5 Reasons to Transfer Your Business From Greece to Cyprus
More and more experienced entrepreneurs who maintain their business in Greece decide to seek better “tax headquarters” to optimize their business profitability and operations. With taxation rates and operating costs rising dramatically, it is no surprise that many business founders end up in Cyprus looking for alternatives.
In the recent report of the World Bank on the most favorable locations for business professionals, Cyprus is ranked 54th out of 190 countries. In contrast, Greece is ranked 79th, making Cyprus one of the most attractive locations in the European Union for company incorporation.
Moreover, opening a company in Cyprus is not a demanding process; on the contrary, it can be done quickly and without special costs, while the entire process can be easily facilitated by professional service providers such as law firms.
If you are looking for information on starting a business in Cyprus and the immediate benefits that the country’s tax system will offer you, here is a short and practical guide to the five most important reasons that make Cyprus attractive for incorporation.
1. Low Corporate Tax
No entrepreneur does not seek a tax-friendly environment for his/her company. Cyprus has this comparative advantage. For example, the corporate tax rate for Cypriot companies is 12.5%, while in Greece, the corresponding rate is 29%.
Therefore, the first and immediate benefit of starting a business in Cyprus is the low taxation rate, leading to a higher profit. Therefore, many Greek companies are now being transferred to Cyprus, setting up their parent company there and operating a subsidiary in Greece.
2. No Withholding Tax
According to the current regime, there is no withholding tax on dividends received by an EU subsidiary. In other words, no withholding tax is applied on dividends distributed by a parent Cypriot company to shareholders who are non-residents of Cyprus.
For example, suppose you are not a permanent resident of Cyprus. In that case, you can maintain a parent company here and enjoy the profits from your business activities without withholding tax on the distribution of profits. Additionally, there are no capital gains tax on the distribution of profits arising from the sale of securities – such as shares or securities – except profits derived from the sale of real estate located in Cyprus.
3. Lower Social Insurance Premiums
Paying social insurance premiums is undoubtedly a big hoax for most professionals, who are required to pay large sums of money to the social insurance funds. However, in Cyprus, this is a minimal amount compared to other countries.
For example, when a Greek company pays 24.81% employer contribution to Social Insurance and an employee 15.75%, the corresponding amounts are only 8.3% participation for both parties in Cyprus.
Lower Social Insurance contributions are yet another reason companies elect to set up their operations in Cyprus. It is, however, essential to note that a Cypriot company and individuals who operate professionally in the country are required to pay a Special Defense Tax at a rate of 17% on dividends and 30% on interest. Still, non-residents of the country do not pay this tax.
4. Lower VAT
With VAT at 19%, the fact that more and more foreign companies start their business activities in Cyprus is no surprise. VAT is applied on the supply of goods and the provision of services in Cyprus and goods imported from other EU countries. Compared with other countries, this rate is also significantly lower.
For example, Cyprus VAT is significantly lower than other countries, such as Greece, where the VAT rate is 24%.
5. Better Banking System
Another factor that plays a critical role in the entrepreneur’s decision on the business’s location is, of course, the banking system. Cyprus holds a strong position in this regard as per the latest international rankings.
Among other things, the banking system in Cyprus presents comparative advantages in obtaining credit, paying taxes, protecting investments from minority groups, and the bankruptcy regime.
To conclude, opening a company in Cyprus is an easy process, which is supported by innumerable, measurable and immediate advantages making this country more and more attractive for foreign investment. Following the regulations and the European directive for parent companies, many professionals move their headquarters to Cyprus, enjoying lower taxes and significantly reduced insurance contributions. At the same time, most of their profits go directly to them and not to the state.
The above makes Cyprus one of the most favorable destinations in Europe for starting a company and developing commercial and business activities, and this undoubtedly can not go unnoticed by any experienced or even young entrepreneur.
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