A tax haven can be defined as follows: countries or states where in the majority of cases there are no taxes and no public filing of records requirement. Jurisdictions in a tax haven may also be more reluctant to submit tax information to authorities. For obvious reasons, many companies or private individuals choose to keep their money in a tax haven. Famous examples of tax havens include San Marino and Monaco.
A country like Cyprus is often labelled as a tax haven. It is more accurate to call it a reputable international financial centre. Whilst it might have certain advantages shared with tax havens, such as low taxation (only 10%) and owner anonymity through trustee shareholders and directors, it also has aspects which ensure it remains a reputable international financial centre.
For instance, in tax havens you might also find an element of corruption, lack of due process. Cyprus has enacted and observes strict anti-money laundering laws and regulations adhered to by all professionals involved in the corporate services sector (ie accountants, lawyers, bankers and other), together with sufficient know-your-client due diligence.
In Cyprus there is a very effective legal system, one which is based on the English system. Cyprus is a member of the European Union (EU) and so it adheres to EU policies and directives. It follows the OECD model of taxation, which is followed by all developed nations, and all Cyprus companies must prepare and file with the Registrar of Companies audited financial statements every year, together with an annual return, in contrast to almost all tax haven destinations where there are minimal or no reporting requirements.
There is no distinction between an offshore company and a local company, rather all companies incorporated in Cyprus are treated the same and have the same rights and obligations, whilst in almost all tax haven jurisdictions, offshore companies are not allowed to have onshore activities and are treated more favourably for taxation and other purposes.
Cyprus’ location is also very advantageous. It is located in the Eastern Mediterranean, by the meeting of Europe, Asia and Africa. This is obviously a very strategic location, and has long been considered so, even since ancient times.
Cyprus companies enjoy many benefits then, and so you might consider company formation in Cyprus if you want to experience many of the advantages of a tax haven company, like low taxation (10%) and owner anonymity, without any of the negative implications.
