An increasing number of Serbian businessmen, who have companies registered in Cyprus, a very popular offshore destination among Serbian entrepreneurs in recent decades, are beginning to transfer their financial affairs somewhere else, including Serbia.
The main reason is that Cyprus is no longer what it used to be: the running costs of a company in this offshore area have increased dramatically and can amount up to €10,000 per year.
The existing corporate benefits in Cyprus, as a tax haven, started to decrease significantly after the country joined the European Union in 2004.
At that time, however, the decision did not have a significant impact on Serbian business activities, but the new obligations that Cyprus has taken on in the meantime have become significant. First of all, companies are now required to keep books, i.e. to have an accountant and therefore a mandatory control of transactions, which represents an additional cost for companies amounting to between €5,000 and €10,000 per year.
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Almost all prominent businessmen in Serbia have at least one company registered in this Mediterranean island and more than 1,000 companies operating in Serbia are founded by individuals from this island.
According to the latest data provided by the Business Register Agency (APR), the number of Serbian companies that have owners in Cyprus currently stands at 666. However, it is interesting to note that, since the beginning of this year, only one company has been registered Cypriot nationals.
“In the beginning, Cyprus was very popular because it had many advantages – the state did not give out any information about the owners, the tax was paid only in Cyprus and we had a favourable intergovernmental agreement with this country. Meanwhile, maintaining a business in Cyprus has become more expensive,” explains Milan R. Kovacevic, a foreign investment advisor.
He believes it is now cheaper to do business in the Netherlands, France or Sweden, with which Serbia has better intergovernmental agreements compared to Cyprus. Intergovernmental agreements cover dividends, interest and royalties. Previously, Cyprus had extremely favourable dividend yield rates and low corporate income tax.
According to the National Bank of Serbia, most of the companies which carry out their financial affairs in tax haven come from the sector of metal production (32.3%), the exploitation of minerals, other ferrous, precious and other metals (18.8%) and non-specialized wholesale trade (10%).
This post is also available in: Italiano