Cyprus Holding Company
MN & ASSOCIATES offers financial advice and explains the benefits in choosing Cyprus as the jurisdiction of your holding company and aids its clientele through the financial and legal procedure needed in creating a Cyprus Holding Company.
There are several factors to consider in deciding which jurisdiction to take but then Cyprus has already established an overwhelming reputation for itself, that is, it is ideal for a Holding Company. If it is the aim of your company to maximize to its full potential the tax minimization on income and gains, then opt for Cyprus than other traditional jurisdictions. Ideally, a resident holding company is subject to a 12.5% tax rate on its income whether such income is derived from within or outside Cyprus .In case of a non-resident company, income may be taxed only if it is obtained from a Permanent Establishment in Cyprus. In Cyprus, holding companies are free from payment of capital gains tax as well as income tax on such gains unless it involves immovable property in Cyprus. Furthermore, profits derived from a Permanent Establishment (PE), located outside of Cyprus is also tax-exempt.
In the distribution of dividends, a Cyprus holding company may also be free from withholding taxes. In dividends distributed by a Cyprus Holding Company to non-residents, a withholding tax will not be imposed provided a minimum of 70% of the profits must be issued within two years at the end of the company’s fiscal or calendar year in order to avoid the 17% defence contribution tax that may be otherwise imposed. Dividends received from foreign companies are likewise tax exempt for as long as the holding company sustains the 1% holding in the paying company.
Cyprus does not also require taxes on royalty payments in case the rights to the intellectual property are used outside of Cyprus. It is also very important to emphasize that among European jurisdictions, Cyprus is one of those states which offers 0% dividend withholding tax.
With all these tax benefits, a new Holding Company is sure to profit in Cyprus. Tax Losses are also allowed to be carried over to the succeeding taxable years and may be carried forward indefinitely. Despite that, for companies facing liquidation processes, no payment of capital gains tax or income tax will be required. This benefit will help losing companies speed up their liquidation process. In case of mergers or consolidations, companies need not worry about the tax burden that may be brought about by these changes since it does not bring about additional tax liabilities.
Cyprus therefore grants numerous tax exemptions and benefits to companies whether it involves different kinds of income, dividends, royalties, or interests. To better understand the course of action in putting up a Cyprus holding company and to have a clearer picture of the tax structure in Cyprus, MN&ASSOCIATES experience in the field assists its clients through this venture.