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Potential of Cyprus tax planning in international structure
The details in the structure of International tax planning in Cyprus depend on the overall strategy.
There are two International tax-planning structures for two different categories of users: One for private individuals and other for corporations.
1. Cyprus: International tax-planning Structures for Private Individuals
Leveraging Offshore Financial Centers
Entrepreneurs can start with offshore structure and receive strategic benefits like, investment returns, exposure of global markets, tax benefits, and better risk management.
Executives can use offshore for various aspects of their corporate agendas. Offshore can also help them restructure their compensation and stock programs so as to take advantage of reduced tax, asset protection, and access to global markets.
- Individuals from entertainment industry
Entertainers and authors can reduce the tax with this strategy. Both parties benefit with this, as the offshore corporation earns, and the entertainer or author is compensated for service.
- International Investors
Instead of offshore companies holding areas for investments in multiple markets, collect all of them and let a single offshore company handle legal ownership. Offshore entities expose your portfolio to different investment and reduce risk.
Cyprus: International tax-planning structures for Corporations
Leveraging Offshore Financial Centers
Corporations these days find it strenuous to sustain their competitiveness for survival and growth of the business. Even small and medium sized enterprises, multinationals and financial institutions, aiming for international expansion face this situation.
Competitive edge can be established by structuring some major components of their functions through offshore centers. This includes:
- Investment holding
- International trade and services provisions
- Property ownership
- Insurance and Re-insurance
- Ship registration
Cyprus investment tax planning system and benefits
Foreign property purchases or buying a house in Cyprus may have consequences if you are not aware of its tax rules and regulations. Below listed is the complete guide to the taxes involved with property investment in Northern and Southern Cyprus.
1. Tax rules in Southern Cyprus for property investments
- Real Estate Transfer Tax
This is applied in progressive scale starting from 5% for up to CYP10, 000, and then escalates in five steps to a maximum of 8% for above CYP75, 000.
- Immovable Property Tax
This depends on value of the property at a rate of –
0.2% between CYP100, 000 and CYP250, 000
0.3% for up to CYP500, 000
0.35% for over CYP500, 000
*The first CYP100, 000 is tax exempt.
Stamp duty charges are at a rate of 0.15% on the first CYP100, 000, and 0.2% above if it is above this.
- Local authority tax
It covers sewerage, refuse collection, street lighting, and it starts from 0.1% to 0.5% per annum depending on the size and value of the property.
- Capital gains tax
This is charged on disposals of real property and shares of company in Cyprus. The first CYP10, 000 of a gain is tax exempt. If the seller resides in the property continuously for five years, then this exemption limit rises to CYP50, 000, and in any scenario, it can never exceed this beyond this limit.
*Consult lawyers in Nicosia or lawyers in Limassol for further queries.
2. Tax rules in Northern Cyprus for property investments
- VAT (Value added tax)
15% VAT is payable at the time of transfer of title of new properties.
- Purchase Tax
Purchase Tax of about 3% is also payable upon transfer of title and it depends on the Land Registry Valuation of the property.
- Capital Gains Tax
The professional vendor or private individual is usually liable to pay this tax on the purchase of property, unless it is specified the other way in the agreement. Individuals in Northern Cyprus gets tax free sale once in a lifetime for a property which does not exceed land measure of 1 donum. Later on, 3.5% capital gains is payable on one more on every sale. If individuals sell more than 3 properties a year, they are considered a professional vendor and for vendors there is no tax exemption, un fact they are liable to pay 6.25% tax on every sale.
Remove totally the information about the Northern Cyprus. Cyprus is occupied and not legally divided so we don't want to promote any information about the occupied side as there is no solution to the problem yet. Secondly the information about immovable property tax is not accurate as it has been abolished since 1/1/2017. There are also certain rules regarding the transfer fees that are not mentioned. Please make a better research especially on the article "Cyprus investment tax planning system and benefits" Both articles are weak as all measures to attract investors that was implemented after 2013 are not mentioned, no conclusion is made. Please read the latest news in this sector and not outdated information