Cyprus

Cyprus is the jurisdiction we are asked about most often, and for defensible reasons. It combines EU membership with one of the lowest corporate income tax rates in the Union, an extensive double tax treaty network, and a professional services sector deep enough that everything can be handled locally.

Why it is used

EU membership matters commercially as much as fiscally. A Cyprus company is an EU company: it can register for VAT within the Union, benefits from the EU directives on dividends, interest and royalties between member states, and is accepted by counterparties who will not deal with entities from offshore centres.

The holding company regime is the most frequent application. Dividends received from abroad are, subject to conditions, exempt from taxation, and there is no withholding tax on dividends paid to non-resident shareholders. Gains on the disposal of securities are generally outside the charge to tax. The result is a structure that can hold subsidiaries across several countries without adding a tax layer at the holding level.

The intellectual property regime, aligned with the OECD nexus approach, is widely used for structures where development activity genuinely takes place in Cyprus.

What it requires

Cyprus is not a light-touch jurisdiction, and clients who expect it to behave like one are usually disappointed.

Companies must maintain proper accounting records, file audited financial statements annually and submit tax returns. Audit is required regardless of company size, which is a meaningful ongoing cost.

Tax residence depends on management and control being exercised in Cyprus. A company with a nominal local director who takes no decisions is exposed on exactly the point that matters — and this is the issue on which Cyprus structures most often fail when examined. Directors who genuinely decide, board meetings that genuinely take place in Cyprus, and an office that genuinely exists are what the position depends on.

Banking

The Cypriot banking sector was restructured after 2013 and applies compliance standards that surprise clients working from an older impression of the jurisdiction. Onboarding is thorough, source of funds evidence is examined closely, and accounts are declined where the connection to Cyprus is thin.

For companies with genuine local substance, banking is workable. For companies whose only Cypriot feature is the registration certificate, it is increasingly not.

How we help

We advise on whether Cyprus genuinely suits your case, incorporate the company, arrange the substance the structure requires, and work with you on banking. We will also tell you when a different jurisdiction fits better — Cyprus is a good answer to many questions, but not to all of them.