Cyprus Companies - Company Formation, Registration and Law
We specialise in company registration, incorporation and administration in Cyprus, a jurisdiction which currently operates the most attractive business environment in the EU. Due to our vast experience and expertise, we are capable of offering our clients assistance with all aspects of Cyprus company formation and administration.
In light of the 2003 tax reform combined with Cyprus’ accession to the EU it has developed into a popular platform from where international investors and multinational companies hold and manage their trans-border investments. Having one of the lowest tax rates within Europe and in compliance with the OECD requirements against harmful tax practices, Cyprus is preferred by many investors as it is considered to be an ideal International Financial centre
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There is a plethora of advantages surrounding the incorporation of a holding company in Cyprus. The island is situated at the crossroads of Europe, Asia and Africa and also forms a gateway to the oil-rich Arab states and the rest of the Middle East. The Island also has a state of the art telecommunication infrastructure, low operating costs, multi lingual and high skilled human capital, and excellent banking systems. As a holding company, a non resident can benefit from the following tax advantages:
- A uniform 12.5% corporate tax rate is applicable to the worldwide income on all resident companies. This is one of the lowest corporate tax rate in the EU and thus the most advantageous standard rate of corporation tax for Cyprus. The taxation status on a Company is residence-based. A company is only 'resident in Cyprus' if its business is centrally managed and controlled in Cyprus. Therefore, under the relevant rules, a resident corporation is taxable on its worldwide income accrued or arising from sources both within and outside Cyprus if it is managed and controlled from Cyprus.
- There is no capital gains tax payable on the sale or transfer of securities and the gains are exempt from Income Tax. (This does not apply when the Company owns real estate in Cyprus) Consequently, no tax arises on the disposal of participations held by the Cyprus Holding Company or the disposal of the shares of a Cyprus Holding company or the liquidation of the Cyprus Holding Company owned by non residents.
- Dividends received from Cyprus or non Cyprus companies are exempt unless more than 50% of the payer’s company’s activities derived from investment income or the tax burden in the payer’s country is substantially lower than the Cyprus tax rate.
- Profits from a permanent establishment abroad are exempt from corporation tax, subject to exemptions.
- There are no withholding taxes on the distribution of profits by way of dividend payments to non residents irrespective of whether the recipient is a corporate body or an individual and irrespective of the country of residence or the existence of a double tax treaty.
- Corporate tax losses incurred during a tax year can be carried forward over the next five years to be offset against taxable income or they can be set off against profits incurred from companies within the same group under group relief. (Two companies are considered for group relief purposes if one is a 75% subsidiary of the other or if both are 75% subsidiaries of a third company).
- The Cyprus tax legislation has transposed the Merger Directive into the local income tax law and unlike the Directive itself which provides only for cross-border reorganisations of companies within the EU and is restricted to income tax consequences, it has extended the tax benefits to domestic reorganisations, to cross-border reorganisations with EU member and non EU member states and to reorganisations abroad with tax implications in Cyprus. In accordance with this legislation, no tax consequences arise in the case of a reorganisation involving a Cyprus holding company.
- There are no debt / equity ratio requirements in the Cyprus tax legislation. A Cyprus company can be capitalized entirely with loans and any arms’ length interest paid to a parent will be fully deductible.
- Cypriot tax legislation does not contain thin capitalization provisions.
- There is an extensive double tax treaty network with over 40 countries and a further 25 treaties under negotiation.
In conclusion, Cyprus is a suitable place for locating an intermediary company due to the island’s combination of tax treaties and low-tax regime. Dividends can flow through the Cyprus company totally tax free and the company can be used to take advantage of the extensive network of double tax treaties.