Disproving an old misconception: Cyprus Tax Haven

Is Cyprus a Tax Haven?

When the OECD announced that Cyprus, along with Luxembourg and Seychelles, had been deemed to be substantially compliant with the Global Forum on Transparency and Exchange of Information for Tax Purposes requirements, Cyprus' “tax haven” status was formally abolished. Currently, Cyprus has the same status as the United States, Germany, and the United Kingdom. Therefore, Cyprus is not a tax haven. Yet, Cyprus company formation with bank account can still significantly reduce the tax burden for its businesses. In addition, Cyprus provides a wide range of benefits and incentives to foreign investors and businesses, which are comparable to those offered by numerous tax havens.

Limassol city - Cyprus

The government did develop Cyprus as a tax haven immediately after the unification of Germany, primarily targeting Russian billionaires as well as Eastern European people and businesses. Cyprus' popularity grew over the next three decades as a result of its low corporation tax rate, tight privacy regulations, and geographic attractiveness. As a result, the banking industry boomed in Cyprus, growing to become nine times larger than the country’s economy. The demand for Cyprus company formation with bank account was at its all-time high.

However, nowadays the country has followed a different development strategy. Rather than continue to position Cyprus as a tax haven, the government has made a huge effort to change its image and policies to comply with the rules from EU and OECD. The changes were to move toward a new vision of globalization and international cooperation. Opening a company in Cyprus for foreigners can now lead to more benefits from strategic agreements, innovative policies and several other incentives.

Benefits from opening a company in Cyprus for foreigners

There are many opportunities for Cyprus company formation with bank account. For instance, foreign businesses can benefit from many of the EU’s economic and trade treaties. The country offers one of the lowest corporate tax rates in the EU, at 12.5%, and it also exempts non-resident based businesses from all local taxes.

Whether it's a local or international bank, companies can simply be linked to an offshore bank account. Cyprus company formation with bank account can be very flexible to suit different business purposes.

The country has nearly fifty double taxation treaties in existence, which allow offshore corporations to pay just 12.5% on worldwide trade profits while non-resident companies can enjoy tax exemption on all foreign-sourced income.

Other benefits of Cyprus company includes:

• Access to a variety of EU treaties and accords. All OECD and FATF financial laws have also been effectively implemented in Cyprus, paving the way for seamless transactions and economic activity. Cyprus tax haven is no longer a stigma harming the reputation of firms incorporated there since it has complied with all know-your-customer, anti-money laundering, and international financial regulatory rules.
• Single-member business ownership is possible, and the incorporation process is simple. The government has created an atmosphere that is favorable to all types of investors and businesses. Cyprus tax for expats is also quite liberal, allowing all types of businesses to conduct business there. Cyprus' Companies Act is modeled after UK Company Law, making it simple for businesses to navigate the legal landscape. Nominee services are also available for anyone looking for peace of mind while opening a company in Cyprus for foreigners.
• A strategic geographic location for international trade, making it ideal for opening a company in Cyprus for foreigners. It is located deep in the Mediterranean Sea, offering access to nations in the southern EU, northern Africa, and the Middle East. Because English is widely spoken in this jurisdiction, it is very attractive to foreign investors.

Cyprus’s environment for business development.

Cyprus has a free market economy that is predominantly service-oriented. The GDP per capita is USD 23.8 billion (2020), with services accounting for the majority of the economy (81.2 percent ). Tourism, financial services, and shipping are three significant economic areas, suitable for opening a company in Cyprus for foreigners. Cyprus has established itself as a major financial center, serving as a crossroads for trade between Europe and the Middle East as well as a conduit for investment from the West into Eastern Europe. Prior to the start of the global financial crisis, Cyprus was a tax haven with the business services sector being the fastest expanding in the country. In 2008, it adopted the Euro as its primary currency after joining the European Union.

Cyprus' infrastructure and transportation system are both very developed. The country boasts an advanced road network as well as public transportation. Two international airports and two major harbors serve freight and passenger ships in Cyprus. The primary telecommunications firm is controlled by the government but there are other private enterprises as well. This creates a solid foundation for opening a company in Cyprus for foreigners.

The busy ships at Limassol city

In Cyprus, there are no exchange restrictions. Bank accounts in foreign currency denominations are permitted for residents. Income earned in Cyprus can be freely repatriated by non-residents and international investors. There is no need for enterprises to switch their abroad income to the local currency when they are in Cyprus, cutting expenses incurred through foreign currency conversion.This is perfect for any Cyprus company formation with bank account.

If a company is founded in Cyprus as a Non Resident Company and does not conduct business within the island, it is exempt from paying any local taxes. If a firm does business within the country, however, the revenue generated domestically is subject to taxation. The VAT rate is 19%. There is also a 12.5% business tax rate, which is the lowest in the EU. Cyprus has signed approximately fifty Double Taxation Treaties with several of the world's most powerful countries. Cyprus, despite not being a tax haven, still maintains a thriving financial industry thanks to tax advantages for a range of business types. Non-resident corporations are exempt from paying any taxes on earnings received from foreign sources, including, but not limited to, tax on profits, dividends, royalty payments, capital gains, withholding tax and wealth or inheritance tax.