Advantages of Cyprus Holding Company
Cyprus holding companies are a popular tool for international tax planning and optimization. The process of creating and setting up a holding a company is simple and is a type of company that allows nominee shareholders. In only few days the company can be registered with tax authorities in order to get TIC and VAT registration numbers. License to operate is only required if the activity that is going to carry out is included in the list of activities required by law such us an investment company, banking etc. Cyprus holding companies have 0% tax on dividends paid for shares that are hold in any company abroad and 0% tax on dividends paid by it to its shareholders.
Tax Benefits of Holding Company
Cyprus is a jurisdiction that offers many advantages and incentives for the Cyprus holding company making it very attractive to the international businessmen and entrepreneurs such as the following:
- Profits can be distributed to the nonresident shareholder’s tax free. Corporate tax is in the region of 12.5%.
- Revenue from sale of securities is not taxed.
- Dividends received at very low or even 0% withholding tax rate.
- 0% tax on dividends that a shareholder receives from other abroad subsidiary companies.
- 0% tax on their profits from a permanent establishment abroad.
- Only 2% corporate tax on their revenues from intellectual property rights.
- No defense contribution tax.
- Many other tax incentives and advantages.
No Tax on Revenues from Trading in Securities
- Securities consists of shares, bonds, debentures, options, futures, binaries, collective investment schemes which can be open-ended or closed-ended and repos on titles.
- According to the tax department bills of exchange, currency trading, and promissory notes are not securities and therefore earnings from these sources will be taxed at 12.5%.
- In case a holding company is tax resident and it is the owner of immovable property and all of its shares are sold to a third party, it will be considered as sale of that property also, and 20% capital gains tax will be levied on the value of the property.
Dividends Received by A Cyprus Holding Company Are Not Taxable
- Any dividends received by a Cyprus holding company, which is tax resident or non-tax resident which maintains a permanent establishment in the country, are not taxable but there are some exceptions to this rule.
- If the foreign company paying the dividends engages its activities in more than 50% in investments and the dividends paid are of income of more than 50% from such investments such dividends will be taxable provided that the tax paid on such income abroad, is substantially lower than the Cyprus corporate tax which is 12.5% and is lower than that of many other countries in the EU and outside.
- Hence if that income is taxed for example at 5% abroad, such income will be taxed under the special defense contribution law.
- Tax is not paid on any dividends paid out to a tax resident company by some other tax resident company.
- No special defense contribution tax is paid on dividends coming from dividends on which such tax has already been paid.
Dividends at Very Low or Even Zero Withholding Tax Rates
- A rich network of double tax treaties with third countries (i.e. Russia) enables a Cyprus Holding Company to receive dividends from other legal entities local or foreign without having to pay tax on those dividends in respect of the same company or even physical person.
- The parent-subsidiary directive of the EU exempts the withholding tax deduction on the dividends and other revenues distributed in the EU by a subsidiary company to the holding company and so it eliminates the double taxation of dividends of the parent companies.
- A unilateral tax relief is given for any withholding tax paid on the specific revenue abroad, and so the tax bill is decreased.
For more information and guidance get in touch with our lawyers or email iMPK Global Business Law Firm – Cyprus Lawyers – Michalaki, Pitsillidou & Co. LLC, at email@example.com .Tel. +357 99345000 – Fax +357 25 660097.