The firm provides legal advice and assistance
to clients wishing to register any type of Cyprus Company in order
to benefit from the tax incentive regime of Cyprus as well as its
wide network of Double Tax Treaties. Among the various Cyprus Companies
which can be registered, the Cyprus Holding Company stands out as
the most efficient vehicle for tax-planning structures.
Below is information on the following:
The Cyprus Company
The Cyprus Holding Company
Tax residency, Confidentiality & Disclosure
Types of Cyprus companies
The Cyprus Company of Limited Liability
The liability of its members is limited to the amount, if any,
unpaid on their respective shares.
There is no more 'offshore' status in Cyprus; there is now only
one form of Cyprus Company which can have activities in or out of
Cyprus or both.
The Company can be owned at 100% by Europeans or non-Europeans.
There is a corporate tax of 10% on all Cyprus Companies and full
exemption on disposal of securities
The Company can have 1 shareholder owning 100% of shares.
The Company can benefit from a large Double tax treaty network with
about 40 Countries.
The Memorandum must state the name and objects of the company,
the fact that the liability of its members is limited and its share capital.
The Articles of Association contain the regulations governing
the administration and functioning of the Company: changes in the
statutes of the Company are made by special resolutions, private
companies may have only one member and the maximum number is
limited to fifty, private companies are prohibited from inviting
the public to subscribe for any share or debentures. A private
company can become public and vice-versa.
- Capital: The usual authorized/nominal share capital is Euro
10,000. The usual issued share capital is Euro 1,000 but in practice
it is not paid up/subscribed for as the payment done by the beneficiary
to register the Company is considered by the local authorities
to cover the Euro 1,000.The usual value is Euro 1.00 per share.
Board meetings: must be held in Cyprus if management and control
is to be deemed to be conducted from within Cyprus. General Meetings
can be held anywhere. Independent tax advice is recommended.
Local premises: a Cyprus company can have any activity which
implies owning and using local premises, storing goods,
receiving and executing orders, etc.
The tax on the Cyprus Company's net profit is 10%,
save for Shipping Companies (0%) which opt for tonnage
Registration of the Cyprus Company & Prerequisites: please
go to the Company Registration paragraph.
The Cyprus Holding Company
It is possible to achieve 0% taxation using a Cyprus Holding Company.
The Cyprus Holding Company under certain conditions can extract
dividends from its foreign subsidiaries at 0% withholding tax as long
as these subsidiaries are within the EU and there is compliance with
the EU Parent Subsidiary Directive. In the event the provisions of the
EU Parent Subsidiary Directive are not met or where there are
anti-avoidance provisions the Cyprus Holding Company can use its
wide network of Double Tax Treaties.
1. Taxation in Cyprus of Dividends received in Cyprus.
Dividends received in Cyprus by a Cyprus Holding Company
from Cyprus resident or non-resident Companies or foreign Companies
are not taxed under Cyprus income tax law. However, they are subject
to Special Defence Contribution Tax (15%) according to which
Dividends received from another Cyprus Resident Company are not taxed,
whereas dividends received from a non-Resident Company are not taxed
if the Cyprus Holding (Resident) Company holds at least 1% of the
shareholding of the non-resident Company paying the dividend, with
this exemption not being granted when the Company paying the
Dividend is directly or indirectly engaged in activities of which
more than 50% result in investment income and the general tax income
imposed by the foreign jurisdiction on the Company paying the
Dividend is significantly lower (at least 50%) than the general 10%
income tax applicable in Cyprus to the Cyprus Holding (Resident)
Company. The above also implies that both criteria must be fulfilled
for the exemption not to apply.
2. Taxation in the foreign jurisdiction of Dividends paid to Cyprus.
Taxation in the foreign jurisdiction of Dividends sent to a
Cyprus Holding Company by its subsidiary can be lowered or fully
exempted in various ways. Furthermore, the investor can then repatriate
income from Cyprus without any withholding tax in Cyprus.
(i) The EU Parent Subsidiary Directive: Its application in Cyprus
abolishes withholding taxes upon the subsidiary for dividends paid
to its mother Company resident in any member state, as long as the
mother Company has its tax residence in a member state and possesses
1% or more of the shareholding of its subsidiary for any period of time
(the original EU Directive implies 25% and a time period of a few years).
(ii) The Double Tax Treaties: The network of Double Tax Treaties
ratified by Cyprus comprises of around 40 treaties with 40 different
Countries. Their purpose is to avoid the double taxation of the income
of a Company in the two states jurisdictions related to the incoming
Dividends. Most Double Tax Treaties provide full exemption or low
taxation in the foreign jurisdiction for incoming dividends to Cyprus.
In order for double taxation to be avoided the Cyprus Holding Company
or individual must be a tax resident in Cyprus or both contracting
states. In Cyprus the criterion for tax residency is for the management
and control of the Company to be in Cyprus, in other words for the
Company to have a majority of Cyprus resident directors and in the
event where both state jurisdictions would dispute the tax residency
the applicable criterion would be where the effective management of
the Holding Company applies.
(iii) Unilateral Tax Credit Relief: In practice this means that a
tax credit is given in Cyprus on any tax including Special Defence
Contribution Tax and Income Tax for any tax paid in the foreign state
jurisdiction including underlying local trade tax paid by the subsidiary
company or withholding tax on outgoing dividends to Cyprus.
3. Taxation in Cyprus of Dividends paid from Cyprus
(i) There is no withholding tax in Cyprus on dividends paid
by the Cyprus Holding Company to its non Cyprus resident shareholders
(companies and/or individuals), whether the shareholders are holding
their shares in the company directly or via nominees.
(ii) There is no withholding tax in Cyprus on dividends paid by
one tax resident Cyprus Company to another tax resident Cyprus Company.
(iii) There is 15% withholding tax in Cyprus on dividends paid by
one tax resident Cyprus Company to a physical individual person who
is resident of the Republic of Cyprus.
4. Gains from disposal of securities: full exemption from capital gains tax and income tax
There is no taxation on the profits from the disposal of securities
for all the companies and individuals that are tax residents of Cyprus
irrespective of whether the gain is of capital or revenue, and this
exemption applies without any minimum holding period criteria. It
allows the Cyprus Holding Company to dispose of the shares in a
subsidiary with no tax in Cyprus, and allows the disposal of shares of
a Cyprus Holding Company with no tax in Cyprus irrespective of the
provisions of a relevant Double Tax Treaty. However, the full capital
gains tax exemption on profits from the disposal of securities does
not apply to the disposal of shares of a Cyprus company owning immovable
property, the sale of the property and the disposal of the shares
being subject to 20% Capital Gains Tax.
According to the new Law 118(1)2002 which applies since
January 1st 2003, securities include shares, debentures,
government bonds, founder's shares or other securities of
companies or other legal entities incorporated in Cyprus
or abroad and stock options thereon. It solely refers to
buying and selling securities and does not include promissory notes.
It allows 0% tax on profits made from the sale of shares bought
before or after 1/1/2003 from another company abroad, with the
sale of the shares taking place after 1/1/2003, and without
affecting the value of shares.
5. Tax advantages applying to the Cyprus Holding Company
In order to proceed with the registration of the
Cyprus Company we shall need the following information from the
Ultimate beneficial owner:
A list of 3-4 names as diverse and original as
possible by order of preference for the name application
of the company.
For clients who wish to avoid the company registration delay,
we suggest to choose a company from our list of available
ready-made shelf companies. If the client then wishes to change
the company name, he can send us the name he wants for the
company so that we can proceed with the change of the
Full name & address of the beneficiary
- The passwort copy of the beneficial owner or corporate documents
by law of all intermediate companies leading up to the clients
beneficial owners: please e-mail a copy of the passport (jpeg
Number of shares per shareholder. One shareholder
can have 100% shares
- Object/activities of the Company: the simple mention of a type
of activity will not be enough but a brief description of what
the business is about is required.
Whether or not the beneficiary wishes to benefit from full
confidentiality/nominees (see further).
The beneficiary will receive from us: the Memorandum & Articles of Association of
the Company, Certificate of incorporation, registered address, directors & secretary
and shareholders, and in case a nominee shareholder/s is/are appointed, a trust deed
will also be provided.
Tax residency, Confidentiality and Disclosure
Tax residency (Management &
Control, Nominees): under Cyprus Law, a Cyprus Company is
tax resident and can benefit from the 10% corporate tax on profits
and take advantage of the wide range of Double Tax treaties only
if its Management & Control is in Cyprus. Management and Control
is where the majority of the Board of Directors reside, where Board
Meetings are held, where decisions are taken and where the general
policy is formulated, therefore, it is advisable that there must
be a majority of Cyprus resident directors for the Company to have
management & control in Cyprus. When the beneficiary is not
a Cyprus resident, Cyprus resident directors may be appointed. Our
firm provides corporate nominee directors.
The shares of the company may be held by individuals, companies,
partnerships, trusts or foundations or any other entity having legal
personality. As no share warrants can be issued to the bearer, if
confidentiality and/or anonymity is required, nominee shareholders
may be used with adequate safeguards such as blank transfers and
trust instruments. The Cyprus Company can have one or more shareholders.
Only the registered shareholders will appear in the public folder
of the company held with the Registrar of Companies.
Cyprus companies can have their charges such as Pledge of
Shares or mortgages registered with the Registrar of companies,
whereas some types of charges, for example floating charges must be
Types of Cyprus Companies
The firm provides for full incorporation and administration
services of Cyprus Companies which may be formed for any kind of business
as the following non-exhaustive list shows: Holding Companies,
Trading Companies, Investment Companies, Finance Companies,
Royalty Companies, Re-Invoicing Companies,.com / e-business
/ on-line companies, Employment Companies, Leasing Companies,
Management Companies, Sales Companies, Advertising & Marketing
Companies, Architecture & Engineering Companies,
Construction & Drilling Companies, Magazines & Newspaper