Ukraine Investment through a Cyprus company, why it's the best?!

[buzzoffshore]

The main features of the current tax system are the following:

• The taxable profit of all Cypriot companies is taxed at the rate of 10%.
  
• Dividend income from abroad to Cyprus is wholly exempt from corporation tax provided the direct holding is at least one per cent (1%) of the share capital of the overseas company. This exemption will not apply if the company paying the dividend engages in more than fifty per cent (50%) of its activities in producing investment income and the foreign tax burden on the income of the company paying the dividends is substantially lower than that in Cyprus.
  
• There is no withholding tax on the payment of dividends, interest and royalties from Cyprus to non-residents of Cyprus.
  
• In order to conform to the European Union, the new tax legislation adopts the appropriate European Union directive which enables reorganizations, mergers, acquisitions and amalgamations of companies without tax implications.
  
• Dividend income and profits from the sale of securities and shares are exempt from corporation tax.
  
• With 2 exceptions, profits from a permanent establishment abroad are exempt from corporation tax.
  
• The treaties for the avoidance of double taxation which Cyprus has signed remain in force. There are currently 34 such treaties (please, see the table 1). The existence of these treaties, combined with the low tax paid by a Cyprus company offer the possibilities for effective international tax planning as we will indicate in the examples below. The main objective of the double tax treaties is to avoid the double taxation of income earned in any of the two contracting countries. This is done through the tax sparing provisions whereby tax is credited against the tax that must be paid in the contracting state. The treaties also provide for reduced withholding taxes for dividends, interest and royalties.
  

The aim in Cyprus has always been to create not a tax haven but a tax incentive country. Therefore, regulations have always been adhered to. Permission from the Central Bank is necessary before a company can be established while at the end of each fiscal year audited accounts and annual returns must be submitted both to the Central Bank and to the tax authorities. Having said that, applications for the incorporation of a Cyprus company are processed efficiently by the Central Bank and the Registrar of Companies and the procedure can be completed in about a week. Local law firms and accountancy firms can provide nominee services for the administration of the company thus securing anonymity for the actual owner, where this is required. Instructions for the incorporation of a company can be given by fax or e-mail and the presence of the owner in Cyprus is not required.


With EU accession in May 2004 the status of a Cyprus holding company is enhanced further as it enjoys the reputation and privileges attached to a European company.


What about the relations between Cyprus and Ukraine? If you have a look at the list of international documents protecting Cyprus investors in Ukraine I believe there will be no doubts:

• Convention on Settlement of investment disputes between states and foreign entities (effective as of 18.05.1965),
  
• Partnership and cooperation agreement between the EU and Ukraine (effective as of 01.03.1998),
  
• Treaty between the Government of the USSR and the Government of the Republic of Cyprus of the avoidance of double taxation with respect to taxes on income and estate (effective as of 26.08.83),
  

• Agreement between Ukraine and Cyprus on legal assistance in civil cases (effective as of 18.03.2006),
  

• Trade agreement between the Government of Ukraine and the Government of Cyprus (effective as of 21.02.2000).
  

Cyprus has always been one of the main sources of investments into Ukraine. Generally the advantages may be distributed into several groups:

• protection of assets,
  
• tax optimization,
  
• tax free gains on disposal.
  

To be vivid we can illustrate the table 2 and 3. The highest level of confidentiality is provided with the use of another offshore structure. Royalties, dividends and interest paid from Ukraine to Cyprus are not taxed at all. Mergers and acquisitions may be carried out without taxes.


source to the author

 

[JohnLocke]

Thank you for sharing. Indeed many from the Ukraine are incorporating in Cyprus for the almost same purpose. There are other EU countries where it can be of a great benefit to have a Cyprus Holding company or Investment company to be paramount or inbetwen.

 

[buzzoffshore]

I'm from Ukraine and have been in touch with a few tax consultancy there. Some of them shared the information above so I thought I would share it with all of you. Always a pleasure, enjoy

 

[buzzoffshore]

What I learned is you can do some similar setup with a Seychelles entity not with the same tax benefits in a legal manner but you can create the structure to avoid total tax.

 

[Sany zeth]

i have heard somewhere that there is some relief in tax if you have a personal company then a business company.
Is that true?