Cyprus

The globalisation of investments is a growing trend as capital movements become more mobile and barriers to foreign investments are rapidly disappearing. As a result, investors and businessmen set up holding companies for the purpose of holding their participations around the world, in jurisdictions with low tax costs which enable them to maximize their after tax return on investment and help them to achieve efficient tax repatriation of profits.

The main tax features which make Cyprus the ideal holding company jurisdiction and it s advantages inherent from the Cyprus Tax System are listed below:

Corporation tax

Corporate income is taxed at the rate of 10%, the lowest in European Union, in line with Cyprus’ longstanding commitment towards a steady, low tax fiscal regime.

Generous deductibility rules

Under Cypriot law all expenses incurred wholly and exclusively for the production of the income are deducted before arriving at the taxable income.

Tax exemption on disposal of securities

The profit arising on the disposal of securities in a private or public company by a Cyprus tax resident company is tax exempt from any tax in Cyprus, provided that securities refer to shares, debentures, government bonds, founder’s shares and other securities of companies or legal persons incorporated in Cyprus or abroad and rights thereon. Full exemption from income tax on the liquidation of participations held by the Cyprus holding company or on the disposal of the shares of the holding company.

Incoming Dividends

Dividends received by a Cyprus tax resident company from a foreign subsidiary are exempt from corporation tax. They are also exempt from special contribution of Defence. The exemption from special contribution of defence is subject to the conditions that the overseas company paying the dividend does not engage directly or indirectly by more than 50% in activities which give rise to investment income and that the foreign tax burden on the income of the paying company is not significantly lower than the Cyprus tax burden of the company receiving the dividend.

Extensive network of agreements

The extensive network of double tax treaties that Cyprus has with more than 40 countries, lowers the withholding tax rates on dividends remitted to Cyprus from the subsidiary’s jurisdiction, as the terms of the double tax treaty supercede the national law. Moreover, dividends between associated enterprises which are both situated in the European Union are paid without any withholding tax, based on the provisions of the Parent- Subsidiary EU Directive.

Repatriation of dividends from Cyprus

Cyprus does not impose any withholding tax on dividends and other profit distributions paid by a Cyprus company to non resident shareholders including individuals and corporations irrespective of country of residence.

Foreign Tax Credit on income Received

Income received by a Cypriot company from abroad may have been liable to a withholding tax on payment in the country of origin. If this income is liable to tax in Cyprus, the tax paid abroad can be credited against the tax payable in Cyprus.

Tax Treatment of Losses

Losses can be carried forward indefinitely against future profits. Losses incurred abroad can be set off against the company’s profits as long as they belong to the same group of companies. Companies part of a group (with minimum participation of 75% for the whole fiscal year) can consolidate their results, thus allowing losses of one company to be set off against the profit of another company.

Based on the latest tax changes, as from 1 January 2012, in cases where a company has been set up by its parent company during the year, this company will be deemed to be member of the group for the whole year for group relief purposes (at least 75% shareholding must exist).

Intellectual Property Rights

As from 1 January 2012 and onwards, 80% of the profit gained from the exploitation of such intangible assets will be deemed as expenses and only 20% of the profit will be taxed. The net profit is calculated after deducting from the income all the direct expenses related to the generation of such income. The exemption of 80% of the profit applies also for intangibles assets which have been acquired before the year 2012 but for profit arising after the 1st of January 2012. The capital allowances rate on such intangibles is set at 20%.

Full exemption from capital gains tax

There is full exemption from Capital gains tax that arises from the disposal of immovable property held outside Cyprus or shares in companies which may include immovable property held outside Cyprus. Therefore, Cyprus companies can be used to hold real estate outside Cyprus with no capital gains tax implications in Cyprus on their disposal.

Conclusion

In the light of the above tax benefits, Cyprus company is most commonly used as an intermediate holding company especially in cases where investors invest in EU countries or in countries with which Cyprus has a double tax treaty. Tax benefits arise to the investors who aim at dividend income as well as significant capital appreciation from the disposal of the shares.

For the incorporation of an IBC, our organization has to follow a DDP in compliance with the International Money Laundry Regulations.

Documents & Information needed to be sent to Globalserve upon Order:

  • We need to know if the client wishes to have nominee services that we offer such as nominee shareholders and or nominee director. Registered office and secretary is always provided by us
  • Copy of the passport of the owner of the company and /or the director if not nomineeWe advise clients who wish their company to be tax resident of Cyprus to have in their board of directors at least 50% local directors in order to be able to defend that management and control is in Cyprus, if the need arises in the future. We try to provide substance to the companies that we manage by offering nominee directors and shareholders, address, telephone and fax, bank accounts, preparation of invoices, contracts and minutes, bookkeeping and audit all in Cyprus.
  • Bank reference for the beneficial owner and director (if not nominee) and for the signatory at the bank in case it is different from the previous two. Also we need to know who will be the signatory and user of the internet bank codes
  • Proof of address of above such as copy of a utility bill
  • Information about the line of business of the company and expected turnover and the countries with which it will have commercial relations

Property Search

Banners

Travel
Globalserve Consultants Ltd
Dinos Antoniou & Co Ltd
skyscrapers

Copyright © 2017. All rights reserved. Designed and Developed by mmVirtual