International Business CompaniesInvesting in Cyprus
There is an increased interest internationally for the in-corporation of Cyprus International Business Companies (IBCs). Today such registrations have reached 60,000. Cyprus enacted new tax legislation and harmonised with the EU Laws and Directives, the Code of Conduct and the Organisation T" for Economic Cooperation and Development's (OECD) recommendation on Harmful Tax Corporation. This makes Cyprus an ideal location for es-tablishing an international entity for trading, consulting, ship management, holding companies and other opera-tions. Companies established in the European Union have the automatic right and privilege to operate in the EU countries.
The procedures for incorporating a Cyprus company have been extremely simplified. Under the new tax reform which came into effect on 1st January 2003, there is a uniform rate of corporation tax (10%) for all companies registered in Cyprus. There is also a windfall tax of 5% for chargeable income in excess of CYP 1 million.
The expatriate employees of IBCs pay the same rates applicable to resident Cypriots (i.e. 0%-30%) but for three years of assessment following the year in which their employment in Cyprus begins, 20% of their emolu¬ments or CYP 5,000, whichever is lower, is exempt from tax. EU nationals do not require a work permit to work in Cyprus either as Directors of a Company or employees. A residence permit is still needed but the procedure for acquiring such was simplified. The renewal of the residence permit is every five years and not every year as it used to be before the island's entry to the EU. Non EU-nationals still require a work permit.
Cyprus is a highly esteemed European low tax jurisdiction that can be a suitable place to locate a business entity due to the island's combination of tax treaties and low-tax regime. Dividends can flow through the Cyprus entity totally tax free and the entity can be used to take advan¬tage of the extensive network of double tax treaties. Low incorporation and operating costs, high professional services, European business climate, simple procedures of registration and the geographic location of the island are the most important advantages which are attracting a great number of foreign companies and individuals to base their business operations in Cyprus.
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