The Cyprus Parliament has recently approved the memorandum of understanding agreed by the Cyprus Goverment and the European Commission, the European Central bank and the International Monetary fund (collectivley called TROIKA).
Despite the unprecedent ‘haircut’ of the deposits of Laiki Bank and Bank of Cyprus, which the majority of their clientelle are local people, the International Business Sector has retained its advantages. The main changes as to taxation are:
Increase of Corporate tax from 10% to 12.5%. The increase of the corporate tax rate from 10% to 12.5% has not affected the vast majority of the International businesses since they operate as holding companies in their structures and any hike in the corporate tax rate leaves them untouched. So profit from sale of shares and other company tiltes as well as dividends received remain tax exempt. Even with the 2.5% increase the new 12.5% corporate tax remains one of the most competitive rates in Europe.
Special Defence contribution on passive interest received was also increased from 15% to 30%. This applies only to Cyprus tax resident people and entities.
It is undestandable that certain clients may feel uneasy with the use of Cyprus banks given the recent vindicitve attitude of Cyprus’ so called European ‘partners’. So it also important to note, that it is not a prerequisite for a Cyprus company to maintain a bank account in Cyprus in order to take advantage of its legal and taxation regime.
Please contact us for a more detailed discussion or with any queries you may have.