Cyprus: Offshore Business Sectors
In 1975 the Cypriot Government began to create a regime that was welcoming to offshore companies. Cyprus now has particularly favourable tax treaties with Russia, other CIS members and Eastern European countries. A high proportion of firms from these regions choose Cyprus as an offshore base for a holding or investment company or trading subsidiary. Among the emerging markets, there are also favourable tax treaties with China, India, South Africa and a number of Middle Eastern countries.
In 2013, the Cypriot Parliament approved an increase in the uniform corporation tax rate from 10% to 12.5%. In addition, there is a 2% levy on wage bills (meant to subsidise pensioners), and a 'Special Contribution' related to defence which in effect applies the 12.5% corporate tax rate to inter-company dividend and interest payments. However, the corporation tax rules are complicated and cannot easily be summarised here.
This 12.5% corporation tax rate is, with Ireland, the third lowest in the EU. The only other territories with lower rates are the Isle of Man, Jersey and Guernsey, which have all a nil rate for companies not providing financial services. However, these regimes are under attack from the EU and furthermore are not considered part of the Union for most purposes.
Below, we describe the most important types of international business activity carried out from the island. As far as the taxation of offshore companies is concerned, it is now mainly of historical interest, although existing companies were given the option of continuing the 4.5% 'offshore' taxation level up to 2006. In other respects the sectors mentioned are ongoing.
For further information about the taxation of companies in Cyprus under the new regime, see Domestic Corporate Taxation.