The attractive tax system of Cyprus, together with its EU accession has helped Cyprus establish itself as an ideal holding company location in the EU.
The main advantages of the Cyprus tax legislation are as follows:
Cyprus’ current tax system is in full compliance with the EU and OECD.
Taxable profits of all Cypriot companies are taxed at the rate of 12.5% (however, effective corporate tax rate is NIL for most international transactions through Cyprus).
Extensive double tax treaty network leading to the avoidance of double taxation.
Gains from the disposal of securities are tax exempt.
Profits earned from a permanent establishment abroad are fully exempt from corporation tax (under certain conditions).
Dividend income received in Cyprus from a foreign corporation is wholly exempt from taxes in Cyprus (under certain conditions).
Interest income earned from trading activities, including interest which is closely related with trading activities, is subject to income tax at 12.5%.
No withholding tax on dividends and interest paid to non-residents of Cyprus. Also no withholding tax on royalties arising from sources outside Cyprus.
Group relief provisions for companies resident in Cyprus.
Capital gains are not subject to tax, except on sale of immovable property situated in Cyprus.