Cypriot Professional Advisory Specialists
Cyprus today is firmly established as a reputable international financial centre, claims Michael Korelis, managing director of Korelis & Co. LLC. It has gained its privileged position for a number of reasons including its favorable tax system, wide network of agreements for double taxation avoidance with more than 40 countries and its excellent infrastructure facilities and services, such as banking, consulting services including legal, accounting and auditing, telecommunications and human capital.
Moreover, Cyprus’ accession to the EU in 2004 and the adoption of the Euro added to the country’s impressive advantages. Cyprus is the ideal gateway for EU inbound and outbound investment as investors benefit from cross-border opportunities within the EU by selecting the island to host their investment holding and use it to carry out business activities, raise funds or list their shares in EU capital markets.
Despite the economic crisis, the Cypriot economy maintained its advantages, namely low corporate and personal income tax. In fact, the uniform corporate tax rate of 10% is the lowest in Europe. The labour market has also performed relatively better to other peripheral EU countries with a lower unemployment rate and smaller reduction in productivity.
Cyprus’ tax system is in full compliance with EU requirements and also within the OECD requirements against harmful tax practices. Mr. Korelis described the main features of the tax system. He said that tax is imposed on all Cypriot residents (individuals and corporations) on their worldwide income.
A corporation is tax resident in Cyprus when its management and control is exercised in Cyprus. An individual is tax resident in Cyprus when they spend more than 183 days a year in Cyprus. There are no withholding taxes on payments of dividends, interest and in most cases on royalties paid to non-residents. There is no capital gains tax on profi t from the sale of shares or securities and there are no thin capitalization rules for companies.
“Further,” continued Mr. Korelis, “due to the implementation of the EU Merger Directive into the Cypriot legislation, which enables company reorganization, both locally and internationally, Cyprus has become a popular destination for M&A”.
There is a growing need for company reorganizations to promote tax efficiency, said Mr. Korelis. Such reorganizations do not lead to recognitions of income at company and shareholders levels, and any gains made are exempt from Cypriot tax. Furthermore, losses incurred before reorganizations may be carried forward indefinitely by the new entity and losses from one activity may be off set against profits from another.
Mr. Korelis concluded: “At Korelis & Co. LLC we have a specialised team of professionals, both legal and commercial who, along with our firm’s senior tax consultant (ex Head of the Corporate Division of Nicosia Income Tax Office), ensure the satisfaction of our clients’ international tax planning by offering the following services: incorporation and annual operations of companies in Cyprus or abroad; establishment of international trusts; provision of accounting services and performance of audit through our preferred providers; and legal services such as draft ing of shareholders’ agreements, pledge, consulting and sett lement agreements, internal corporate procedures, legal due diligence and reorganisations.”