A Cyprus Holding Company is a company that holds shares in other companies. It usually refers to a company which does not produce goods or services itself, rather its only purpose is owning shares of other companies. Holding companies enable a reduction of risk for the owners and can allow the ownership and control of a number of different companies.
Cyprus is increasingly becoming one of the most popular holding company jurisdictions in Europe. It has a multitude of tax advantages and due to the island's recent EU membership, this has made it extremely attractive to those wishing to establish a Holding Company.
Why are Cyprus companies used as holding companies?
There are many reasons:
- Cyprus has the lowest rate of corporate tax in Europe - just 10%
- under certain conditions, dividends received by the Cyprus parent company from overseas subsidiaries are exempt from tax
- no withholding tax on dividends received from EU subsidiaries
- there is no capital gains tax on the profits from the sale of securities
- there is no tax on capital gains or income upon the liquidation of the Cyprus holding company
- there is no tax on the payment of dividends to shareholders of the Cyprus holding company who are resident outside Cyprus
- double tax treaties for the avoidance of double taxation with more than 40 countries
- there is no withholding tax on the distribution of profits
Types of Holding Companies
Holding companies can be divided up into 3 types:
Asset Holding Company - this type of company actively looks for the purchase of shares that will be profitable in return and its sole aim is to increase profit on share values.
Operational Trading Holding - These are generally formed when the main Holding company has expended and needs to outsource its work to sister companies.
Management Holding Companies - This is a mixture of the two above named Holdings. Its aim is to manage the shares and assets of its sister companies. This type of Holding can provide loans and services to sister companies but has the advantage of being registered offshore and therefore has no taxation.
Advantages of a Cyprus holding company
An IBC has the following advantages as a Cyprus holding company;
- Holding investments in other companies or entities.
- Tax free income from dividends.
- No capital gains tax on disposal of capital assets.
- No tax on profits from trading shares.
- No tax on profits from a permanent establishment abroad.
- Tax free distributions by Cyprus Holding companies to their non resident shareholders.
- Lower withholding tax rates in other countries on remittances of income from dividends.
- Royalties or interest due to double taxation treaties between Cyprus and 34 countries
