Many investors choose to register a company in Cyprus in order to develop overseas market, and Cyprus has introduced a series of preferential measures for foreign investors. For Cyprus company registration, here are some important preferential policies you should know.
1, The Framework of Preferential Policy
Cyprus treats domestic companies and foreign companies in the same way, conducting same tax administration methods and providing same welfare to them.
In terms of taxation, primarily, Cyprus has one of the lowest corporate income tax rates among the EU countries, which is 12.5%, and it is only next to those of Hungary and Bulgaria, which are 9% and 10% separately. What's more, Cyprus companies whose shareholders are Cyprus residents also enjoy a series of tax incentives:
Ø The Dividends that shareholders of Cyprus company get are exempt from taxation (the minimum amount of participation required is 1%, and the income of the invested company must be directly or indirectly derived from trade instead of investment);
Ø After investment, the sales income is exempt from taxation;
Ø No minimum time limit on investment and shareholding;
Ø In July 2015, the President announced tax reduction measures to attract investment: tax reduction for new investment capital, introduction of non-domiciled resident status, exemption from special defense contribution on the premise of voluntary tax payment, and continuing to provide tax incentives for individuals who are working in a Cyprus company and have already obtained a resident status;
Ø The House of Representatives Plenary of Cyprus voted to approve a reduction of 75% on the real estate tax in July 2016; and the real estate tax will be abolished from 2017.
2, Preferential Measures for Industry
Ø The industries that can attract and develop high technology, technology-intensive products and traditional Cypriot economy, the companies that can improve productivity and labor skills, and the foreign investment that is capital-intensive, are all encouraged and supported by national policies;
Ø The acquisition cost of intellectual property rights can be amortized within 5 years from the date of acquisition, that is, 20% of the acquisition cost is amortized annually;
Ø 80% of the net income obtained through intellectual property in any fiscal year is exempt from taxation during that year;
Ø 80% of the net profit obtained through disposing of knowledge products is exempt from taxation in the year of disposal;
Ø The definition of intellectual property includes all intangible assets as stipulated in the re-patent law, intellectual property law and trademark law. The scope of intellectual property rights is expanded in the new tax bill, and it covers patents, trademarks, copyrights, etc.;
Ø Strong support for the shipbuilding industry: Income of operating ship registered in Cyprus and dividends of ship-owning enterprises are exempt from tax, and income tax rate for ship managers is 4.25%.
3, Preferential Measures for Region
Ø The factories importing machinery, equipment and raw materials near the tax free industrial zone of Larnaca City all enjoy the exemption from customs duties, and the manufactured goods are allowed to enter the Cyprus market and enjoy the largest tax incentives;
Ø In addition to the tax free industrial zone, there are also some duty-free factories and duty-free warehouses. Investors can also choose other locations for establishing factories, production, operation, importing machinery and equipment, raw materials, etc. They all enjoy the same customs-free policy.
4, Regulations for Special Economic Zone
The free industrial zone located in Larnaca promotes the export-oriented development of the Cyprus industry. The tax free Larnaca industrial zone is located 6 km away from Larnaca Airport, 9 km away from Larnaca Port and 48 km from Nicosia. There are 92 industrial zones in the tax-free area, totaling 3.12 million square meters. Companies in the free industrial zone enjoy the same preferential policies, and they are as follows:
Ø Exemption from import duties on machinery and raw materials required for importation;
Ø The products of free industrial zone enjoy the same import tax rate as that of EU when being sold locally in Cyprus;
Ø The products exported to the EU countries, except food, are exempt from export tax;
Ø Only half of the salary of foreigner employees of joint ventures or companies in the free industrial zone is subject to personal income tax;
Ø The corporate income tax of Cyprus company located here is 4.25% of the net profit;
Ø The land in the industrial zone will be leased for 33 years and can be renewed for 99 years with lower rent.
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