Savva & Associates Cyprus

SERVICES

Tax Planning and Compliance

Services

Tax Planning and Compliance

Savva & Associates expertise in the international business environment enables our staff to offer a comprehensive set of tax advisory services and customized solutions that can be tailored to any specific need. We offer Cyprus and international strategies, designed to legally enhance your business, taking into consideration all applicable taxes – corporate or personal, and taxable gains as a result of Business tax, Capital gains tax, VAT and other related taxes. We can efficiently and precisely set out a strategy to manage your ongoing liability both in Cyprus and internationally, taking into account the bigger picture.

We are well positioned to offer guidance and advice in Cyprus Tax PlanningCyprus Double Tax TreatiesCorporate Tax Residency structuring in CyprusCyprus VAT Advice and ComplianceNotional Interest DeductionThe Taxation of Intellectual PropertySubstance Solutions and Personal Income tax.

In short, we have the knowledge and expertise to solve your international multi-jurisdictional tax issues in a timely, cost effective, straight-forward and matter-of-fact way.

Seeking more insights or curious about how we may assist you and dive deeper together?  We have dedicated ourselves to providing the highest levels of service and tailored solutions to meet the diverse needs of our valued clients.  Please get in touch with one of our managers to arrange for your free consultation.

Cyprus is consistently voted as one of the most attractive European tax regimes by major business organizations and tax professionals across Europe.

Cyprus, a premier holding, finance, intellectual property, royalty and trading company jurisdiction, has been commended for the stability of its tax law, the consistency in interpreting its tax legislation and its low tax and VAT rates.

In summary, Cyprus is among the lowest-tax EU onshore jurisdictions. The standard corporate tax rate of 12.5% is among the lowest in the European Union.

Cyprus does not apply any withholding taxes for payments of dividends and interest by Cyprus tax residents to non-Cyprus tax residents. There is also no withholding tax on royalties granted for use outside of Cyprus.

Cyprus boasts an extensive network of double tax treaties (with more than 65 jurisdictions) and is commonly cited as the preferred jurisdiction for routing investment into:

  1. European Union: Cyprus is commonly referred to as the gateway to doing business in the EU. It is chosen by investors in the USA, UK, Canada, China, Russia, and other jurisdictions for structuring investment into the EU. Through the use of the EU Parent-Subsidiary Directive and the EU Interest and Royalties Directive, a Cyprus Holding, Trading or Finance company is the most effective vehicle for doing business in the EU.
  2. Eastern Europe: Cyprus has historically been the primary choice for routing investment in Eastern Europe, namely Bulgaria, the Czech Republic, Hungary, Poland and Romania.
  3. China: Cyprus is commonly used in the international tax strategies of globalizing Chinese companies and companies looking to expand into China.
  4. Other jurisdictions: Cyprus is commonly used to route foreign investment into the Near and Far East, as well as Africa.

As of 31 December 2022, the definition of corporate tax residency is expanded to additionally include the incorporation test. More specifically, a company which is incorporated or registered in Cyprus, and its management and control is exercised outside Cyprus, should be considered a resident of Cyprus for tax purposes unless it is a tax resident in another country. It should however be noted there is always the risk of a foreign jurisdiction challenging the tax residency of a Cyprus company if it is deemed to be managed and controlled outside Cyprus- such challenges against Cyprus companies are common.

We will provide you with high level Cypriot and EU VAT/VIES advice and ensure all of our client companies are in full compliance with EU and Cypriot VAT laws. We also identify and communicate to our client when it may be possible and beneficial to voluntarily register for VAT and/or structure in a more VAT efficient way our client’s transactions. We also undertake to prepare and file VAT returns, VIES reports and returns under the One Stop Shop Legislation.

The NID was introduced with the aim of reducing corporate debt by increasing the attractiveness of equity from a corporate income tax perspective.  The introduction of the NID overall enhances the international attractiveness of the Cyprus tax system as the effective tax rate can now be minimized from 12.5% to as low as 2.5%, the lowest possible in Europe.

Cyprus tax resident entities and permanent establishments of non-resident entities are eligible for NID benefits.

In summary, NID is an annual tax allowable expense, calculated as a percentage of new equity (share capital and share premium) introduced within a Cyprus company from 1 January 2015 onwards. A company can claim this annual tax expense indefinitely until there is a share capital/premium reduction or redemption of preference shares.

Intellectual Property (IP) can be one of the most valuable assets an organization owns. If IP is critical to your business, choosing the right location for the centralisation and management of the IP is a key strategic business decision. The ideal location to establish an IP structure is one that can serve the organisation’s business strategies and model, safeguard and protect its IP, taking into consideration possible tax implications.

In order for IP to benefit from the applicable IP regime it must be categorised as a “Qualifying Intangible Asset”. Qualifying intangible assets refer to an asset that was acquired, developed or exploited by a person in performance of his business (excluding intellectual property associated to marketing), which relates to research and development activities, and includes intangible assets for which only economic ownership exists.

These assets are:

  • patents as defined in the Patents Law;
  • computer software;
  • other IP assets that are non-obvious, novel and useful, where the person which utilizes them in further development of a business that doesn’t generate annual gross revenues exceeding Euro 7.500.000 (or Euro 50.000.000 for a group of companies).

Assets not treated as qualifying intangible assets include: business names, brands, trademarks, rights to public presence, image rights and other intellectual property rights.

In short, the effective corporation tax rate can be reduced to only 2.5%, being the lowest possible corporate tax rate in the EU.

The international tax landscape has changed and will continue changing drastically.  Developments from both a domestic law perspective as well as from an EU and international perspective, have given substance great importance.  The law regarding the role of “economic substance” is evolving in most developed and even developing countries. The absence of “economic substance” in the country where a company is registered is now generally considered as a prominent indicator of abusive tax avoidance practices.

Each structure is unique, and so are the substance requirements of each client – this is the simple approach we take. With this in mind, we have developed a proposal merely outlining the numerous possibilities available for creating substance in Cyprus. Our proposal serves as a solid starting point for the wealth of options open to clients wishing to build and maintain a strong presence in Cyprus.

Please contact us if you would like to receive our substance fee proposal and/or have a no obligations call with one of our tax professionals.

An individual who qualifies as a tax resident in Cyprus is taxed on income accruing or arising from sources both within and outside Cyprus (i.e. worldwide income). An individual who does not qualify as a tax resident in Cyprus is taxed only on income accruing or arising from sources within Cyprus (e.g. rental income from real estate property located in Cyprus).

Cyprus Income Tax Law states that an individual who does not have a “domicile of origin” in Cyprus can qualify as a non-domiciled tax resident for at least 17 years from the year he/she qualifies as a Cyprus tax resident. As a result, the individual will not be subject to Special Contribution for Defence (“SCD”), enabling the individual to receive dividends and interest exempted from SCD. Dividends and interest are also exempt (except for interest arising from the ordinary business activities or closely related to the ordinary business activities of an individual) from income tax.  Most international tax advisors around the world today agree that the Cyprus non-domicile scheme is the (onshore-tax) world’s most attractive (and simple!) personal income tax regime.  Furthermore, eligible persons can qualify as a non-domicile with as little as 60 days of physical residence in Cyprus each calendar year (among other requirements).

Our tax and legal professionals assist clients from around the world establish tax residency in Cyprus, enjoying the extraordinary benefits of the worlds most attractive personal income tax regime.