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VAT is arguably a success story of the EU - a model of harmonisation - and through the application of the Sixth Directive on VAT (2006/112/EC), member states can easily make cross-border supplies of goods or services, eliminating any VAT distortions or encumbrances.
Cyprus, having an excellent communications network and fast broadband service, is a natural base for any business wishing to make a supply of electronic services within the EU, without any barriers or being subject to any onerous refund procedures under EU Directive provisions.
Maintaining the fundamental freedoms of the EU, particularly the Freedom of Establishment, is essential when considering any cross-border group structure within the EU.
Furthermore, under the EU Directives, withholding taxes can be eliminated on the distribution of dividends, or on the payment of royalties or interest between companies resident in different EU member states.
Similarly, EU law prevents other problems of cross-border taxation in the areas of group-relief and exit taxes from distorting rational business decisions, with previous CJEU rulings deterring member states from placing any tax barriers to free movement of capital, goods, services and people through the EU.
If any multinational business is considering cross-border tax planning within the EU, Cyprus remains an ideal choice as it remains an EU member state and offers a stable corporate route, with competitive tax rates for both companies and individuals resident in the Republic. Arguably, in the wake of Brexit, Cyprus now assumes additional strategic importance.
Key characteristics of Cyprus include:
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