CYPRUS as an island is deemed to be an ideal place for offshore activities due to high quality of life, low cost of living, modern telecommunications and efficient banking services. There is infrastructure which means that high quality professional and managerial services can be provided by both lawyers and accountants. These combined with various tax incentives introduced to attract foreign companies, many enterprises established presences for their activities in Cyprus.

The offshore companies have to conduct their business activities and earn their incomes from sources outside Cyprus and the net profits of the companies are subject to a 10% tax rate.

Now local and offshore companies are treated the same and are taxed at the rate above on their worldwide income. Nevertheless, one has to see additional advantages which can emanate from the registration of an international company in Cyprus or even a local one and not merely to see the top of the iceberg. Cyprus has signed many double tax treaties including Germany, Austria, China, Czech Republic, Hungary, India, United Kingdom, Ukraine, Russia and Yugoslavia. Due to the favourable treaties that Cyprus has with a lot of countries, most of the western corporations are using Cyprus for their operations in East European countries.

This by itself can offer opportunities for serious investments and international tax planning. After all:

1. Duty free goods
   
   Cars, office and household equipment (excluding office furniture) are free of import duty for offshore entities and their foreign employees.
   
   
2. Exemption from social insurance contributions
   
   Offshore entities and their foreign employees are fully exempt from social insurance contributions.
   
   
3. Exemption from capital gains tax
   
   Full capital gains tax exemption on capital gains, except on sale of immovable property situated in Cyprus.
   
   
4. Estate duty exemption on inheritance of shares in an offshore company, no inheritance tax and the estate duty only applies to properties physically located in Cyprus.
   
   
5. Legalization of documents from Cyprus Chamber of Commerce.
   
   
6. Bonded facilities
   
   Full facilities are offered for-bonded warehousing-bonded yards for keeping and maintaining equipment – storing of materials and goods in transit without payment of import duty.
   
   
7. Freedom of movement of foreign currency.