Cyprus has become a desirable option for international business companies, with its good relations with countries of the Eastern Europe, Middle East and its harmonisation with the European Union, as well as taxation incentives, English-based (common law) legal system, and liberalisation of the distribution of capital, make offshore Cyprus an attraction to foreign companies to choose Cyprus as their headquarters for their international business activities. The newly upgraded airports are attractive to business men and women, and put Cyprus within easy reach of European and Middle Eastern Countries.
Cyprus Offshore companies are officially termed International Business Companies (IBC’s). A basic provision that was introduced by Law No. 15/77 states that a Cyprus incorporated company is liable to Cyprus tax on its worldwide income even if no business activity is actually carried out in Cyprus. The place of incorporation is the fiscal residence of the company. This is appealing to International companies as the standard rate of Cyprus corporate tax as at 2014 is just 12.5%. IBC's are not permitted to conduct business within the jurisdiction in which they are incorporated.
Every company is required to have a registered office and address in Cyprus as well as a secretary by law who can be a legal or natural entity, however there are specific local companies that con provide legal registered offices for you. To register a limited liability company, Memorandum and Articles of Association must be prepared by a licensed law practitioner and filed at the Office of the Registrar of Companies.
All the rules and regulation placed by the European Union are followed, which places Cyprus at the forefront of Enterprise Centres in the European Region. The main objectives of the Cyprus tax reforms which are in effect today are:
• Complete harmonisation with the tax system of the European Union.
• Complete conformity with the Code of Deontology of the OECD.
• Intensification of competitiveness of Cyprus as a Center of international activities.
There is a large presence of shipping companies and ship management companies in Cyprus. This being because Cyprus also offers a favourable tax system to both Ship owners and Ship managers. Under the tonnage tax system, shipping companies can opt for a tax calculated on the net tonnage of their fleet, instead of being taxed on the actual profits of their maritime activities. This puts Cyprus in the forefront to offer a very competitive overall package to shipping companies. The dividends paid to the shareholder or the members of a corporation, out of profits made from the operation of a Cyprus ship are also exempted from the income tax, thus making Cyprus a very attractive location for shipping companies.
Cyprus currently has the third largest shipping industry in the EU, and it is the tenth largest globally. The shipping sector contributes 5 per cent to GDP and involves not only the flag, but also maritime support services including legal, accountancy and logistics firms.
The EU Commission recently gave its approval to the tonnage taxation system operated in Cyprus, and has given the green light for the system to remain in force until 2019 with the option of a further ten years until 2029. With this approval it is expected that Cyprus will see an increase in its percentage of the world shipping market.