Cyprus for Iranian Business

Cyprus offers unique tax opportunities: the lowest corporate tax rate in the EU, a network of favourable double tax treaties, no capital gains on profits from shares and securities and exemption of taxes on foreign dividends received and paid out. A truly significant International Business Centre.

At the beginning of August 2015, the governments of Cyprus and Iran signed a Double Tax Treaty. With the lifting of international sanctions against Iran, Cyprus is now uniquely positioned to act as a gateway for investments both into and from Iran.

The island is expected to attract Iranian businesses as well as businesses wishing to do business in Iran. Apart from the many legislative and fiscal advantages, the island is also a Member of the European Union as from 1 May 2004.

Incentives for locating a business in Cyprus include:

• Favourable taxation which includes, inter-alia, 12,5% corporation tax, low personal income tax and no capital gains tax on the sale of shares and securities
   
• A prosperous and resilient economy enjoying long-term stability and growth
   
• Member of the EU and a gateway for the movement of goods inside and outside the EU
   
• Skilled work force, qualified and multilingual
   
• Excellent infrastructure providing easy access by air and sea
   
• Low set-up and operating costs
   
• Simplified procedures for obtaining requisite permits
   
• A fine place to live and work in, with pleasant climate and high quality of life
   
• Non-domicile advantageous regime
   
• Exemptions from income tax for highly salaries expatriates working in Cyprus

Use of Cyprus in International Structures

The Cypriot tax system provides to investors:

• Only 12,5% corporation tax, the lowest rate in the EU
   
• Exemption from tax of dividend income, in most cases
   
• Exemption from tax on profits from foreign Permanent Establishment (PE), in most cases
   
• Exemption from tax on profits generated from transactions in shares, securities, bonds and units
   
• Exemption from withholding tax on the repatriation of income either in the form of dividends, interest and on almost all royalties
   
• Extensive double tax treaty network
   
• Access to EU Directives
   
• No thin capitalisation rules
   
• Absence of Controlled Foreign Company (CFC) rules, thus exempting foreign income received
   
• Flexible reorganization rules and group relief provisions

Example: Cyprus Holding Company

• From a Cyprus perspective, no participation or holding requirements exist in order to obtain tax benefits. Incoming dividends from Iran are exempt from Cyprus corporation tax and are usually exempt from the Special Defence Contribution (SDC) provided that no more than 50% of the Iranian entity’s activities arise from investment income or the foreign tax rate is not significantly lower than the tax payable in Cyprus (lower than 6,25%)
   
• 5/10% withholding tax is imposed on dividends distributed by the Iranian company according to the DTT in place
   
• The Cyprus Company is liable to a 12,5% corporation tax on its worldwide income

To access the full publication on Cyprus for Iranian business please click here.