The option of whether to set up a resident or non-resident International Business Company  depends partly on whether the company wants to take advantage of Double Tax Treaties. A non-resident company does not qualify for Double Tax Treaty benefits.

The pros and cons of the two options are:

Option A - Company with non-resident shareholders set up, having its management and control in Cyprus (resident IBC)

• is subject to 10% corporation tax.
• is subject to 10% special defence contribution on interest and 3% on rents (after deduction of 25%)
• is subject to 2% special coherence contribution on the emoluments of their employees in Cyprus
• qualifies for Double Tax Treaty protection
• qualifies for unilateral tax credit

Option B - Company with non-resident shareholders set up having its management and control outside Cyprus (non-resident IBC)

• is not subject to tax in Cyprus except for income derived from Cyprus
• does not qualify as resident of Cyprus for Double Tax Treaty benefits
• unilateral tax credit is irrelevant

Comment:

If profits from an IBC are not to be repatriated but instead transferred to a foreign bank account by the shareholders (e.g. Switzerland) or left in a foreign currency account in Cyprus, then option B may be the option to choose. If Double Tax Treaty protection is required, then option A should be considered. It should be obvious, however, that there are many opportunities for successful corporate tax planning which may effectively lead to reduced or even 0% tax in Cyprus.