The Cyprus Holding Company at a Glance
When deciding upon a corporate structure the location of a Holding Company is of great importance in order to take advantage of the many tax benefits on offer. Current applicable legislation makes Cyprus one of the best locations to incorporate Holding Companies.
What is a holding company?
It is a company which is formed in such a way, so that its management can control and/or influence other companies within the same corporate structure. A Cyprus Holding Company is usually formed in order to hold foreign investments, the income of which is distributed to non-residents.
Benefits of a Cyprus Holding Company in brief:
- No withholding tax on dividends paid to non-residents shareholders;
- No withholding tax on interest paid from Cyprus;
- No tax on dividend income received from another Cyprus tax resident company;
- No tax on dividend income received from a foreign permanent establishment (PE) of a Cyprus holding company; provided one of the following conditions are met:
1. The PE must not engage more than 50% directly or indirectly in activities which lead to passive income.
2. The foreign tax burden on the profit of the dividend paying company is not lower than 6.25%. - No tax on dividend income received from abroad; provided
1. that they are not allowed as a tax deduction in the jurisdiction of the foreign paying company;
2. the dividend paying subsidy company must not engage directly or indirectly more than 50% in activities which lead to passive income;
3. or if the foreign tax burden of the dividend paying company is not lower than 6.25% - Dividends received from abroad are exempt from Special Defense Contribution if one of the following conditions are met:
1. The dividend paying company must not engage more than 50% directly or indirectly in activities which lead to passive income.
2. The foreign tax burden on the profit of the dividend paying company is not lower than 6.25%. - No withholding tax on royalties paid from Cyprus in respect of intellectual property exploited outside Cyprus;
- No tax on disposal or trading of securities;
- Only 2,5% effective taxation on profits from qualifying intellectual property;
- Notional interest deduction upon the introduction of new equity
