Cyprus 2017: an Overview

The crisis of 2013 has proved to be a stimulus to reform and prosperity. Cyprus has become a fully compliant jurisdiction and has introduced a number of incentives to encourage foreigners to bring their business to the country. The Emergency Loan has been repaid and banks are again lending. There has been considerable inward investment.
Cyprus has adapted to the new world of transparency. It is distinguished by its simple and straightforward tax system and its low rates. It is one of the preferred jurisdictions for the establishment of a business base for both individuals and corporations and enjoys a large treaty network, with comparative cost advantages and favourable treatment for executive remuneration. The notional interest deduction on new equity reduces the taxable profit whilst at the same time safeguarding the beneficial ownership of income test at the level of the income recipient. The corporate tax rate is 12.5%, but there are various important tax exemptions, which, along with the notional interest deduction and the absence of withholding tax or outgoing dividends, result in a very low effective tax rate in practice. A Cyprus company may function as an investment fund, manufacturer, bank, finance company, IT licensing company, real estate investor etc. Alternative structures that can be used include an English-registered company resident in Cyprus, free of UK tax and with minimal taxation in Cyprus, or the Cyprus-registered company resident in Malta, which, for operations of a passive nature, can be free of tax in both countries.