Cyprus: Country and Foreign Investment
Cyprus has an excellent business infrastructure with good telecommunications; this coupled with the widespread use of the English language and a legal system largely based on English law makes the island a very convenient and effective business base.
Nicosia, the administrative capital, is also the chief business centre, although Limassol, with its port, and Larnaca, with the main airport, are also significant in business terms.
There are a number of local banks, but many international banks have formed Offshore Banking Units on the island and provide services to foreign or offshore companies. Business legislation created special offshore regimes for a variety of types of business, including shipping companies, insurance companies, and 'Offshore Financial Service' companies, although as from 2003 most distinctions between 'offshore' and 'onshore' were abolished. There is also legislation for Trusts modelled on English trust law.
Taxation for offshore entities was very light until 2003, and Cyprus is unusual among low-tax countries in having tax treaties with more than 40 other countries. These include the CIS and many Eastern European countries; for that reason Cyprus has developed particularly close links with that region.
In July, 2002, as part of the Income Tax Act No. 118(I) of 2002, Parliament approved a uniform 10% corporate tax rate, to apply to both onshore and offshore companies, plus a 2% levy on wage bills (meant to subsidise pensioners), and a 'Special Contribution' related to defence which in effect applies the 10% corporate tax rate to inter-company dividend and interest payments. The new regime was effective from January, 2003, although certain Special Contribution payments were increased as of January 1, 2012.