why is cyprus a tax haven?

Cyprus as a tax haven Cyprus lost its tax haven status when the OECD gave the country the same status as the US. Cyprus also initiated participation in the Automatic Exchange of Financial Information in Tax Matters. This rule will probably have no effect on those who officially live in Cyprus or wish to do so. When Cyprus joined the EU with a reformed tax system, it had the lowest tax rate of all EU countries at 10%.

This exception does not matter if the worker has been a Cypriot tax resident in the previous tax year or for not less than three of the last five tax years quickly preceding the tax year of commencement of the activity. Cyprus has evolved from being considered a tax haven with a tax rate of 4.25 for grey zone companies to a single EU jurisdiction offering a range of advantages and financial benefits to companies and individuals. Cypriot culture is divided between Greek and Turkish identities, each of which maintains its own rituals and customs, with little exchange between them. Deposits in Cypriot banks have over the past decade often returned about twice the interest rates of banks in other European countries, such as Spain or Italy.

The opportunity to cut income tax rates arose from the need to harmonise value added tax (VAT) and excise duties with the European Union, where the minimum rate was 15 per cent. A German intelligence report (Bundesnachrichtendienst - BND) was leaked to Der Spiegel warning that a bailout of Cyprus would actually be a bailout for Russian oligarchs. The EU blacklist puts pressure on nations to make changes and reforms to their tax codes, and blacklisted countries can face EU sanctions, according to OXFAM International. Currently, Cyprus has an exceptionally basic residency rule: a person is considered to be a tax resident if he or she spends more than 183 days of physical presence in the country during a calendar year (the tax year).

This makes the Cypriot tax regime one of the least taxed in the world, e.g. for holding companies. Milosevic used front companies and offshore bank accounts in Cyprus to avoid the international embargo and to buy military equipment that was used in the wars in Bosnia and Kosovo. This was basically a permit, due to the importance of the maritime business for the Cyprus economy, although it was considered to violate the principles of EU tax law.

The professional services sector, especially since the beginning of the financial crisis, was almost the only sector creating new university-level jobs in Cyprus. With the dissolution of the Soviet Union in December 1991, Cyprus was one of the few countries to which Russians could travel without a visa. Cyprus agreed to have Moneyval and an auditing firm, Deloitte, carry out an assessment of the implementation of anti-money laundering measures in Cyprus' banks and government institutions.

Latisha Busler
Latisha Busler

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