An Overview: Cyprus Offshore Company or IBC
Since joining the European Union in 2004, Cyprus is not an offshore jurisdiction or tax haven anymore. All company and entity formations in Cyprus are considered onshore (companies’ tax residences are in Cyprus). Therefore, the term Cyprus IBC (Cyprus International Business Company) or Cyprus Offshore Company is not applicable anymore.
The word Offshore Company is commonly associated with ‘tax havens’, being misinterpreted as illegal. Offshore simply means that a company is registered in a low tax/non-tax jurisdiction and is not tax resident in the country where it is registered. Offshore Companies are not allowed to conduct business within the country of registration, they are not considered as a tax resident of those countries, so their profit is not taxed in those countries (the company is located “off the shores” of the country).
Cyprus has successfully reformed its legislation related to taxation and has implemented a transparent tax system, which is fully compliant with the EU, OECD, FATF, and FSF.
A new tax regime from 2003 introduced a uniform 10% corporate tax rate, which has later been increased to the current 12,5%.
Cyprus has also adopted IFRS (the International Financial Reporting Standards) and implemented all current AML Directives to prevent money laundering and terrorist financing.
As a result of these new measures, Cyprus was removed from the OECD’s ‘harmful tax haven’ blacklist and was placed on the ‘white list’ of territories.
The terms ‘Cyprus Offshore Company’ and ‘Cyprus IBC’ are wrongly used as those types of companies do not exist anymore. Cyprus Company is a Cyprus Company and tax resident of Cyprus if the management of the company is carried out from Cyprus, regardless of where the shareholders live.
A single corporate tax rate is applicable for all tax resident companies.
A Cyprus Company is considered a tax resident if it is managed and controlled in Cyprus. If a Cyprus Company does not have its management and control in Cyprus, then the company is considered a non-tax resident and thus it is not subject to taxation in Cyprus. For more information regarding Cyprus tax residency and the Cyprus Tax Regime please visit our respective page.