Holding Company Structure
Cyprus, by virtue of its exceptionally advantageous tax system, has emerged into
the most favoured jurisdiction in Europe to conduct international business from. This,
coupled with the added advantages of EU membership rightly justifies Cyprus as
the premier holding, finance, royalty and trading company jurisdiction. It is also utilized
in other types of tax structures, such as employment companies, shipping
companies and foreign permanent establishment structures.
Holding Company Structure
Cyprus has become the most popular holding company jurisdiction in Europe and amongst the most popular in the world.
A Cypriot Holding Company enjoys the following tax advantages:
- Full exemption from tax on dividend income received
- No withholding tax on dividends paid to the ultimate shareholders of the Holding Company
- Full tax exemption on the profits from the sale of shares or other securities
- Full tax exemption on the profits from the sale of its shareholdings in the subsidiary companies.
- Use of wide double tax treaty agreements with over 45 countries which provide for reduced withholding taxes on dividends received from treaty countries.
- Unilateral tax credit relief irrespective of the existence of a double tax treaty
- No substance requirements, no debt-equity restrictions, no minimum holding period and no thin capitalization rules.
The Basic Cyprus Holding Company structure may be described as follows:
- A Cyprus Holding Company is set up by a non-resident investor / ultimate shareholder;
- The Cyprus Holding Company may acquire controlling interest in the equity of subsidiary companies registered and tax resident in various countries worldwide;
- Dividends received by the Cyprus Holding Company from subsidiaries registered in EU countries, for example Germany, will be received gross, i.e. without deducting withholding tax at source;
- Dividends received by the Cyprus Holding Company from subsidiaries registered in countries with Double Tax Treaties, for example Belarus, Russia, will be received after deducting reduced withholding taxes;
- Dividends received by the Cyprus Holding Company from subsidiaries registered in countries with zero tax, for example Belize, Seychelles will be received gross, i.e. without deducting withholding tax at source.
- Dividend income, irrespective of its source of origin, is exempt from tax in the Cyprus Holding Company;
- Similarly, dividends paid out to the Investor / ultimate shareholder by the Cyprus Holding Company are paid gross without any deduction of withholding taxes;
- Therefore, the profit distribution from the various operating locations in the form of dividends to the Investor / ultimate shareholder will result in zero or minimal taxation.