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Cyprus Holding Companies
A Cyprus Holding company is a legal entity that can be used by investors as a
vehicle to hold properties or make investments in Cyprus and or abroad.
Cyprus has become an important world business centre mainly due:
To its favorable tax regime, having the lowest corporation tax in Europe
at 10 %,
The exemption from tax for dividend income from overseas subsidiaries
,(under some criteria)
The wide network of double tax treaties that Cyprus has signed with several
countries
The exemption from taxation of the sale of securities such as shares,
bonds, debentures and other securities of companies incorporated both in Cyprus
or abroad.
Functions of Holding companies
The main functions of the Holding companies are:
Receiving dividends, interest or royalties
Making investments in other companies (holding shares in subsidiary or
associated undertakings)
To act as Financing bodies for their investment undertakings by supplying
the companies that they hold shares in with funds.
More specifically, the following matters are worth mentioning why Cyprus
is an advantageous location to establish a Holding Company:
Dividends from abroad received in Cyprus
Dividends paid by a foreign company to a tax resident Cyprus Holding company
are tax free in Cyprus provided that:
a) the revenue of the foreign company paying the dividend
,derived directly or indirectly from investments activities does not exceed 50 %
of the total revenue and,
b) the corporation tax rate of the country of the paying
company is not substantially lower than the Cypriot corporate tax rate.
Double Tax Treaties
The wide network of Double Tax Treaties that Cyprus has entered into makes
Cyprus a very attractive place to establish a Holding Company as it helps to
minimize the withholding tax rates.
Group losses relief
The tax losses of one company in the Group can be set off against the
Profits of another group company if:
a) the companies are tax resident in Cyprus, and
b) the holding company has at least a 75 % of the share
capital of the subsidiary, or
c) each company is at least 75 % subsidiary of the other
company
The set off of the losses can be made against profits of the same tax year
Any unused tax losses are carried forward to be set off against future
profits without any time restrictions.
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