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Cyprus - The Legal System

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The Republic of Cyprus is a member State of the European Union and a member of the Eurozone.

Cyprus is an independent sovereign republic with a presidential system of government and a written Constitution that protects the rule of law, political stability, human rights and property ownership rights.

Cyprus is a member of the British Commonwealth, the Council of Europe, the IMF, the UN, the World Bank and the WTO.

Cyprus is a party to many international conventions and agreements, including a large number of Agreements on the avoidance of double taxation.

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Cyprus' close ties with Great Britain within the framework of the British Commonwealth (Cyprus was previously a British colony before it achieved independence in 1960) mean that its legal and judicial system is very close in form and content to the legal system of the United Kingdom, although, in fairness, it should be noted that the UK does not have its own written constitution. Thus, the original statutory and constituent documents of Cypriot companies and legal entities are based for the most part on the basis of the same documents of English companies, moreover, the legal system of Cyprus is modeled on the common law system of Great Britain. At the same time, the Cypriot legislation fully complies with the legislation of the European Union. The directives of the European Union are implemented in local legislation and the European Union Rules have direct effect and application in Cyprus.

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Overview of the tax system in Cyprus

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Cyprus has a highly competitive tax system, which, at the same time, fully complies with European and international standards. Cyprus companies that are tax residents of Cyprus enjoy all the benefits and benefit enormously from the use of the network of international double taxation agreements of Cyprus with more than 60 countries around the world, as well as full access to EU directives. The OECD has included Cyprus in the white list of jurisdictions that have largely implemented internationally agreed tax standards. In 2016, Cyprus was excluded from the so-called "black" list of offshore countries of the Ministry of Finance of the Russian Federation.

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There are several types of companies in Cyprus, of which the following are the most acceptable for doing business, ideal for the Cyprus tax environment :

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Holding Companies;

Financial companies (investment firms or Investments Firms);

IP companies;

Investment Funds (Investments Foundations, Investments Funds);

Trading and manufacturing companies, or so-called "Active" companies, the use of which does not lead to taxation of the profits of such companies.

 

Corporate income tax for companies (income tax) Cyprus is set at a strictly fixed level, relatively one of the lowest rates in Europe, equal to 12.5%, and is the main tax that is applied to the income of a Cyprus resident company.

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The advantages of the Cyprus tax and corporate system are :

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Dividends received from a foreign source are exempt from income tax if a number of simple conditions are met;

Income from the sale of shares and other qualifying securities (for example, corporate bonds) is exempt from income tax, provided that such a company whose shares or securities are being sold does not own any real estate in Cyprus;

There is no source tax on almost all payments from Cyprus abroad, including when paying dividends abroad;

The profit of a foreign permanent establishment (IPP) is exempt from taxes in Cyprus, subject to a number of simple rules and conditions;

Cyprus has one of the lowest income tax rates in the world, equal to 2.5%, for those companies that are officially registered and have the right to conduct activities and business in Cyprus in the so-called "IP BOX" mode.

Flexible rules for the reorganization of companies, allowing for a quick restructuring of a company or group of companies with minimal tax costs;

The ability to issue different classes of shares in companies for shareholders with a different set of rights, including redeemable preferred shares, shares with different voting rights, as well as shares with the right to receive a larger percentage of profit than ordinary shares, etc.

Almost without exception, EU banks open bank accounts for Cypriot companies, funds, and other legal entities, not to mention banks and the banking system of Cyprus, which compete with leading European banks and world-class banks, being modern financial institutions with an effective multilingual and operational business-oriented communication system, including the number in Russian.

English is one of the most widely used languages of business communication in Cyprus, although the official official languages of Cyprus are Greek and Turkish.

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This information posted on this page is for informational purposes only. If you need any tax advice , we recommend you contacting professional tax consultants of the Republic of Cyprus. We can help you with this (to find good consultants).