Cyprus - The Gateway to the EU

The European Union is growing more and more into a single market. With their efficient measures, the European Parliament and the European Commission are trying by various ways to resolve legal differences and other barriers between the Member States in order to facilitate investment Europe-wide.

The most important of these facilities are free money transfer within Europe, the use of discriminatorial different tax rates of the various member states, the EU-wide taxation according to the tax law of the founding state of a company and the EU-wide general application of the law of the founding state of a company. For example, a Spanish company in Germany is to be treated according to Spanish law.

As is known no customs duties levied on products of intra-European trade, the value added tax has also been posted - the rate varies according to Member State – to the level of an EU-wide tax. A selling company in Italy (goods, services or units) pays the value added tax in either Italy or Germany, and gives a report to the other country.

In addition, each company, which sells goods or services directly to the to end consumers in the EU VAT liable. An American company, for example, that sells online programs, must be registratet for VAT in an EU country.

Given the above circumstances, new strategies have revealed in international investments. A non-European company that wants to invest in the EU taking advantage of the EU freedom of establishment, will set up a company in a low-tax EU country with favorable conditions and make the investment in the properly advised EU country in the name of that company. For example, a non-European company that wants to undertake an investment in a high tax country such as the UK, will incorporate a company in Cyprus, which will in turn then realize the investment in England. Thus the non-European company will benefit from the law corporate income tax and other benefits of Cyprus.

 

Russia, Ukraine and other Eastern European Countries

Cyprus has double tax treaties with a number of states which provide incomparable advantages. The double taxation agreements with Russia, Ukraine and other Eastern European countries stand here especially out. Many companies in Europe and elsewhere prefer Cyprus as the location of their companies to invest in the said countries.
For this reason, for example, about 60% of all foreign investment in Russia have Cypriot origin. In Ukraine, the share of foreign investment has grown to 16% in 2-3 years!

 

It would violate the secrecy, to name some examples. Though, the Dutch Group Heiniken is a publicly-known example, which has bought in May 2008 on the way of a capital increase, the Belarusian brewery Rechitsa. Heiniken has taken over the Belarusian brewery of the Cypriot company Detroit Investments Limited.