Doing Business in Cyprus (UAE Edition)
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DOING BUSINESS C YPRUS<br />
80<br />
UNITED ARAB EMIRATES EDITION<br />
KEY FEATURES OF THE CYPRUS TAX SYSTEM<br />
Simple, transparent and EU harmonised tax system<br />
follow<strong>in</strong>g recommended OECD practices.<br />
Enjoys the tax benefits of EU Directives (Parent – Subsidiary Directive,<br />
Merger Directive and Interest and Royalties Directive).<br />
Extensive Tax Treaty network with 67 countries.<br />
A corporate <strong>in</strong>come tax rate of 12.5%, one of the lowest with<strong>in</strong> the<br />
EU with possibility to enjoy a much lower effective tax rate.<br />
Availability of a Notional Interest Deduction for companies<br />
receiv<strong>in</strong>g new equity fund<strong>in</strong>g. The tax deduction can reach up to<br />
80% of the taxable <strong>in</strong>come generated by the new equity.<br />
IP Box regime based on the nexus approach which allows 80% deemed<br />
deduction on qualify<strong>in</strong>g profits from the bus<strong>in</strong>ess use of qualify<strong>in</strong>g IP.<br />
Increased deduction of 20% on the actual expenditure <strong>in</strong>curred for scientific<br />
research as well as research and development, subject to conditions.<br />
Attractive Tonnage Tax (TT) regime for ship owners, managers and charterers.<br />
Attractive tax jurisdiction for funds and attractive tax regime for fund managers.<br />
Capital ga<strong>in</strong>s are exempt from tax (except for capital ga<strong>in</strong>s aris<strong>in</strong>g<br />
from the disposal of immovable property located <strong>in</strong> <strong>Cyprus</strong>).<br />
Profits of a foreign Permanent Establishment exempt from tax.<br />
Ga<strong>in</strong>s from trad<strong>in</strong>g <strong>in</strong> securities (shares, bonds and certa<strong>in</strong><br />
other f<strong>in</strong>ancial <strong>in</strong>struments) are exempt from tax.<br />
Unilateral credit relief for foreign taxes.<br />
No withhold<strong>in</strong>g tax on dividend, <strong>in</strong>terest or royalty payments<br />
(for use of royalties outside of <strong>Cyprus</strong>) made abroad.<br />
No taxes on entry and on qualify<strong>in</strong>g reorganisations.<br />
Carry forward of tax losses for five years.<br />
Tax <strong>in</strong>centives for expatriate employees tak<strong>in</strong>g up<br />
employment <strong>in</strong> <strong>Cyprus</strong> (20%/50% exemption).<br />
Dividend <strong>in</strong>come and <strong>in</strong>terest <strong>in</strong>come are exempt from SDC for<br />
non-domiciled <strong>in</strong>dividuals tak<strong>in</strong>g up tax residency <strong>in</strong> <strong>Cyprus</strong>.<br />
Possibility to obta<strong>in</strong> <strong>Cyprus</strong> tax residency by spend<strong>in</strong>g<br />
only 60-days <strong>in</strong> <strong>Cyprus</strong> (subject to conditions).<br />
No <strong>in</strong>heritance tax.<br />
No immovable property tax.