Introduction to Cyprus
Location and history of Cyprus
Cyprus is the third largest island in the Mediterranean after Sicily and Sardinia. It is located at Latitude 35 deg. north, 33 deg. east and the land area is 9,250 sq. km. The population of the Island is estimated at 784,000 and the capital is Nicosia.
Following internal strife the northern one-third of the Island was occupied in 1974 and remains occupied by Turkey. The southern part of the Island is known as the Republic of Cyprus and references in this web site to Cyprus refer to the Republic of Cyprus.
The history of Cyprus can be traced back to the Bronze Age. In ancient mythology it was the legendary birthplace of Aphrodite, the goddess of beauty, love, sex and passion. Over the centuries it has been invaded and occupied by Phoenicians, Egyptians, Persians, Romans and Greeks. The culture has been predominantly Greek since about 1200 B.C. It came under British control in 1878 and was formally annexed in 1913. It remained a British colony until independence in 1960. Cyprus joined the European Union in 2004 although EU law currently applies only in the Republic.
Government of Cyprus
Cyprus is a parliamentary democracy. The President is elected for a five-year term and is Head of State and Head of Government. The Cabinet is the Council of Ministers appointed by the President and Vice-President. The post of Vice-President is reserved for a Turkish Cypriot and is currently vacant. The Legislative branch is the House of Representatives, which is elected by popular vote for a five-year term.
Taxation in Cyprus
Individuals resident in Cyprus are subject to income tax at rates up to 30%. Some forms of income are exempt. The government also levies a further tax known as the special contribution for defence. There is a limited capital gains tax but no estate tax.
The system of taxing companies was completely overhauled to enable Cyprus to meet its international obligations and to fulfil the requirements for joining the European Union. All companies are now taxed at 10%. Where the company is tax resident in Cyprus, tax is imposed on its income from all sources, both within and outside Cyprus. Where a company is not resident in the Republic, only Cyprus source income is assessed to tax.
Cyprus has an extensive network of double taxation treaties making it an attractive base for many international activities. The Island is a full member of the European Union and accordingly the European Savings Tax Directive applies in respect of savings income paid to EU residents.
Regulation of the Financial Services Sector in CyprusThe regulator for banks in Cyprus is the Central Bank of Cyprus. The Central Bank also acts as the licensing authority for Financial Advisory firms and the managers of collective investment schemes. The Superintendent of Insurance at the Ministry of Finance is responsible for the regulation of insurance companies.
The Regulation of Fiduciaries Administration Businesses and Company Directors Bill will be enacted in 2006 to comply with EU requirements and bring regulation in Cyprus into line with that in other major offshore financial centres. The Act will introduce a licensing system for businesses engaged in the provision of company and trust formation and management services. The Regulatory body will be the Central Bank of Cyprus.
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