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Commercial Companies in Cyprus

Contributed by Fiducenter (Cyprus) Ltd
25 November, 2013


Contributed by Fiducenter (Cyprus) Ltd [www.fiducenter.com.cy]

Introduction

The geographical position of the country combined with its business-friendly time-zone, the first grade infrastructure, the low Corporation Tax rate – part of the efficient and supportive tax regime - are just a few of the factors which have led to the rise in the attractiveness of Cyprus for commercial operations.

 

Use of Cyprus in commercial structures

Due to its geographical location, Cyprus is a natural transhipment load centre for shipping lines between European and Middle Eastern ports in the Mediterranean Sea. As such, the island has developed in to a central depot for distribution to the markets of Europe and Africa of more and more goods coming from booming manufacturing countries like China and India. The availability of bonded warehouses and similar operations can facilitate transit trade activities.

In addition to this, following the entrance of Cyprus in the EU in 2004, the Island is considered as the ideal gateway to the EU for Middle East, Far East and African countries and vice versa.

The above are just two of the numerous ways in which Cyprus companies can be utilised in commercial structures. As the diagrams below illustrate, Cyprus companies can be used for the invoicing / re-invoicing of goods and services (as well as for the receipt of trading commissions) from any country to any destination and for transit trade activities in combination with the operation of bonded warehouses, bonded factories and free trade zones.


In examples 1 – 3 above, goods may or may not pass through Cyprus, depending on the circumstances.

Furthermore, Cyprus companies may provide services such as marketing, accounting, provision of labour - executive staff, consulting, market research, commission agency, intermediation, client introduction and many others.

 

Human Resources

For what concerns human resource requirements, commercial companies might employ local staff, taking advantage of the abundance of highly educated and qualified personnel in the country. Alternatively, they may employ expatriate staff, who can benefit from provisions enacted over the last few years in the local legislation in order to attract qualified people from abroad and from Double Tax Treaty provisions. As a result personal tax and social insurance contributions can be borne at much lower than normal rates in Cyprus and, as is usually the case, the home country of the staff.

You are more than welcome to contact us for more information about incentives to relocate and perhaps even invest in Cyprus, a topic on which we also have a dedicated publication.

 

Tax Implications

Profits made by a Cyprus company engaged in commercial activities are taxed under Corporation Tax at the standard rate of 12.5%, and not at higher rates than for other activities, as it is the case in many other countries. Trading from a low-tax EU State such as Cyprus and using appropriate tax planning-structuring to optimise the actual tax burden, to levels even lower than the headline rate, is a far superior strategy nowadays than operating through agent structures, offshore companies or tax havens.

 

VAT

Depending on its activities a commercial company might also need or want (where there is an entitlement but not an obligation) to register for VAT. The VAT Authorities require supporting documentation evidencing the commercial nature of the company’s activities before proceeding with the registration.

Indeed VAT can be a significant reason for including Cyprus in international business structures since it has one of the lowest standard VAT rates in the EU.

 

Other

Double Tax Treaty (DTT) Network and EC Directives

Cyprus has a network of close to 50 DTTs currently in force (with most major countries). Furthermore, through its EU membership, Cyprus offers access to the EU Directives and all related EU freedoms, such as those of establishment and movement of capital.

Payments out of Cyprus

There is no Withholding Tax (WHT) on dividend, interest and royalty payments to non-residents of Cyprus.


Fiducenter (Cyprus) Ltd

1, Iakovou Tompazi Street
Vashiotis Business Center
CY-3107 Limassol

T: +357 25 50 40 00 | F: +357 25 50 41 00

W: www.fiducenter.com.cy | E: fiducenter@fiducenter.com.cy

 




 


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