According to a recent survey conducted by one of the remaining "Big Three" accounting terms, KPMG, the Republic of Cyprus is one of the most attractive offshore tax havens in Europe.
Along with Ireland and Switzerland, Cyprus enjoys clarity in its tax structures, has fewer changes in taxes annually compared to other European countries, and has the highest percentage of local citizens happy with the level of current tax laws, according to the KPMG survey.
Of all the nation’s covered by the KPMG survey and from more than 400 interviews conducted with tax professionals in European multinational companies, Cyprus was tagged as the one country with a high percentage of the business community backing the decisions of the government relating to tax laws.
The majority of the Cypriot population is Greek, with a minority of Turks and other nationalities. Languages are Greek and Turkish, but English is widely used, especially in the legal and business communities. Technical communications are excellent, and it is a popular tourist destination. As a result of its relationship with Great Britain, Cyprus is a common law country.
Island Changes
Once part of the Byzantine Empire, Cyprus was, until changes in money laundering laws, a great place to make things disappear. This nation has long been a way station for international scoundrels, where officials traditionally have been willing to look the other way. Just 150 miles from Beirut, closer to the Middle East than to Europe, Cyprus has been a hot spot for cigarette smuggling, money laundering, arms trading and the like. The site of secret meetings between Israelis and Palestinians, it has also been a refuge for the Russian mafia transporting immense wealth of dubious provenance.
Cyprus is also a popular low tax haven for public and trading companies which can find significant advantages in the double taxation treaties network available to offshore companies, although it is expensive and subject to significant disclosure requirements.
The offshore regime in Cyprus changed after the island joined the EU in 2004, and as a result of agreements with the Organization for Economic Cooperation and Development (OECD). There is now a uniform 10% corporate tax rate that applies to both onshore and offshore companies.
The 10% corporate tax gives Cyprus the lowest rate in the EU, after Ireland (12.5%), with the exception of the Isle of Man, Jersey and Guernsey, all of which have a zero rate. For companies seeking a European base for international business transactions, Cyprus could just be the ideal offshore tax haven for incorporation.
Even other low tax countries such as Luxembourg and Switzerland were behind Cyprus in terms of the backing received from the local business community, proving that the island nation has done well to maintain its positive tax status and reputation as an internationally focused business oriented country since it joined the EU.
Since Cyprus is an EU member companies enjoy the 27 nation associated status by establishing operations there. The country has managed to maintain a low level of corporation and even personal income tax as well as dividend and royalty tax despite and now, from the January 1, 2008 Cyprus has adopted the euro as its official currency which makes European based trading simpler for companies
Low Taxes
A non-domiciled resident pays a flat tax of 5% on investment income received from abroad and remitted to Cyprus. Royalties are treated as investment income. Foreign earned income can be remitted to Cyprus in order to reduce foreign withholding taxes under one of the many Cyprus tax treaties. When that is done, any foreign withholding tax paid can be credited against any Cyprus tax owed and that may wipe out the 5% Cyprus tax obligation.
So far no directly targeted recommendations have been made to Cyprus, but the nation does tread a fine line between offering the likes of companies and international retirees an incredibly favorable taxation regime in which to live and work and complying with international legislation designed to prevent serious crime.
As long as Cyprus continues to balance both camps so well, it should remain one of the most attractive offshore tax havens in Europe.
* To learn more about Cyprus and other offshore financial centers read Tax Havens of the World. Click here: http://web-purchases.com/190STHOW/W190H723/
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