The Cyprus Holding Company in 2021
Since 2003, Healy Consultants Group PLC has been assisting our Clients to incorporate their businesses in the Republic of Cyprus. Please find below more information on holding company registration in Cyprus.
Use of a holding company structure in Cyprus
- A Cyprus holding company must hold a minimum of 1% of its resident subsidiaries;
- The holding company structure allows diversification of investments across multiple industries based on the interests of the investors and the advantage of the companies;
- Cyprus is a transparent and tax-efficient jurisdiction for setting up legal entities to lessen tax exposure;
- A company is considered tax resident if it is managed in and controlled from Cyprus and is taxed on income accrued from both within and outside Cyprus.
Requirements to set up a Cyprus holding company:
- There is no specific structural requirement for a holding company in Cyprus, however, the most commonly used type is the limited liability company;
- By law, there is no minimum share capital requirement to incorporate a holding company, Healy Consultants Group PLC advises its Clients to put up a minimum of €1,000 at the time of company incorporation;
- A minimum of one director and one shareholder is mandatory too establish a company in Cyprus. The director need not be a Cypriot resident;
- The company must maintain a registered physical office address within Cyprus where all its statutory records and documents must be available for review;
- Appointing a resident company secretary is also necessary for the company to remain in good standing with the Registrar of Companies.
Advantages of a Cyprus Holding company
- Ease of trade with European Union customers and /or holding EU subsidiaries and other assets;
- At a single rate of 12.5% of all worldwide income, Cyprus offers one of the lowest corporate tax rates in the EU – which means that the holding company can receive income from all its operations with minimum tax loss;
- Income accrued from the sale of securities (shares, debentures, bonds, options, etc.) is exempt from corporate tax;
- Most interest income (except interest income from the business itself) is tax-exempt;
- Profits from the exploitation or sale of intellectual property rights are considered tax-deductible;
- Dividends and interest paid to non-resident individuals or corporations are legally tax exempt;
- Dividends received from abroad are legally tax-exempt, provided they are not used as tax deduction abroad;
- Cyprus enjoys a wide network of 65 double taxation avoidance treaties that allows easy access to tax credit;
- R&D expenses for companies dealing only with innovation technologies are fully deducted from corporate tax;
- Both realized and unrealized forex gains or losses are considered tax-exempt. This regime is not applicable to forex companies;
- Cyprus allows 75% group relief on tax losses for the current year, which can cross the country’s borders to other EU countries;
- There are no thin capitalization rules in Cyprus;
- The loss of one company may be offset against the profit of another company within the group of companies of the holding company;
Disadvantages of a Cyprus Holding company
- There are no deductions of capital losses (both unrealized and realized) or a deductibility of amortization of underlying goodwill;
- Every resident person (individuals and companies) receiving any dividends and/or interest income is subject to Special Contribution for Defence Tax (SCDT) except the following cases:
- A Cyprus resident company pays dividends to another Cyprus resident company;
- A resident company of Cyprus obtains dividend from an overseas company.
- A non-resident company is not entitled to the Cyprus tax residence certificate and thus would not be able to benefit from the double tax-treaty network;
- There is no special holding company regime, which means that taxation on a consolidated basis is not permitted and each resident subsidiary company must submit a separate return;
- A Cyprus parent company of a multinational group must file an annual country-by-country report with the Commissioner of Income Tax if the consolidated turnover of the group exceeds €750 million.
Differences between a Cyprus holding company and other holding companies
The table below outlines the major differences between holding companies in Cyprus, Malta, Switzerland, and Ireland:
|Factors||Cyprus holding company||Malta holding company||Switzerland holding company||Ireland holding company|
|Dividend withholding||0%||0%||0% - 35%||0% - 20%|
|Capital gains||0% - 20%||5% - 10%||0%||33% - 40%|
|Standard VAT Rate||19%||18%||8%||23%|
|Local corporation tax rate on IP income?||0%-2.5%||0%||9.5%||25%|
|Must register for EU VAT?||No||No||No||No|
|Minimum number of directors required?||1||1||1||1|
|Minimum number of shareholders required?||1||2||1||1|
|Corporate tax payable %||12.5%||0% - 10%||10%||12.5%|
|Total number of double tax treaties the country has access to||65||74||94||73|
Learn more about the differences between various business entities in Cyprus on our Cyprus companies entities page.