Cyprus Offshore Credibility & Credible Jurisdiction
Cyprus Offshore Credibility, as categorised by the OECD and other major international organisations
Cyprus is not an offshore tax haven. Cyprus is a credible European Union and Eurozone jurisdiction for conducting professional services and offshore activities – maintains an excellent international reputation for conducting business. With 12.5% corporate tax, Cyprus is the lowest tax jurisdiction in the European Union that is not offshore and has the lowest non-offshore jurisdiction corporate tax rate in the world – alongside Ireland (12.5%) and with the exception of the Isle of Man, Jersey and Guernsey, which although have a nil rate for some sectors, are not in the EU.
Cyprus simply offers a host of financial advantages and benefits to companies and individuals. It can do so due to maintaining a strong and stable economy (especially in relation to its size) that almost completely focuses on professional services and the financial sector. With this comes excellent infrastructure for such activities, such as accounting firms, legal practices and banking, highly educated, qualified and multilingual workforce specific, as well as appropriate government regulations and a general policy of non-intervention in business operations. Beyond this, Cyprus has excellent geopolitical and trading relationships with key source markets, which together with an ideal geographical location, is a prime choice for investments into many neighbouring markets, including the EU, Europe, Russia, CIS, as well as the Middle East and North Africa.
Reforms and initiative to position Cyprus as the ideal offshore jurisdiction
The offshore regime in Cyprus has changed drastically due to EU accession, and as a result of agreements with the Organisation for Economic Cooperation and Development (OECD); certainly for the better. Cyprus has transform itself from being considered an off-shore tax haven with a 4.25% corporate tax rate for grey-area businesses to a unique EU jurisdiction with a standardised tax rate of 10%, and now increased to 12.5% - still the lowest tax rate in the European Community. It has not only met all challenges and requirements head-on, but gone beyond expectations.
Cyprus has successfully reformed all its financial sector legislation in line with international best practice and has implemented a simplified, effective and transparent tax system which is fully compliant with the European Union, OECD, Financial Action Task Force (FATF), and Financial Stability Forum (FSF). Since EU accession, Cyprus has harmonised local regulations to the Acquis Communautaire, allowing the country to further develop as a financial and fund centre. Following these measure, Cyprus was excluded from the OECD's harmful tax haven blacklist and was placed on the OECD white list of territories which have substantially implemented the internationally agreed standard in tax transparency. Cyprus introduced a residence-based system of taxation in 2003, where it proposed to maintain its company and trust management regime, although the identity of the beneficiaries to be disclosed to tax authorities when a company is registered or when a change of ownership takes place.
Other action taken by Cyprus to boost its global recognition as a credible offshore jurisdiction includes:
- Tax reform to bring legislation in full conformity both with EU Laws and Directives and with the Organisation for Economic Cooperation and Development's guidelines.
- Immediately implemented the EU Tax Directive, which includes a Code of Conduct on harmful tax practices and rules to avoid the double taxation of royalty and interest payments.
- Adopting International Financial Reporting Standards.
- Passing Anti Money Laundering legislation (Law188(I)/2007), Markets in Financial Instruments Directive (MiFiD), and Transparency Law and Anti Money Laundering Law.
- Enormous steps in structural reform, modernisation, and liberalising its market-oriented economy, with a view to enhancing international competitiveness and EU compatibility.