The Law Firm provides for Tax Planning advice to clients wishing to optimise their international business activities. Cyprus is the European country with the most favourable tax system and has a wide network of Double Tax Treaties. The legislation effective since January 2003 has abolished the distinction between local companies and International Business Companies (IBC) and created one form of Cyprus Company.

Cyprus tax residence

An individual is resident if he lives in Cyprus for one or more periods which exceed the total of 183 days per fiscal year. Residents are subject to tax in Cyprus on their worldwide income, whilst non-residents are subject to tax only on their income derived in Cyprus. A company is resident if its management and control is in Cyprus, which in practical terms means that the company must have a majority of Cyprus resident directors.

Corporation Tax

All Cypriot companies pay corporate tax except shipping companies which pay tonnage tax. The corporate tax rate is 12.5% except for royalties. Since, January 1st 2012, royalties are exempt from corporate tax for up to 80%, net of direct expenses, with the remaining 20% being subject to 12.5% corporate tax, thus giving an effective intellectual property tax rate of 2%. The 80% exemption on profits arising from intellectual property assets applies after deduction of all direct expenses including amortisation on the cost of acquisition of IP assets and interest expenses to finance the acquisition and/or development of the IP assets. 80% of profit generated from the disposal of IP net of any direct expenses and owned by a Cyprus resident company is exempt from income tax. IP assets include all intangible assets, copyrights, patents and trademarks.