What makes Cyprus attractive for trading or service companies
Regular trading or services income earned by a Cyprus company is taxed at 12.5%.
Yes, it’s more than zero.
Yet, it is less than businesses pay in any other EU member-state. It is also not ‘progressive’, as in many other rich countries, where You are punished for being successful by being forced into a higher and higher tax bracket. It’s just a flat 12.5%.
In our book, it’s a modest price to pay for being part of the biggest single market in the world. For avoiding the stigma of owning and using an offshore company from a banana republic. For the ability to obtain and produce upon demand proper tax returns and taxpayer certificates. For being able to wave-off accusations in tax-evasion. For being able to open and keep a bank account in a normal bank, in a decent country.
Sounds good, there is even more! The company may reduce the effective tax rate even further with attractive tax exemptions and deductions
As is common practice, all normal business expenses (including our service fees, of course) can be written off, including interest expenses incurred at acquisition of subsidiaries. Losses can be carried forward. Fixed assets depreciated. Entertainment expenses at up to 1% of the gross income are tax-deductible. Your company will only pay the tax on what it has really earned. And it’s not a high tax to start with. It’s ok.
Importantly, the effective tax rate of a Cyprus company will often be less than the standard 12.5%. There are many attractive exemptions. Capital gains – exempt in most cases. Dividends – completely exempt. Investment income, intellectual property income, company capitalized by equity – a much lower tax rate is achievable. If your business makes money in several different ways, chances are Your actual tax bill will be reduced to single digits. It’s a fair price to pay for a decent, reputable way of doing business.