Cyprus IBC Types

TRADING / RE-INVOICING

International trading is one of the most commonly used examples where a Cyprus IBC can be used. An intermediary Cyprus IBC can be placed in between a Buyer and a Seller. In this way, taxable profits can be transferred from a high tax jurisdiction to one with low taxes. The trading will continue with the goods moving directly from the seller to the final buyer and the documents through the intermediary Cyprus IBC company.

The addition of a Cyprus IBC in the commercial chain can be suitable for a seller or a buyer. Both the seller and the buyer can use an intermediary IBC to reduce taxes paid on the profits arising from the trading in their home countries.

It must be mentioned that the transactions with the intermediary company should be entered into on terms and conditions which could be obtained on an open market basis from independent third parties.

For trading within Europe it is necessary to register the company for VAT purposes. We can assist you to register with the VAT Authorities in Cyprus and we can administer the VAT documentation.

The advantages of Trading and Re-invoicing Cyprus IBC’s are the following:

Movement of goods

Goods are not necessary to be physically delivered to Cyprus. They are delivered directly to their destination.

VAT registration

VAT registration in Cyprus with EU VAT registration number.

Trading Profits

Trading profits will be subject to corporation tax at the rate of 12,5% after deducting all relevant expenses.

Dividends distributed

No withholding tax on dividends distributed to non-resident shareholders of Cyprus Companies.

Interest paid

No withholding tax on interest paid by a Cyprus Company to non-resident creditors.

CONSULTANCY

Professionals and consultants with international business activities can use a Cyprus IBC as a tax planning tool for the management of their operations in Europe or to third countries.

The Cyprus IBC will enter into contracts with other parties for the performance of the relevant work and will invoice and receive payments accordingly. Therefore, the profits will be transferred to a low tax jurisdiction. Cyprus is a suitable jurisdiction with extensive double tax treaty agreements.

The advantages of a Cyprus IBC offering consultancy services are the following:

Consultancy income

The income from consultancy services will be subject to corporation tax at the rate of 12,5% after deducting all allowable expenses such as salaries and consultancy fees.

Salaries

The salaries paid by a Cyprus IBC to employees who are not resident in Cyprus , are not subject to any taxation or social insurance contributions in Cyprus.

Consultancy fees

The fees paid by a Cyprus IBC to consultants who are not resident in Cyprus , are not subject to any taxation in Cyprus.

Dividends distributed

No withholding tax on dividends distributed to non-resident shareholders of Cyprus Companies.

EMPLOYMENT

The use of a Cyprus IBC can be tax advantageous to Individuals who are not tax residents in Cyprus and who receive substantial amounts of income and benefits in kind in respect of employment exercised outside Cyprus.

The right to receive their income and benefits in kind can be assigned to a Cyrus IBC. In other words, the Cyprus IBC would contract with the Employer for the performance of a relevant work and would invoice and receive payment accordingly. The Individual will be and employee of the Cyprus IBC.

Personal Taxation

The Individual will not be taxed in Cyprus personally for salaries received from his employment contract with the Cyprus IBC in respect of employment exercised outside Cyprus.

Corporation Tax

The net income of the Cyprus IBC will be subject to corporation tax at the rate of 12,5% after deductiong all relevant expenses including salaries, bonuses and other benefits paid to the Individual. Therefore, a small margin of the income will be taxable in Cyprus at 12,5%.

Dividends Distributed

The net profits after taxation of the Cyprus IBC can be distributed as dividends without any withholding taxes in Cyprus.

HOLDING

Cyprus IBC’s are very popular to hold shares in subsidiaries and associate companies operating internationally. The advantages of a Cyprus Holding IBC are the following:

Dividend income

Dividends received by a Cyprus Holding Company are totally exempt from taxation in Cyprus. This exemption does not apply if
A) more than 50% of the overseas company’s activities result directly or indirectly in investment AND
B) the foreign tax is significantly lower than the tax rate payable in Cyprus.

Profit from the sale of securities

Profits realized by a Cyprus Holding Company from the sale of shares and other securities are exempt from tax. The only exemption applies, and taxation at 20% will take place, if and to the extent that a profit is realized upon the sales of shares in certain companies owning Cyprus real estate.

Dividends distributed

No withholding tax on dividends distributed to non-resident shareholders of Cyprus Companies.

Interest paid

No withholding tax on interest paid by a Cyprus Company to non-resident creditors.

Dividends received

Cyprus has concluded tax treaties with more than 53 countries worldwide. Dividend Income received in Cyprus benefits from the low withholding taxes imposed by countries which signed Tax Treaties with Cyprus.

INVESTMENT

A Cyprus IBC can be used as an investment company financing various projects internationally belonging to the same group. The advantages of a Cyprus Investment IBC are the following:

Interest income

Interest income of investment companies is considered to arise from the ordinary activities of the company and is subject to 12.5% corporation tax.

Dividends distributed

No withholding tax on dividends distributed to non-resident shareholders of Cyprus Companies.

Interest paid

No withholding tax on interest paid by a Cyprus Company to non-resident creditors.

Interest received

Cyprus has concluded tax treaties with more than 53 countries worldwide. Interest Income paid to Cyprus benefits from the low withholding taxes from countries with which Cyprus signed Tax Treaties.

FINANCE

An intermediary Cyprus Finance IBC can be placed in between a parent company in a no tax jurisdiction and subsidiary companies operating in countries which signed Tax Treaties with Cyprus.

The Cyprus Finance IBC will borrow money from the parent company in a no tax jurisdiction and lend money to the subsidiary companies operating in countries which signed Tax Treaties with Cyprus.

The advantages of a Cyprus Finance IBC are the following:

Interest income

Interest income of finance companies is considered to arise from the ordinary activities of the company and is subject to corporation tax after the deduction of the interest payable. Therefore, a small margin of net interest income will be taxable in Cyprus at 12.5%

Dividends distributed

No withholding tax on dividends distributed to non-resident shareholders of Cyprus Companies.

Interest paid

No withholding tax on interest paid by a Cyprus Company to non-resident creditors.

Interest received

Cyprus has concluded tax treaties with more than 53 countries worldwide. Interest Income paid to Cyprus benefits from the low withholding taxes from countries which signed Tax Treaties with Cyprus.

SECURITIES TRADING

Cyprus has a favorable tax regime for IBC’s trading in securities worldwide.

The advantages of a Cyprus IBC used to buy and sell securities such as bonds and shares worldwide, listed in a stock exchange or not, are the following:

Profit from the sale of securities

Profits realized by a Cyprus IBC from the sale of shares, bonds and other securities are exempt from tax.

The only exemption applies, and taxation at 20% will take place, if and to the extent that a profit is realized upon the sales of shares in certain companies owning Cyprus real estate.

Dividends distributed

No withholding tax on dividends distributed to non-resident shareholders of Cyprus Companies.

Withholding taxes

No withholding taxes on payments out of Cyprus.

INTELLECTUAL PROPERTY

Intellectual Properties (IP) can be one of the most valuable assets of an organization. Cyprus offers an efficient Intellectual Property Tax regime combined with the protection offered by EU Member States and by the signatories of all major Intellectual Property treaties and protocols.

The Cyprus Intellectual Property Taxation

The Intellectual Property taxation includes a wide range of intangibles:

• Copyrights (literary works, dramatic works, musical works, scientific works, artistic works, sound recordings, films, broadcasts, published editions, databases, publications, software programmes)
• Patented inventions
• Trademarks designs and models that are used or applied on products

Intellectual Properties are not necessary to be registered in Cyprus to benefit from Intellectual Property regime of Cyprus.

Tax benefits of Intellectual Property of Cyprus companies

The tax provisions provide exemptions from tax of income related to Intellectual Property. More specifically:

• 80% of worldwide royalty income generated from Intellectual Property owned by Cyprus resident companies (net of any direct expenses*) is exempt from income tax
• 80% of profit generated from the disposal of Intellectual Property owned by Cyprus resident companies (net of any direct expenses*) is exempt from income tax
• Any expenditure of a capital nature for the acquisition or development of Intellectual Property is claimed as a tax deduction in the year in which it was incurred and the immediate four following years on a straight-line
• All the above exemptions are also available for Intellectual Properties acquired or developed before January 2012

*Direct expenses include finance costs to acquire/develop Intellectual Property and annual tax amortization.

The EU Directives and Regulations relating to Intellectual Property protection apply and have been introduced into Cyprus local legislation. With a single Intellectual Property registration in Cyprus, Intellectual Property rights owned by Cyprus companies may enjoy full protection in all EU Member States.

Cyprus is signatory to the following international conventions relevant to Intellectual Property

• European Community Trademarks
• Convention Establishing the World Intellectual Property Organisation (WIPO)
• The Madrid Agreement Concerning the International Registration of Marks (the Madrid Agreement) and Protocol to the Madrid Agreement
• The Patent Cooperation Treaty
• Berne Convention for the Protection of Literary and Artistic Works
• Paris Convention for the Protection of Industrial Property
• Convention for the Protection of Producers of Phonograms against Unauthorised Duplication of Their Phonograms
• WIPO Performance and Phonograms Treaty
• Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations
• Trademark Law Treaty
• WIPO Beijing Treaty on Audiovisual Performances

REAL ESTATE

In certain jurisdictions the use of an IBC owning a real estate will minimize or eliminate capital gains taxes, inheritance taxes and income taxes.

The advantages of a Cyprus non-resident Company are the following:

Capital Gains Tax

Gains from the disposal of immovable property situated outside Cyprus including gains from the disposal of shares in companies which own such immovable property are exempt from capital gains tax in Cyprus.

Dividends Distributed

No withholding tax on dividends distributed to non-resident shareholders of Cyprus Companies.