Holding

Company (CC)

Dutch Holding

Company (DHC)

Trading

Company (TC)

slide18

No withholding tax over outbound dividends

CYPRUS COMPANY

  • Tax exemption for benefits
  • 0% withholding tax based upon EU-parent subsidiary directive (PSD), also in Italy, where Cyprus is now on the white list.

EU- COMPANY

  • Capital gains tax protection based upon many double tax treaties (DTTs); Cyprus has DTTs with more than 45 countries.
slide19

No withholding tax over outbound dividends

  • Tax exemption for benefits

CYPRUS COMPANY

  • 0% withholding tax based upon broad implementation PSD

LUXEMBOURG

HOLDING COMPANY

  • Capital gains tax protection based upon
  • new DTT
slide20

No withholding tax over outbound dividends

CYPRUS COMPANY

  • 0% withholding tax based upon broad implementation PSD

DUTCH

HOLDING COMPANY

  • Capital gains tax maybe an issue due to lack of DTT
slide21

No WHT over outbound dividends

CYPRUS COMPANY

  • 5% withholding tax only under the mere condition of a USD 100,000 capital investment

RUSSIAN COMPANY

  • Capital gains tax protection including real estate companies
slide22

No WHT over outbound dividends

CYPRUS COMPANY

  • Licensing and/or financing activities
  • Profits subject to 10% income tax only
  • 0% WHT over licence/ interest payments based upon Cyprus- Russia DTT

RUSSIAN COMPANY

slide23

No WHT over outbound dividends

  • Holding company income generally exempt

CYPRUS COMPANY

  • Other income subject to 10% tax only
  • 0% WHT over dividend/ interest and licence payments without special conditions to be met, based upon DTT

UKRAINE COMPANY

  • Capital gains tax protection including real estate companies
slide24

No WHT over outbound dividends

  • Holding company income generally tax exempt
  • Other income subject to 10% tax only

CYPRUS COMPANY

  • 0% WTH over dividends, interest & royalties

OTHER

“EX-USSR” COMPANY

  • Armenia, Azerbaijan, Kyrgyzstan, Tajikistan,
  • Turkmenistan, Uzbekistan
  • Capital gains tax protection, including real estate companies
slide25

No WHT over outbound dividends

CYPRUS COMPANY

  • Tax exemption for the entire income

INDIAN COMPANY

  • Cyprus-India treaty provides for protection from Indian capital gains tax, including shares in real estate companies
slide26

No WHT over outbound dividends

CYPRUS COMPANY

  • No additional taxation over interest income

LOAN

  • Reduction of WHT over interest payments to 10% only based upon Cyprus – India DTT

INDIAN COMPANY

slide28

No WHT over outbound dividends

CYPRUS COMPANY

  • Tax exemption for entire income
  • No withholding tax over dividends
  • (based upon PSD)

REAL ESTATE COMPANY

  • Czech Republic/ Hungary/ Poland/ Romania/ Slovak Republic/ Slovenia
  • Capital gains tax protection based upon
  • respective DTTs
slide29

No WHT over outbound dividends

CYPRUS COMPANY

  • Tax exemption for benefits
  • Bosnia & Herzegovina/ Macedonia/ Serbia/ Montenegro

REAL ESTATE COMPANY

  • Capital gains tax protection based upon DTTs
slide30

No WHT over outbound dividends

CYPRUS COMPANY

  • Tax exemption for profits in Cyprus
  • Construction project > 3 months ≤ 12 months in a treaty
  • country (e.g. Poland, Romania)
  • No taxation in source country based upon DTT (and/or
  • domestic legislation)
slide31

No WHT over outbound dividends

CYPRUS COMPANY

  • Tax exemption for profits in Cyprus
  • Offshore support services (e.g. in relation to oil exploration / exploitation) outside Cyprus’s territorial waters for more than 3 months.
slide32

No WHT over outbound dividends

CYPRUS COMPANY

  • Tax exemption for profits in Cyprus
  • Other kind of services (e.g. IT services) outside Cyprus for more than 3 months
slide33

No WHT over outbound dividends

CYPRUS

INVESTMENT FUND

  • Access to 50 treaties; no special purpose vehicle required. So unlimited access.
  • Tax exemption for all the profits from the sale of securities (shares, bonds, put options, call options)
  • No capital tax
  • No net wealth tax
  • Effective tax exemption for all dividends from
  • EU companies
  • EU passport
  • Superb Infrastructure
  • High financial expertise
slide34

No WHT over outbound dividends

  • Investments in securities
  • Tax exemption for profits from the sale of securities
  • Tax exemption for all the benefits from the SPV as well

CYPRUS

INVESTMENT FUND

  • Dividends

TAX EXEMPT SPV

  • Investments in commodities (gold, oil etc…) profits from the sale of which would be subject to 10% tax in Cyprus
slide35

OFFSHORE COMPANY

  • No transfer pricing documentation
  • requirements
  • No exchange of information risk
  • No WHT over interest
  • No thin capitalisation rules
  • Relatively small spreads acceptable

Loan

Interest Payment

CYPRUS COMPANY

Loan

Interest Payment

  • Reduction of/ exemption from WHT based on treaty, or
  • Exemption from WHT based upon EU Interest and Royalty Directive.

TREATY COUNTRY/ EU-COUNTRY BASED

AFFILIATED DEBTOR

slide36

OFFSHORE COMPANY

  • No transfer pricing documentation
  • requirements
  • No exchange of information risk
  • No WHT over license payment
  • Relatively small spreads acceptable

License

License Payment

CYPRUS COMPANY

Sub- License

License Payment

  • Reduction of/ exemption from WHT based on treaty, or
  • Exemption from WHT based upon EU Interest and Royalty Directive.
  • The double tax treaty between Cyprus and Italy provides for withholding tax exemption in Italy.

TREATY COUNTRY/ EU-COUNTRY BASED

AFFILIATED DEBTOR

slide37

No WHT over outbound dividends

“Soft” Advantages:

CYPRUSGROUP TREASURY

COMPANY

  • No traffic problems
  • Good schools & universities
  • Fairly priced commercial & private real - estate broadly available
  • Low population density and clean air
  • More than 300 days of sunshine per year
  • Good air connections
  • Low criminality
  • Group treasury activities
  • Profits subject to 10% tax only
  • Access to good treaty network
  • Access to EU Interest and Royalty Directive
  • No withholding tax over interest
  • Ideal strategic position for companies with
  • operations in Europe, Russia, CIS, The Middle East and Asia
  • Low taxation on salaries
slide38

Entire income exempt from tax provided that:

CYPRUS

INTERNATIONAL TRUST

  • The settlor is not a resident of Cyprus
  • At least one trustee is resident of Cyprus
  • No beneficiaries are resident of Cyprus and
  • The trust property does not include Cyprus
  • immovable property
slide39

CYPRUS COMPANY

  • No WHT over outbound dividends
  • Tax exemption for all the benefits

OPERATIONAL

DUBAI

COMPANY

(OR COMPANY BASED IN

ANOTHER TAX HAVEN)

slide40

CYPRUS COMPANY

  • No WHT over outbound dividends
  • Tax exemption for all the benefits

TAX EXEMPT GROUP FINANCE COMPANY