As part of the accession process towards full membership of the European Union, Cyprus reformed its tax legislation which, as of 1 January 2003, conforms with EU requirements and fully complies with the OECD initiative against harmful tax practices.

The existence of a wide and expanding network of double tax treaties, including particularly favourable treaties with Russia and most Eastern European Countries, combined with low taxation, makes Cyprus a key jurisdiction in international tax planning. Cyprus is now firmly established as the main international business centre for holding investments in Russia and other Eastern European countries. Since its accession to the European Union on 1 May 2004, Cyprus is also proving to be an ideal and effective location for EU inbound and outbound investments.

The significant advantages that Cyprus has to offer to international companies with a Cyprus tax-resident base include:

• member of the European Union
• double tax treaties with 40 countries
• favourable tax regime including corporation tax of 10%, the lowest rate in the EU
• nil withholding taxes on dividends and on interest payable to non-Cyprus tax residents
• exemption from tax in most cases on dividends received
• exemption from tax of  profits from operations of permanent establishments situated abroad
• exemption from profits on disposal of shares, bonds and other securities
• exemption from capital gains tax on gains arising from the disposal of immovable property situated abroad
• exemption from capital gains tax on gains arising from the disposal of shares in a company which owns immovable property situated abroad

Moreover, international companies with a permanent establishment in Cyprus can benefit from:

• strategic geographic location
• availability of free zone area
• excellent communications
• efficient legal, accounting and banking services
• liberal Foreign Direct Investment Regime
• highly qualified, well-educated and multi-lingual labour force
• freedom of movement of foreign currency
• one of the lowest crime rates in Europe