Holding Company
Holding or Mother Company is a company incorporated in Cyprus and which is the main shareholder of other incorporations. Parent company’s main objective is to hold shares of subsidiaries in Cyprus or international companies. Beyond this objective a Holding company can perform activities in other sectors such as commercial, financial, manufacturing, construction, engineering or others without any limitations.
Cyprus Holding companies can ensure the of the risk reduction for owners and provide simultaneously the possibility of ownership and control of other companies.
Cyprus is one of the most attractive destinations for the formation of Holding companies.
The use of a holding company provides serious financial advantages to the shareholders or business people operating from all around the world.
A rich network of double tax treaties with third countries enables a Cyprus Holding Company to receive dividends from other legal entities local or foreign without having to pay tax on those dividends in respect of the same company or even physical person.
The parent-subsidiary directive of the European Union exempts the withholding tax deduction on the dividends and other revenues distributed in the EU by a subsidiary company to the holding company and so it eliminates the double taxation of dividends of the parent companies.
Cyprus Holding Companies became essential in the international business circles because of the advantages offered:
- Profits of a Cyprus Company are only taxed at a standard corporate rate of 12,5%
- No withholding tax on interest paid to non-tax resident shareholders
- No withholding tax on dividends paid to non-tax resident shareholders
- Cyprus maintains an extensive network of advantageous double tax treaties with over 50 countries that allows a Cyprus Holding Company on payments of dividends, interests and royalties to suffer a tax burden at destination jurisdiction from 0% a maximum of 15%.
- According to the provisions of the community directive 90/435/EEC for Holding Companies (EU Parent Subsidiary Directive) the outgoing dividends towards a Holding Company of another state member are not subject to withholding tax from a state member that dividend comes from, as a result no taxation is applied.
- No capital gains tax is applied on profits arising from the sale of securities
- No capital gains (goodwill) or income tax is applied after the liquidation of the company
- No withholding tax is applied on the distribution of profit, except those arising from the disposal of property in Cyprus or profits arising from the disposal of the shares of a company that owns real estate in Cyprus
The Parent (Holding) company is considered a tax resident and enjoys the attractive tax regime as long as the control and management of the company are operated in Cyprus. Thus meaning some criteria should be met to prove that the company operates and uses Cyprus as its base.
When a company is considered Cyprus Tax resident, is then taxed based on the tax rates for income arising from any world-wide source.
Cyprus uses the Anglo-Saxon legal system, support the corporate formation providing anonymity of the shareholders through Trust formation.
The Trust is founded from the Trustee, the owner and holder of the property.
With the Trust, the property owned is hold by one or more people, the “Trustees” at the name and account of the beneficiaries, those who benefit out of the Trust. The Trustees are the registered owners of the Trust, and handle the property of the Trust according to the agreement (Trust deed) signed between the involved parties.
