Why forming a holding company in Cyprus will benefit your business
What is a Cyprus Holding Company?
The term ‘Cyprus Holding Company’ refers to a company incorporated in Cyprus (limited by shares) under the Cyprus Companies Law, the activity of which is that of holding investments (shares) in other companies worldwide. There is no time restriction imposed on the use of the Holding Company, nor is there any restriction on carrying on other activities, but the tax treatment of the income from such other activities will be different.
Benefits of using the Cyprus Holding Company
Cyprus Holding companies can provide simultaneously the ability of ownership and control on other companies, as well as offering a number of tax benefits on both a corporate and personal level.
Here’s a summary of the most important tax advantages of a Cyprus holding company :
- Income from dividends is tax-free
- Gains on the sale of shares are tax-free.
- Proceeds from the liquidation of subsidiaries abroad are tax-free
- Capital gains on disposals of capital assets are tax-free.
- Profits from activities of a Permanent Establishment abroad are tax-free.
- Lower withholding tax rates in other countries on remittances of income from dividends, royalties or interest due to wider applicability of Treaties for the Avoidance of Double Taxation.
- Tax-free distributions by Cyprus Holding Companies to their non-resident or non-domiciled resident shareholders
Some other tax advantages in Cyprus:
- Net income from other activities is taxed at one of the lowest corporate income tax rates in Europe, 12,5%
- Notional Interest Deduction (NID) Rules
- EU Parent-Subsidiary Directive
- It can be re-domiciled to a third country (provided is allowed by that country law)
- Can be listed in any stock exchange abroad
- No thin capitalization rules
- It can be incorporated and maintained with very low costs
- The holding company is considered a tax resident and enjoys the attractive tax legislation, when the control and the management takes place in Cyprus
- No capital duty on the initial authorized capital at incorporation of a new company or on any subsequent increase of the authorized share capital (or share premium)
Other reasons to choose Cyprus in locating your holding company
- A very favorable and welcoming environment to international business.
- Excellent climate and lifestyle ensuring residents enjoy a high quality of life.
- A democratic and free society with a well-established legal system.
- Excellent location for business in the Middle East, Eastern Europe and North Africa.
- Good air connections.
- Excellent telecommunications. (High speed broadband Internet networks cover most of the island)
- A broad range of high-quality professional services.
- Highly skilled, educated and flexible workforce, well acquainted with the use of modern technology.
- Modern banking system
- Educated, well-trained and multi-lingual population. English is widely used in business. Many other important languages are also spoken.
- Excellent residential and office accommodation.
- Low cost of living.
- Crime free society and high quality of life.
- Good education available from elementary schools to university level.
- The membership of the EU enables employment of any EU national without complicated procedures. Non EU personnel may also be employed following the required procedure for securing work-residence permits.
- Full membership of the EU and of the EURO Zone.
- Compliance with OECD and FATF standards.
- No exchange controls.
Cyprus may well be the best location within the EU for the establishment of a Holding Company. International businesses can derive very important tax (and other) benefits from using a Cyprus Holding company. This is mainly due to the combination of completely tax-free income from dividends and the reduced (or eliminated) withholding taxes from Cyprus’ extensive network of Treaties for the Avoidance of Double Taxation.
The contents of this publication should be considered to be of a general nature only not referring to any particular business. Before proceeding with any action, please request further advice relating specifically to your business. We will be very pleased to be of assistance.