The offshore legislation was introduced in 1975 and the industry has developed hugely since then.
The location of Cyprus – between Europe, Africa and Asia – has been helpful to the growth of the offshore industry. The northern part of the Island is occupied by Turkish forces, but its administration is not internationally recognised. Cyprus has a high standard of living and is a member of the United Nations and other international bodies. It has developed an efficient banking system, a high standard of accounting services, excellent air links and telecommunications. The Association Agreement with the European Community gives Cyprus access to EU markets.
The offshore company pays tax at 4.25%. Beneficial ownership must be with non-residents. An audit is required. There is no withholding tax on dividends. Offshore partnerships, offshore branches, offshore banking units (OBU’s) or representative offices, offshore insurance and offshore captive insurance companies and shipping companies may be used. The Cyprus Registry now has over 2,300 ships and is the third largest in the world (5th largest, measured in tonnage)
Cyprus has 21 tax treaties. Offshore companies are excluded from the U.S. and Canadian treaties and from part of the U.K., German and French treaties.
Over 22,500 offshore companies are now in operation. Most of them come from Europe and, recently, the majority of new companies have originated from Eastern Europe. Of those having operations on the ground, over 50% are situated in Limassol. There are over 1000 of these employing over 2,700 expatriates. Revenue to the Cyprus government amounts to some US$ 377 million, and is rising rapidly.
Author: Peter Economides (updated 1998)
