Cyprus – Benefits of Cyprus Holding companies

Cyprus is an ideal place for holding company location. The following factors are important for location of a holding company:

1. Tax treatment of inward and outward dividends
2. Tax treatment of capital gains arising from sales of subsidiaries
3. Taxation of consolidated profit
4. Reputation of jurisdiction where the holding company was formed
5. Cost of incorporation and maintenance
6. Cost of audit of consolidated accounts

Tax treatment of dividends

Dividends received from subsidiaries are exempt from profit tax

Dividends paid to non-residents are exempt from withholding tax.

Tax treatment of capital gains

There is no tax liability when a holding company disposes shares in subsidiary or associated company.

Tax treatment of consolidated profit

There is no Controlled Foreign Company rule. There is no income tax on consolidated profit in hands of a Cyprus holding company. This simply means that a profit centre could be in Singapore or Hong Kong (both jurisdictions are applying territorial taxation principle where non-Singapore or non-Hong Kong source income is not a subject to income tax in Singapore or Hong Kong), or even a “tax heaven” like Belize where all profit is earned but consolidated in the hand of Cyprus company and show in consolidated profit a loss account and balance sheet without incurring any tax liability in Cyprus.

Reputation of jurisdiction

Cyprus is a full member of European Union from May 1, 2004.

Cost of incorporation and maintenance

Cost of incorporation is relatively low. Registration of a Cyprus holding company is only €1,500, including registered office, secretary, incorporation set with apostille and all registration fees. Nominee service is available at additional cost.

Annual audit cost

Annual audit cost of a Cyprus holding company is 25%-30% lower than in continental Europe.