Transcript Slide 1

CYPRUS – THE IDEAL HOLDING
COMPANY LOCATION,
ADVANTAGES OF THE CYPRUS
TAX SYSTEM
By
Marios Efthymiou
Senior Partner
Dinos Antoniou & Co Ltd
Certified Public Accountants
MAXIMISATION OF NET RETURN THROUGH
INTERNATIONAL TAX PLANNING
• GLOBALISATION OF THE WORLD ECONOMY HAS LED TO
CROSS BORDER INVESTMENTS AND HAS ENHANCED
INTERNATIONAL TRADING
• INVESTORS/BUSINESSMEN ARE INTERESTED IN MAXIMISING
NOT JUST THEIR GROSS YIELD BUT THEIR NET RETURN AFTER
TAXES
• HENCE MINIMISING THEIR TAX BURDEN THROUGH
INTERNATIONAL TAX PLANNING STRUTURES IS SOUGHT
INTERNATIONAL JURISDICTIONS
• OFFSHORE JURISDICTIONS ( TAX HEAVENS)
– British Virgin Islands
– Belize
– Panama
– Seychelles
– Delaware
– And many others
• ONSHORE JURISDICTIONS (TAX BURDEN REDUCED THROUGH
COMPLICATED TAX BUSINESS STRUCTURES - HOLDING JURISDICTIONS)
– Cyprus
– United Kingdom
– Luxembourg
– Switzerland
– Netherlands
– Malta
CRITERIA FOR CHOOSING AN INTERNATIONAL
JURISDICTION
• TAX BENEFITS AND ABILITY TO APPLY AND SUSTAIN THEM
• POLITICAL STABILITY
• RESPECTABILITY OF THE HOLDING JURISDICTION
• DOUBLE TAXATION TREATIES
• HIGH LEVEL OF PROFESSIONAL SERVICES AND RELIABLE
BANKING SYSTEM
• ESTABLISHMENT AND MAINTENANCE COSTS
CYPRUS COMPANIES
•
TAX ADVANTAGES – LOWEST TAX RATE IN EUROPE
•
MEMBER OF THE EUROPEAN UNION
•
STRATEGIC LOCATION
•
HIGH STANDARD OF BUSINESS ENVIRONMENT
•
TAX SYSTEM IN FULL CONFORMITY TO EUROPEAN LAW & OECD DIRECTIVES
AGAINST HARMFUL TAX PRACTICES
•
PAYMENTS FROM CY COMPANIES TO COMPANIES ABROAD ARE NOT SUBJECT
TO ANY WITHHOLDING TAX
•
TRANSACTIONS WITH OFFSHORE COMPANIES ARE ACCEPTED
•
REPUTABLE AND LONGSTANDING INTERNATIONAL BUSINESS CENTRE WITH
STABLE AND COMMITTED POLICY TOWARDS INTERNATIONAL BUSINESS
COMPANIES
MAXIMISATION OF NET RETURN THROUGH
INTERNATIONAL TAX PLANNING
• GLOBALISATION OF THE WORLD ECONOMY HAS LED TO
CROSS BORDER INVESTMENTS AND HAS ENHANCED
INTERNATIONAL TRADING
• INVESTORS/BUSINESSMEN ARE INTERESTED IN MAXIMISING
NOT JUST THEIR GROSS YIELD BUT THEIR NET RETURN AFTER
TAXES
• HENCE MINIMISING THEIR TAX BURDEN THROUGH
INTERNATIONAL TAX PLANNING STRUTURES IS SOUGHT
PHILOSOPHY & TAX BASE
PHYSICAL PERSONS
• CYPRUS TAX RESIDENTS ARE TAXED ON THEIR WORLDWIDE
INCOME
• NON TAX RESIDENTS ARE ONLY TAXED ON THEIR INCOME
EARNED IN CYPRUS
• TAX RESIDENT RULE
A PHYSICAL PERSON IS CONSIDERED CYPRUS TAX RESIDENT IF
HE/SHE RESIDES IN THE REPUBLIC OVER 183 DAYS IN A YEAR
PHILOSOPHY & TAX BASE
LEGAL PERSONS (COMPANIES)
• A CYPRUS TAX RESIDENT COMPANY IS TAXED IN CYPRUS
• A NON TAX RESIDENT CYPRUS COMPANY IS ONLY TAXED ON
INCOME EARNED IN CYPRUS
• TAX RESIDENT RULE
MANAGEMENT & CONTROL IN CYPRUS.
IN PRACTICE IT IS CONSIDERED WHERE:
 THE MAJORITY OF DIRECTORS ARE
 THE PLACE WHERE THE MAJORITY OF BOARD OF DIRECTORS
MEETINGS & SIGNIFICANT DECISIONS ARE TAKEN
TAX RATES
Main rate
Cyprus Tax resident Co’s
10%
Main rate
Non - Cyprus Tax resident Co’s
0%
Ship owning – Cyprus flag
0%
Ship owning (foreign flag ships), ship
management & ship chartering
Trusts
Tonnage tax
0%
EXEMPTIONS FOR LEGAL ENTITIES
THE FOLLOWING ARE EXEMPTED FROM INCOME TAX:
• PROFITS FROM THE SALE OF SHARES
• INCOME FROM DIVIDENDS
• INCOME FROM INTEREST
SALE OF SHARES
• THE SALE OF SHARES BY CYPRUS COMPANIES ARE
TOTALLY EXEMPTED FROM TAX WITHOUT ANY
CONDITIONS
UNLIKE
OTHER
COMPETITIVE
JURISDICTIONS WHERE THERE ARE LIMITATIONS IN:
 THE PERIOD OF HOLDING
THE % OF HOLDING
I.E. IN UK THERE IS NO CAPITAL GAINS TAX ON THE
DISPOSAL OF SHARES IN UNDERLYING SUBSIDIARIES IF
AT LEAST 10% OF THE SUBSIDIARY CO. IS HELD FOR 2
YEARS
DIVIDENDS RECEIVED
LEGAL ENTITIES
• DIVIDENDS RECEIVED BY A CYPRUS RESIDENT COMPANY FROM ANOTHER CYPRUS
RESIDENT COMPANY ARE EXEMPTED FROM ANY TAXATION
•
DIVIDENDS RECEIVED BY A CYPRUS COMPANY FROM A COMPANY ABROAD IS ONLY
TAXED IF BOTH OF THE BELOW CONDITIONS ARE MET (WHICH IS VERY RARE):
 THE COMPANY PAYING THE DIVIDENDS ENGAGES MORE THAN 50% IN
ACTIVITIES THAT LEAD TO INVESTMENT INCOME
AND
 THE FOREIGN TAX BURDEN ON THE INCOME OF THE COMPANY PAYING THE
DIVIDENDS IS SUBSTANTIALLY LOWER THAN THE TAX BURDEN OF THE COMPANY
IN CYPRUS
PHYSICAL PERSONS
DIVIDENDS RECEIVED BY PHYSICAL PERSONS ARE TAXED AT 15% DEFENCE TAX ONLY IF
THE RECIPIENTS ARE CYPRUS TAX RESIDENTS
INTEREST RECEIVED
• NON TRADING INTEREST IS EXEMPTED FROM
INCOME TAX BUT IS TAXED AT 10% DEFENCE
TAX ON THE GROSS AMOUNT
• TRADING INTEREST IS TAXED AT 10% INCOME
TAX AFTER DEDUCTING INTEREST EXPENSE
AND ALL OTHER COMPANY EXPENSES
TAX ADVANTAGES IDEAL FOR HOLDING COMPANY
• EXEMPTION FROM TAX ON PROFIT GENERATED FROM THE SALE OF
SECURITIES
• EXEMPTION FROM TAX ON DIVIDEND RECEIVED WHEN CERTAIN
CONDITIONS ARE MET
• EXEMPTION FROM
TAX ON THE PROFITS THAT ARISE FROM A
PERMANENT ESTABLISHMENT ABROAD
• NO WITHHOLDING TAX ON DIVIDENDS RECEIVED FROM A EUROPEAN
SUBSIDIARY COMPANY
• LOWER WITHHOLDING TAX ON INCOMING DIVIDENDS PAID BY A NON EU
COMPANY WITH WHICH CYPRUS HAS A DOUBLE TAX TREATY
LOSSES
• LOSSES CARRIED FORWARD CAN BE SET OFF AGAINST PROFITS
WITHOUT LIMITATION IN TIME
• LOSSES INCURRED ABROAD CAN BE SET OFF AGAINST THE
COMPANY’S PROFITS
• LOSSES OF ONE CO IN THE GROUP CAN BE SET OFF AGAINST
PROFITS OF ANOTHER CO
VAT (VALUE ADDED TAX)
VAT RATES
• 15%
• 8%
• 5%
• 0%
VAT – INTRACOMMUNITY TRANSACTIONS
ALL MEMBERS OF E.U. HAVE THE SAME VAT
LEGISLATION WHICH IS BASED ON THE 8TH E.U.
DIRECTIVE
ANY E.U. COMPANY THAT IS INVOLVED IN
INTRACOMMUNITY TRANSACTIONS, CHARGES 0%
VAT AS LONG AS THE TRANSACTIONS ARE FOR
BUSINESS PURPOSES AND ARE BETWEEN VAT
REGISTERED COMPANIES
CYPRUS COMPANIES - TRADING
SALES TO:
E.U. – INTRACOMMUNITY TRANSACTION (0%)
COUNTRIES OUTSIDE E.U. – OUTSIDE THE
SCOPE OF VAT (NO VAT CHARGED)
PURCHASES FROM:
E.U. – INTRACOMMUNITY TRANSACTION (0%)
COUNTRIES OUTSIDE E.U. – VAT AT CUSTOMS
OF COUNTRY OF IMPORT
CYPRUS COMPANIES - SERVICES
SERVICES RECEIVED FROM:
E.U. – 0%
COUNTRIES OUTSIDE E.U. – REVERSE CHARGE
METHOD - EFFECT IS ZERO VAT
SERVICES RENDERED TO:
E.U. – 0%
COUNTRIES OUTSIDE E.U. – OUTSIDE THE SCOPE
OF VAT WITH SOME EXEMPTIONS
VAT - CONCLUSION
CYPRUS COMPANIES USED FOR TRADING AND
RENDERING OF SERVICES BOTH IN EUROPE AND
OUTSIDE EUROPE ARE VERY EFFECTIVE VEHICLES.
THE VAT CHARGED IS EITHER 0% OR OUTSIDE THE
SCOPE OF VAT.
THIS ENHANCES SIGNIFICANTLY THE CASHFLOW
OF THE COMPANY AS WELL AS THE
COMPETITIVENESS.
CYPRUS CO’S – A POWERFUL VEHICLE FOR
MAXIMIZATION OF NET RETURN
YOU ARE AN ENTERPRENEUR TRYING TO MAXIMIZE
NET RETURN?
THEN COMBINE THE ADVANTAGES OF THE VAT WITH
THE LOWEST INCOME TAX RATE IN EUROPE AND ALL
THE OTHER TAX ADVANTAGES OF THE CYPRUS TAX
SYSTEM, THAT A CYPRUS COMPANY CAN OFFER YOU,
AND YOU HAVE ONE OF THE MOST POWERFUL
VEHICLES IN THE WORLD TO ACHIVE IT.
ADD TO ALL THE TAX
ADVANTAGES
THE BEAUTIFUL WEATHER OF
CYPRUS
AND YOU ARE IN
PARADISE
THANK YOU
Dinos Antoniou & Co Ltd
9 VASSILI MICHAELIDES
3026, LIMASSOL-CYPRUS
P.O BOX 57048, 3311, LIMASSOL, CYPRUS
TEL. 00357 25 824545
FAX. 00357 25 824060
WEB SITE:www.dinoscpa.com.cy
EMAIL: [email protected]
CONTACT PERSONS:
DINOS ANTONIOU, C.E.O.
MARIOS EFTHYMIOU, Senior Partner