Cyprus is an increasingly popular location for developers to incorporate their app and gaming business with an EU location and well-established infrastructure for operating a tech business. For developers with studios based in Russia, Ukraine, Belarus and other CIS countries it’s one of the most popular choices for incorporation and operating their company from. In this guest post by Vasilis Patsalides of Michalis Avraam & Partners, we explore some of the key things to think about when considering incorporating in Cyprus.
The island of Cyprus is a reputable international financial center situated at the crossroads of three continents, with its strategic location making it an ideal gateway for business and investments to Europe, Asia, and the Middle East.
Cyprus's reputation as a business hub has grown due to its well-established legal system, an attractive tax regime, membership with the European Union, and a highly qualified and multilingual labor force.
The legal system of Cyprus is based on English Common Law principles ensuring transparency and reliability in business practices and is also fully compliant with the EU Directives and Regulations, the Financial Action Task Force on Money Laundering (FATF), the Organisation of Economic Development and Cooperation (OECD) and FATCA laws and regulations.
Furthermore, Cyprus offers an attractive and transparent tax regime that is fully compliant with EU Directives, Regulations, and the OECD. The country maintains one of the lowest corporate tax rates in Europe at 12,5%, provides access to an extensive network of Double Tax Treaties (more than 60) offering investors the confidence to invest and grow their business.
The Cyprus tax regime offers numerous incentives including:
- Taxation of trading income at the lowest EU rate of 12,5% on net profits
- Tax-exempt gains on securities trading including disposal of shares in subsidiaries
- Tax-exempt dividend income (subject to easily met criteria)
- No withholding taxes
- Attractive IP Box regime
- Dividend participation exemption
- Tax-exempt profits received from overseas permanent establishments (subject to easily met conditions)
- Utilization of a beneficial and extensive Double Tax Treaty network
- Utilization of EU Directives (Parent-Subsidiary Directive, Mergers Directive, Royalty and Interest Directive)
- Unilateral tax credit relief for foreign tax paid on income received abroad
- Group relief of losses and carry forward of losses
- Investor friendly tax authorities
Additionally, there are significant exemptions in place for non-domiciled individuals who take up residence in Cyprus, including the following:
- No tax on interest and dividend income
- 50% exemption on employment income in Cyprus of a person that was not resident in Cyprus in the past provided that the annual employment income exceeds €100.000. The exemption is applicable for 10 years
Apart from the favorable tax regime, Cyprus offers to investors substantial non-tax incentives including:
- English is the most widely used language for business in Cyprus
- Establishment and maintenance of companies at substantially lower set-up and annual operational costs in comparison with other jurisdictions
- Possibility of re-domiciliation from/to other jurisdictions
- Existence of flexible re-organization rules (for mergers, takeovers, etc) without tax consequences
- First-class service providers (accountants, auditors, lawyers, bankers) and an excellent and mature professional services infrastructure
- Possibility as to the listing in international Stock Exchanges
- No Controlled Foreign Company (CFC) rules
- No thin capitalization provisions
- No foreign exchange controls
What to consider when setting up your business in Cyprus
- Build your business model, financial plan, marketing strategy and incorporate all the above in a business plan
- Choose your premises (physical address)
- Choose a name for your entity and incorporate it as a legal entity
- Arrange for the opening of bank current and merchant accounts depending on your needs
- Register with the Tax Department, register for VAT and VIES (the VAT exemption when trading with other EU countries)
- Recruit your team of professionals (to recruit professionals from third countries, non-EU personnel, an application is needed to the Civil Registry and Migration Department for the issuance of residency and employment permits)
- Register at the Social Insurance Services
- Register any intellectual property rights (e.g. trademarks, patents)
- Launch your business
Michalis Avraam & Partners Ltd was established in 1996 and offers audit, tax, and business consultancy services. Our professional staff is comprised of qualified accountants and lawyers with extensive experience in the field of accounting, auditing, taxation, and business consulting.
Here is how you can reach us:
Email: info@amicha.com
Phone: +357 22 346080
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