Cyprus Holding Companies
Cyprus Holding at a Glance
Most business owners have looked at holding companies at some point, or at least heard of them. If you have already read our companion article on holding structures, you will know these three questions matter:
- What does your business look like today, what are your plans, and is there a good reason to set up a holding at all?
- What does it cost to set up and run a holding, and is that cost worth the benefits?
- What can a holding do for you, at home and abroad, and which country fits your goals best?
Setting Up a Cyprus Holding
Where to base a holding often gets less thought than it should. It can feel natural to put the holding in the same country as the operating company. But that is not required, and it is usually not the best choice. Often the opposite is true.
The country you choose for the parent company is the base of your whole holding structure. This choice generally:
- sets the tax rules your holding will work under,
- decides how flexible your group can be in the future,
- and shapes how well you can manage liability, exit tax and other key points.
In short, building a good holding structure takes more than years of experience. It also takes a special kind of knowledge that most business owners do not have, and that even their local advisers often lack. Local advisers also have little reason to send a client to a provider in another country. So the outcome is usually the same: holdings end up registered in places that are not actually strong for holdings.
Tax and Liability Advantages of a Cyprus Holding
The benefits of a Cyprus holding can be large. They give you extra liability protection and a range of tax benefits across withholding tax, capital gains tax and corporate tax:
- no corporate tax or special defence contribution on dividends from international sources
- no capital gains tax on profits from trading shares and securities
- no withholding tax on dividend income from EU companies (under the EU Parent-Subsidiary Directive)
- no corporate tax on profits of independent international branches
- no withholding tax on dividends paid to shareholders living abroad
- no tax on dividends paid to people who are tax-resident in Cyprus and hold Non-Dom status
- no withholding tax on royalties paid out, as long as the intellectual property is used abroad
- only 2.5 percent corporate tax on royalty income (IP Box regime)
- group loss relief within the corporate group
- losses of a Cyprus company can generally be carried forward for between 7 and 10 years
Cyprus as a Holding Location
Cyprus is a Mediterranean country and a member of the European Union. In business circles, it is now well known. The Cyprus Non-Dom status, the tax advantages for traders and a fairly low corporate tax rate have made it one of the few tax-friendly places left inside the European Union. It has stayed that way even with CRS reporting and national CFC rules now in force across the bloc.
So Cyprus is well worth a close look when you plan a holding structure.
Is a Cyprus Holding Worth Setting Up?
Beyond its handy location and warm climate, Cyprus has a long business-friendly tradition that is hard to find elsewhere in Europe.
For business owners, the paperwork is generally light, taxes are low, the network of double taxation agreements is well set up, and the legal system is solid. These are some of the reasons many thousands of companies have chosen Cyprus as their base in recent years.
A Strong European Choice for International Holding Structures
If you want to make full use of the international network of double taxation agreements, Cyprus is generally hard to beat today. It compares well even against Hong Kong, the United States and other well-known holding locations. Cyprus is also an EU member state. That means business owners largely avoid the friction between EU and non-EU structures.
With a Cyprus holding, and depending on how you set it up, you can often receive and use dividends and trading income almost tax-free. Paired with one or more subsidiaries outside Europe, the benefits can be considerable.
One last point. In many countries, CFC rules are written and applied in ways that make it hard to add and manage non-European companies. In Cyprus, these rules work in a notably practical way and are generally looser than elsewhere. That can give your holding structure more room, more flexibility and a real extra advantage, which is well worth getting to know in detail.
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