Cyprus: Offshore Business Sectors
Trade, Marketing and Distribution
On its own, the Cypriot taxation regime does not stand out particularly from its offshore competitors. Nevertheless, the island has considerable advantages, including its geographical location, network of double tax treaties (especially those with the CIS and Eastern Europe) and relatively sophisticated, European-standard business environment.
This is why a substantial number of companies that trade or distribute fast-moving consumer goods and other physical commodities use Cyprus as a trading base for the Mediterranean, Middle East and North African region. Non-resident enterprises (i.e. those neither 'managed and controlled', nor with a local permanent establishment) may store, maintain, break bulk or repackage their own transit goods in bonded warehouses, providing the handling does not result in any change of tariff classification at customs. Such enterprises are also permitted to conduct sales activities on the island, as long as no local deliveries result and no permanent establishment is created.
In purely physical terms, Cyprus is not a very convenient base for supplying the CIS and Eastern Europe. Nevertheless, a great many companies with interests in these regions have still established holding companies on the island. Not only are the Cypriot treaty withholding tax rates normally lower than those under other countries' treaties, but also no local taxation is payable so long as no permanent establishment is created. Even if it is, Cyprus's 12.5% tax rate on company profits is itself low. The combination is quite hard to beat; for more information, see Financial Holding and Investment Activities.
Along with other low-tax jurisdictions, Cyprus is a suitable base for e-commerce services for retail or wholesale distribution of material or non-material goods; see Offshore-e-com.com for extensive descriptions of how such businesses can take advantage of the combination of offshore and e-commerce.