Especially if you travel to Eastern Europe (places like Latvia) you will hear a lot in offshore company formation circles about Cyprus companies, they are quite common there. (As you travel the world, you’ll find popular hotspots or favorite tax havens in many of the world’s countries, Barbados for Canada (although this is an outdated view), Puerto Rico for the US, etc.)

Let’s start with what is supposedly good about Cyprus:

1. it is part of europe

2. Relatively low taxes: the sticker rate of 12.5% ​​is one of the lowest in Europe

3. A reasonable net of tax treaties

4. Non-resident companies are available, which opens the possibility of companies with 0% taxes

5. No dividends with tax withholding

So you could ask yourself with all these advantages, what is not to love?

The reality is that Cyprus is an option, it is just a worse option than some of the available alternatives, more specifically Gibraltar. Let’s compare:

• Both are part of Europe, so neither earns points over the other.

• Company formation in Cyprus costs around 2250 EUR, while Gibraltar costs around 850 GBP, making Gibraltar cheaper.

• Both can have non-resident companies, but non-resident Cyprus companies are still subject to annual audited financial statement requirements when even Gibraltar-resident companies do not have an annual income of £5m and non-resident companies do not have to file any declarations, making Gibraltar companies much less expensive to run.

• Cyprus definitely has an advantage when it comes to its tax treaty web and I have heard the argument that “you must have your Cypriot company’s tax residence in Cyprus to get a tax treaty advantage” but in practice I rarely find there is any advantage to doing so, if you are doing offshore tax structuring that would result in a Cyprus company you are not normally seeking tax treaty benefits anyway.

• Laws of Cyprus, etc. they are all in Greek, which makes it much more complicated for those who are more familiar with English to get information and do business there.

• Cyprus is not a particularly confidential jurisdiction

• While there is very accessible local banking available in Cyprus and not in Gibraltar, a Gibraltar company could easily open a bank account in Cyprus, but who would want to do so given their history of financial instability?

• Gibraltar has a 10% tax rate on corporations, while Cyprus has a 12.5% ​​tax rate, making Gibraltar more favorable in gross tax rate on resident companies.

• Cyprus taxes worldwide income, while Gibraltar has a quasi-territorial tax system which makes Gibraltar even more tax competitive for resident companies.

If you are going to have a local resident company then yes, Cyprus has one of the lowest tax rates in Europe combined with a mediocre web of tax treaties. Whether there is any reason to go there instead of Latvia, Estonia or Malta is a matter of your individual business circumstances, but as a general rule, there is a rare day when forming a company in Cyprus makes sense for a non-resident.

In a nutshell, I hardly ever use or recommend Cyprus as a jurisdiction to form an offshore company.