Cyprus's favorable tax regime is a significant draw for investors, offering a range of benefits that contribute to its reputation as a business-friendly jurisdiction. Here's a deeper look into why the tax regime in Cyprus is considered advantageous:

1. Low Corporate Tax Rate: One of the standout features of Cyprus's tax system is its low corporate tax rate. The corporate tax rate is 12,5%, which is one of the lowest in the European Union. This competitive rate allows businesses to retain more of their profits and reinvest in growth.
2. Wide Network of Double Tax Treaties: Cyprus has an extensive network of double tax treaties with more than 65 These treaties aim to prevent double taxation and reduce withholding tax rates on dividends, interest, and royalties. This not only minimizes tax liabilities for businesses engaging in cross-border transactions but also enhances Cyprus's appeal as a hub for international business activities.
3. Full Participation Exemption: Cyprus's tax regime includes a full participation exemption, which means that profits earned from qualifying subsidiaries or permanent establishments abroad are exempt from corporate tax. This encourages businesses to establish international structures and engage in cross-border investments without incurring additional taxation.
4. No Withholding Taxes: Cyprus does not impose withholding taxes on dividend payments to non-resident shareholders, making it an attractive jurisdiction for dividend distribution within multinational groups.
5. Capital Gains Tax Benefits: The capital gains tax regime in Cyprus offers favorable treatment for both individuals and companies. Capital gains are exempt from taxation except for disposal of real estate or shares of a company holding real estate. In cases where taxation applies, the rates are generally lower than in many other jurisdictions.
6. Attractive Intellectual Property Regime: Cyprus offers an Intellectual Property (IP) regime that provides tax incentives for companies holding qualifying IP assets. This includes substantial exemptions on the net profit generated from qualifying IP assets, making it advantageous for businesses involved in research, innovation, and creative endeavors. The effective tax rate can be as low as 2,5%.
7. No Wealth or Inheritance Tax: Cyprus does not levy wealth or inheritance taxes, contributing to an environment that is particularly attractive for high-net-worth individuals and families.
8. Transparent Tax System: Cyprus is committed to international standards of transparency and information exchange. It is on the Organization for Economic Co-operation and Development (OECD) "white list" of jurisdictions that adhere to global tax cooperation standards.
9. Effective Use of Holding Companies: Cyprus's tax system, combined with its network of double tax treaties, makes it a popular choice for establishing holding companies. These holding structures can help optimize tax planning and facilitate international investments.
10. Tax Incentives for Startups and Innovation: Cyprus has introduced various tax incentives to support startups, research and development, and innovation-driven businesses, fostering a dynamic ecosystem for entrepreneurial ventures. New legislation applies whereby 120% of R&D expenditure are eligible for deduction.
11. Low personal tax: Up to €19.500 the income is tax free after which the income is tax progressively from 20% to 35% over €60.000. No tax on dividends and interests on non-domiciled individuals. 20% or 50% exemption on income from employment in Cyprus provided that person was for a certain period prior to the commencement of employment not residing in Cyprus. 20% exemption applies up to 2027 while the 50% exemption applies for a period of 17 years but only for income above €55.000.
12. Tonnage tax for shipping companies: Shipowners, charterers and shipmanagers of qualifying ships are exempt from corporation tax and they are subject to tonnage tax which is one of the most favorable worldwide.