Cyprus has long been considered a privileged area for several types of investments and business expansions.
One of the Island’s greatest advantages is that it’s a Member State of the European Union and its tax regulations are in compliance with the Union’s guidelines and general principles. Learn more about the new attractive changes to the Cyprus Tax Legislation.
This article will help you understand some basic principles of EU Taxation before expanding your business in Cyprus.
EU’s Role in Cyprus’ Taxation
First of all we must make clear that tax rates or raises are not determined by the European Union, but by Cyprus government. The European Union acts mainly as an overseer, by making sure that tax regulation and taxation is in compliance with the Union’s policies, some of which are:
• the promotion of economic growth and the generation of new jobs;
• the free circulation of goods, services and capital around Member – States of the single market of the European Union;
• the fair competition of companies or entities of the same industry in all Member – States;
• making sure that taxation does not in any way show favoritism to consumers, employees or entities from other Member – States.
In addition, European Union’s decisions on taxation policy are always validated by unanimous agreements of all member – State governments, thus making sure that the specific needs and circumstances of every single member is carefully considered.
VAT and Excise Duties
For certain taxes, for example VAT or gas taxes, and excise duties on consumer goods such as cigarettes and alcoholic beverages, all Member – States have agreed to generally align their regulations and minimum rates, thus eliminating any chance of unfair commercial competition among the countries of the European Union.
Corporate and Income Tax
Regarding other types of taxation, such as corporate or income tax, the European Union just makes sure that basic guidelines, like the free movement within the single market are applied indeed.
European Union does not have the right to intervene directly to a country’s financial policy and control how each government spends state revenues.
On the other hand, in case a country follows a financial policy that could endanger the stability of the Eurozone, the European Union can exert some pressure in order to ensure the economic growth and health of European economy.
Single Market Taxation
Personal and corporate taxation is mostly regulated by each government. Nonetheless, Member – States are obliged to allow the circulation of all EU citizens across their borders. In addition, certain treaties between most Member – States have been signed in order to solve arising problems, such as double taxation.
Goods and services Taxation
In order to facilitate the free circulation of goods and services, Member – States have adopted the same taxation principles regarding goods and services, such as the afore-mentioned minimum tax rates.
Tax Evasion Measures
The European Union has taken action to minimize tax evasion and it is true that during the last decade several measures have been proven successful, based on sharing valuable information between Member – States and fast reaction against cases of VAT fraud.
Much has also been done towards ensuring reasonable and just corporate taxation. Possible cases of regulation indefiniteness and unavoidable loopholes between the various tax systems of the Member – States, have given the chance to some entities to adopt aggressive tax planning in their effort to reduce their taxation. Hence, the Commission has encouraged the collaboration and the sharing of information among tax authorities of all Member – States.
Member – States are also obliged to make sure their corporate tax system is sound and fair and properly shielded against fraud and tax evasion from entities that wish to take advantage of any regulation loopholes within the European Union.
Taxation regarding Financial Transactions
Several Member – States of the European Union are already designing a common tax system regarding financial transactions, in order to make sure that the financial sector does its best to combat recession. After all, it takes the blame for much of the damage caused by the current financial crisis. This newly developed tax system is specially designed to generate considerable revenues.
Cyprus has successfully overcome the recent crisis and offers businessmen and investors a privileged area for expansion. Understanding European Union’s basic tax principles can help you weigh carefully all possible factors and properly plan your investment. The only thing you need is the right partners. Get now 30 minutes of free consultation.
If you want to work with professionals who provide exceptional quality standards of services in Cyprus, the simplest way is to fill in this contact form.
We will analyze your case and advice you on:
- What company structure suits you best,
- What is the best Tax solution(s) for your business,
- What Banking and cash flows arrangements available.
We will take you through a step by step process from A to Z in creating the perfect business in Cyprus.
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If you want to work with professionals who provide exceptional quality standards of services in Cyprus, the simplest way is to fill in the contact form below.
We will take you through a step by step process from A to Z in creating the perfect business structure in Cyprus.
Can’t wait any longer? Become even more successful by working with accountants you can count on and be among the thousands business that already did.