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"The term "International Business Entity" (IBE) is not a legal term. It is a descriptive term used to denote those entities
- incorporated in Cyprus with Central Bank approval
- whose beneficial shareholders/owners are non Cypriots and
- which confine their activities outside Cyprus.
Since the introduction of the first incentives in 1977, over 60.000 permits for the registration of IBE's have been issued by
the Central Bank of Cyprus
The following types of IBEs exist in Cyprus
- International Business Companies (IBC)
- International Partnerships (IP)
- International Trusts (IT)
- International Branches (IB)
- International Banking Units (IBU)
- Captive Insurance Companies (CIC)
- Shipping Companies
- Ship Owning (SOC)
- Management (SMC)
- International Financial Services Companies (IFC)
Regulatory Framework
The Central Bank, through its permit issued to non-resident investors, imposes certain conditions concerning beneficial ownership,
business activities, financial arrangements and reporting procedures. Most importantly, IBE's are not allowed to derive any income
from within Cyprus by supplying any goods or services to residents or non-residents.
As long as these conditions are observed, the Central Bank permit remains valid, bringing benefits to owners and expatriate employees
living and working in Cyprus. These benefits include exemption from exchange controls and concessions on corporation and income tax.
Tax Benefits and Double Tax Treaties
The major fiscal incentives offered to international business entities (IBEs) are as follows:
- IBEs as well as international branches managed and controlled from Cyprus are taxed at only 4,25 percent of their profits.
As from 1 January, 2003 the rate of tax has been raised to 10%. Existing IBC as at 1 January, 2003 will continue to be taxed at
4.25% until 31 December, 2005.
- International business branches which are managed and controlled from abroad and international business partnerships are totally
exempt from corporation or income tax
- The beneficial owners of international business companies, branches and partnerships are not liable to additional tax on dividends or profits over and above the amount paid or payable by the respective legal entities
- Expatriate employees of IBEs living and working in Cyprus are taxed at one half the rates applicable to locals ie from 0 to 15 percent
- Expatriate employees of IBEs living and working outside the island are exempt from income tax if they get paid through any bank in Cyprus or are taxed at one tenth of the rates applicable to locals if they get paid directly abroad
- No capital gains tax is payable on the sale or transfer of shares in an IBE
- No estate duty is payable on the inheritance of shares in an IBE
- Cyprus has concluded an impressive number of treaties for the avoidance of double taxation. There are currently 32 in force
covering 40 countries and along with the low tax paid by IBE's, offer significant possibilities for international tax planning
through Cyprus. In contrast to tax havens, Cyprus is a tax incentive country, which offers benefits aimed at attracting non-residents
who wish to conduct their business affairs from the island. The existence of these treaties, combined with the low tax paid by IBEs,
offer significant possibilities for international tax planning through the island.
Treaties for the Avoidance of Double Taxation
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