Ideal Situation for Operating a Company
Cyprus’ tax regime is relatively simple, tested and workable. As seen below, the following circumstances in Cyprus constitute an ideal situation for operating a company, especially as an intermediate or ultimate holding entity.
Additional Tax Considerations
- Flexible re-organization rules according to EU directives
- Possibility of losses to be carried forward for 5 years
- Group relief is granted
- Absence of controlled foreign company (CFC) legislation
- No thin capitalization rules
- Possibility of re-domiciliation to other jurisdictions
- Possibility to be listed in stock exchanges (in Cyprus or any other reputable International stock exchange)
- Reasonable stamp duty provisions
The Core Benefits
- Incoming Dividends: No or low withholding tax from foreign jurisdictions & no local tax (apart from specific circumstances)
Cyprus Holding Companies are subject to no or low withholding tax rates due to the fact that Cyprus has signed over 59 double taxation treats, is part of the European Union Parent Subsidiary Directive within EU member states and applies unilateral tax credit relief. Additionally, dividends received from Cyprus or overseas companies are exempted from corporate income tax rates (apart from specific circumstances).
- Outgoing Dividends: In Cyprus there is no withholding tax on dividends payable to non-resident shareholders (whether a company or individual).
- Profit from the sale of Securities (shares, bonds, debentures etc) are also exempt from taxable income
- No outgoing withholding taxes on interest and royalties
- Low tax rates for trading income (12.5% on net profits)
- No taxation on gains relating to foreign exchange differences (apart from Forex companies)
Additionally, Cyprus is known for the continuous improvement of its services which can be seen by the fact that the laws and legislations are being adapted and amended for more efficient and streamlined operations. A few recent examples, leading to further advantages include:
- The addition of the Notional Interest Deduction which allows Cyprus companies to deleverage and realize a tax efficient return on new equity, through the deduction of a ‘notional’ interest expense from the taxable income (this can lead to effective tax rates of up to 2.5%).
- The abolishment of Immovable Property tax as from January 2017