Holding Companies Incentives – 01/2011

A Cyprus Holding Company can be effectively utilized for international tax planning purposes and at the same time enjoy the status of being located at a reputable business centre within the European Union. In summary, a Cyprus Holding Company offers the following advantages in relation to the major tax considerations:

  • Dividend income received from subsidiary companies abroad is exempt from taxation, provided the subsidiary company does not engages in more than 50% of its activities in producing investment income and the foreign tax burden on its income is substantially lower than that in Cyprus.
  • Double Tax Treaties with over 40 countries, enabling lower withholding tax rates on dividend or other income received from the subsidiaries abroad.
  • Being an EU Member State, holding companies registered in Cyprus may also enjoy no withholding tax on dividends received from EU subsidiaries as a result of the utilization of the EU Parent Subsidiary Directive.
  • Profit arising from the disposal of shares is exepmt from income tax
  • Full capital gains tax exemption on capital gains, except on sale of immovable property situated in Cyprus.
  • No tax on capital gains or income on the liquidation of the Cyprus holding company.
  • No withholding tax on distribution of profits.
  • Outward dividends by the Cyprus holding company to its non-resident shareholders are exempt from any withholding taxes.
  • Profits earned from a permanent establishment abroad are fully exempt from Cypriot tax, subject to certain conditions.
  • A diversified group of Cyprus companies belonging to a Cyprus holding company can set off group relief for the utilization of tax losses.
  • No minimum holding period.

The above is brief and general in nature. Kindly contact our professionals for an in-depth analysis and advice.

January 2011