Cyprus Company Formation and Double Tax Treaties

Cyprus has concluded 34 double tax treaties which apply to 40 countries. The main purpose of these treaties is the avoidance of double taxation on income earned in any of these countries. Under these agreements, a credit is usually allowed against the tax levied by the country in which the taxpayer resides for taxes levied in the other treaty country and as a result the tax payer pays no more than the higher of the two rates.

Further, some treaties provide for tax sparing credits whereby the tax credit allowed is not only with respect to tax actually paid in the other treaty country but also from tax which would have been otherwise payable had it not been for incentive measures in that other country which result in exemption or reduction of tax.

To give a simplified example:

A company is taxable in both treaty countries, say 40% at country A and 20% at country B. If the 20% tax at country B is paid, then a tax credit of 20% would be given in country A. The result is 20% tax in country A and 20% in country B.

If now, in country B the normal tax of 20% is reduced to 5% (for incentive purposes), if a tax sparing credit is provided in the respective treaty, the tax to be deducted in country A would still be 20%, as if full tax of 20% was actually paid in country B. The result would be 5% tax in country B and, in spite of that, a tax of only 20% in country A (the remaining 15% being the tax sparing credit).
All Cyprus resident companies qualify for Double Tax Treaty protection.


Countries listThe following countries are among those which have double-tax treaties with Cyprus, although not all have been ratified at this time.:


Armenia Japan
Austria Kuwait
Belgium Malta
Bulgaria Mauritius
Canada Norway
China Poland
CIS (ex-USSR) Romania
Czech Republic Russia
Denmark Singapore
Egypt Slovakia
Germany South Africa
Finland Sweden
France Syria
Greece Thailand
Hungary Ukraine
India United Kingdom
Ireland United States
Italy Serbia and Montenegro

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