Corporate Tax Residence
Cyprus is an ideal place to develop your business activity and transfer your company’s tax base. Thanks to its favourable tax regime and its robust legal system, the island has become the base for more 200.000 offshore companies.
The comparative advantages of Cyprus include:
- The lowest corporate tax in the E.U. (12.5%)
- A zero tax rate on dividends and capital gain for foreign companies
- An easy registration process for new companies
- Limited bureaucracy
- An advanced legal system based on common law
- A full EU member since 2004 and a eurozone member since 2008
- Access to EU funding (Link)
- Strategically located at the crossroads of three different continents
- A maritime superpower with a huge foreign fleet
- A hub for transit trade
- Treaties for the avoidance of double taxation with a very large number of countries
- A high human capital index
- Huge investments in R&D and training
- A multicultural and multilingual environment
Russian companies in Cyprus and deoffshorisation
The particular relations of Cyprus with countries of the former Soviet Union have played a major part in making Cyprus one of the best choices for offshore companies. In the early 1990s, following the introduction of Perestroika, Cyprus became one of the top investment destinations, particularly for Russian companies.
Strong relations were built, mainly thanks to the physical proximity of Cyprus compared to other tax havens, as well as the common religion and other cultural similarities between the two countries. Nowadays, the tax relations between Cyprus and Russia are primarily regulated by a successful bilateral tax treaty, while the deoffshorisation law introduced by the Russian government in 2015 has created a new challenge to further strengthen these relations.
Here is a summary of the most important milestones in the history of Russian-Cypriot relations with regard to offshore companies.
- The first bilateral agreement between Cyprus and the Soviet Union was signed in 1982. Its key points were the introduction of tax exemptions for passive forms of income (dividends, interest and royalties).
- Cyprus, acting as an intermediary, was one of the major recipients of funds from western investors who wanted to invest in the Soviet Union and, later, in Russia but did not trust the institutions and legal system that existed there. The Cyprus-registered Soviet (Russian) companies were regulated under an advanced legal system based on common law, an attractive proposition for many western investors.
- The first bilateral tax agreement (a treaty for the avoidance of double taxation) between Cyprus and Russia was signed in the 1990s. This agreement was revised in 2010 and came into effect in 2013.
- Following the breakup of the Soviet Union on 31st December 1991, Cyprus signed new bilateral tax treaties with most of the former Soviet Union countries, including Russia. There were virtually no changes to favourable taxation regime.
- Over the last 15 years, the growth of the Russian oil industry has contributed to the emerge of some very powerful corporations with are fully or partially state-controlled and enjoy sizeable investment reserves. To this day, Cyprus remains an investment foothold to the West for many large Russian companies, such as Gazprom and Aeroflot.
- Despite the stabilisation of the Russian economy, the ongoing economic challenges have forced many entrepreneurs to place part of their financial profits in Cyprus to take make use of its favourable international trusts regime.
- Despite the deoffshorisation law introduced by Russia on 1st January 2015, there are still major advantages and favourable offshore structures for Russian companies in Cyprus (Link).
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