In this particular video, we are not talking about Cypriot residents. Their situation with taxes is generally very good, so lots of times they don’t really need to go internationally in order to improve their situation. It’s the other way around – people come to Cyprus to set up a company in order to take advantage of a good system.
Advantages and disadvantages of setting up in Cyprus
Cyprus is very interesting for a few reasons: It is part of the EU, part of the EEA which means that it has access to European payment space which allows you to have SEPA transfers and good payment processing, etc. Traditionally it has been an easier place to set up banking, although it has also been riskier (when the banking crisis hit Cyprus people that had over 100k in the bank account lost a significant portion of their money).
As things became more challenging in the world when it comes to banking, Cyprus got more and more popular. Similar to Gibraltar and Hong Kong.
Cyprus is not 0% tax country, taxes are 12,5%. Not great, but not too bad situation either. If you compare to other European countries you will see that Hungary is lower, as well as Bulgaria, Montenegro, and Andorra.
There is no dividend withholding tax in Cyprus. Also, there is a good network of tax treaties.
There is an option of having a non-resident company, which means that your company is not managed and controlled from Cyprus, income is not sourced in Cyprus, therefore you are not taxable in Cyprus.
Historically we would choose Gibraltar over Cyprus. In Cyprus, you needed audited financials, which can be a hassle, and also it was a language barrier that we didn’t like. Laws are written in Greek, even though everyone can speak English perfectly well here. Another disadvantage of Cyprus is that it’s in the VAT regime, while Gibraltar isn’t.
Substance changed the game
When it comes to offshore, substance requirements really changed the game. Today your home country wants you to prove that you’re in a place where you can actually do business from. This basically ruled out all the historically popular offshore heavens.
In Cyprus there is a high enough population that lets you choose your employees, it’s a place with real banks, place where you can actually do business from. Having this in mind doesn’t shock why Cyprus is becoming an increasingly popular place.
Going offshore is getting harder and harder
As we already said, things are not as easy as they used to be. Back at the time, we would send lots of our clients to Gibraltar or Hong Kong and things would work just well. However, recently banking has become a nightmare. Lots of offshore bank accounts are getting shut down, and these places are not as open to foreigners as they used to be. Banks are scared, and would rather not risk it. Cyprus is not an exception, but its game got harder as well.
Costs of operating in Cyprus
If you consider wages in Cyprus, they are fairly low but not too low. In comparison to Bulgaria, expect to pay your employees at least 20% more.
You will have to do audited financials which will cost you some money. It is not the cheapest place to form a company – this will cost you around 2500 EUR.
More pros and cons of Cyprus
From a legal point of view, Cyprus is more relaxed than a lot of other countries. If you are in a tricky industry, such as adult you will be able to set up here.
We personally wouldn’t recommend you to keep a lot of money in Cyprus, since we know about the disaster that happened a few years ago.
Cyrus is a whitelisted country in most of the cases, and you can certainly do your operations from here.
Cyprus is one of the two remaining EU countries where your company’s residency is purely based on management and control, which can work in your favor.
If you want to know whether Cyprus is the best option for you, or if you want to set up in Cyprus feel free to reach out to us.