CYPRUS TAX SYSTEM • Cyprus has the lowest corporate tax rates in Europe – 10% subject to residence rules (Law 58/61) • Wide range of double tax treaties with over 40 countries
• Company is resident and taxable in Cyprus if the management and control of the Company is exercised in Cyprus • Highly developed banking system
MAIN CRITERIA • Majority of Directors must be resident in Cyprus (more than 50%) • Registered office must be in Cyprus • At least one meeting must be held in Cyprus annually, where all Directors must be present • Decision making must take place in Cyprus • Annual General meeting must take place in Cyprus – signing of minutes
BASIS OF TAXATION • Year of assessment: A period of 12 months starting 1st January and ending 31st December. Each company is assessed every year in respect of it’s income arising or accruing during the year of assessment • Financial year: Normally the financial year of a company should be the same as the year of assessment however the Commissioner of Income Tax may allow that financial year of a business close at a date different from the last day of the year assessment • Tax return (IR4) must be submitted for each year of assessment by 31st December of the following year e.g. a company must submit the 2011 tax return by the 31st December 2012
CORPORATE TAX EXEMPTIONS • 100% of interest income not received in the ordinary course of business (Amendment passed by Cyprus Parliament 22/10/2009)
• Dividend income • Profits from the disposal of securities • Profits from a permanent establishment which is maintained abroad (with exemptions)
CORPORATE STRUCTURE Cyprus is ideal for registration of: Holding Companies Companies, owners of intellectual property rights and trademarks Finance Companies
Real Estate Companies Trusts Trading Companies
WORK PERMIT FOR EXECUTIVE DIRECTORS A Work Permit enables non-European citizens to obtain a visa to come to Cyprus and work as an Executive Director in a Company. The permit also allows the family members of the Employee (the children must be under 18 years old) to come to Cyprus as dependents of the applicant. Children above 18 years old and other dependants can be issued with residence permits, provided that it can be proven that they are dependants of original applicant The terms â€œexecutiveâ€? includes third country nationals registered as Directors, Partners, General Managers, Departmental Managers
WORK PERMIT FOR EXECUTIVE DIRECTORS Duration The first permit is issued for a period of 2 years and can be renewed for an additional 3 years, provided that during the elapsed period the applicant lived and worked in Cyprus most of the time. Procedure The procedure involves a lot of documentation and certainly the applicant must visit Cyprus at least once before the work permit is issued in order to sign relevant application forms and to issue the relevant Health Insurances, etc.
The first thing is to set up a Company. The Company may be private company, a European Company or another legal entity such as a branch.
WHO CAN APPLY • Any eligible company may apply for permit to employ third country nationals as Executive Directors. The minimum acceptable total annual salary for an executive director is €41,006 (plus any additional allowances/benefits)
• The maximum number of such executives is 5 unless Civil Registry and Migration Department is persuaded that a greater number is justified
WHICH COMPANIES ARE ELIGIBLE All companies of foreign interest should fulfil the following in order to be eligible to employ third country nationals in Cyprus: • The majority of the Company’s shareholders should be foreign shareholders. This means that the foreign participation in the share capital must be over 51%. • In case where the percentage of the foreign participation in the share capital of the Company is equal or below 51% of the total share capital, this percentage should represent an amount equal or higher than €170,860 in order for a company to be considered eligible. Applications by Companies that deal with offering services or consulting services that invest capital lower than €170,860 will be examined given the fact that the nature of the work does not require a higher capital investment.
WHICH COMPANIES ARE ELIGIBLE • For new companies it should be proved by banking and other documents that the direct foreign capital investment amounts to at least €170,860, and it was brought in Cyprus legally from abroad. The above foreign capital investment can be utilised for any business purposes of the company, such as salary of the employees, purchase/rent of office premises, etc.
• The Company should operate from their self-contained office in Cyprus, which should be located in suitable distinct premises, not part of private residence or another office. Cases where the nature of work allows people to work from their home will be examined.
PROCEDURE FOLLOWING REGISTRATION OF COMPANY Bank Accounts: when applying for work permit, the authorities will require proof that the direct foreign capital investment amounts to at least €170,860 and it comes from abroad. This is evidenced by presenting a bank document, referred to as “credit advice”, which the bank issues when the capital investment is brought to Cyprus. Submission and Examination of Applications: the Civil Registry and Migration Department is the authority responsible for the first issue and subsequent renewals of the Temporary Residence Permit and Employment Permit granted to third country nationals employed by companies of foreign interest in Cyprus. The application forms accompanied with all necessary documents must be submitted to the Civil Registry and Migration Department.