Cyprus isn't the only country with a low VAT (value added tax) rate but it is certinaly one of the lowest at 15%. The Netherlands is 19% I believe. Cyprus is a much easier place to get set up than the Netherlands.
Registering for VAT can be beneficial, however this can only be done for a European Company - you cannot register for VAT with an offshore company (like Seychelles, BVI, Belize, Panama for example).
There was a reply below which gave the following link - HM Revenue & Customs: When to register for UK VAT.
Please note this is only for VAT registration in the UK, no where else in the EU. I can certainly assist in trying to advise whether you will need to register if you give more details.
VAT is a sales tax and is certainly not known throughout the business world, I am often faced with the question - what is VAT? from professionals all over the world so do not be made to feel like this is not a good question. Although to most people based inside EU we will be more than familiar with it (it is a tax we have been paying our whole lives!).
There are different requirements in each country in Europe when it comes to VAT registration. For example in the UK you can only register if you have a turnover of more then £70k and you are dealing with local clients based in the UK. You also have to have an address and local contact number now.
In Cyprus it is actually quite easy to register for VAT and you just need to supply a proforma invoice to a potential client to demonstrate you are trading and need the VAT number.
In some countries you need to have a physical office with staff (like Ireland).
The benefit of registering is that if you are charged VAT by any suppliers than you can claim it back (meaning before it was a cost you had to 'swallow'). If you are registered though you will need to charge VAT on your services (unless your product/serice is exempt like the fellow who was selling books).
Hope this is helpful!
