The Cyprus Holding Company offers a variety of advantages
In this article, we discuss how a Cyprus Holding Company can be a strategic opportunity for business owners to achieve tax optimization and other benefits.
What is a Holding Company?
Holding companies have traditionally been important components of the business landscape, even though their function has changed numerous times over the years.
The holding company is often associated with a lack of transparency and accountability, but it can still serve as a useful investment vehicle.
Holding companies can concentrate power over various business sectors, which is appealing to large organizations. Many of these businesses are also considering relocation to more attractive new markets that can offer better financial incentives and a good tax system.
A holding company is a type of business that owns other companies and turns them into subsidiaries.
A holding company is a firm that owns a significant stake in another company’s assets. A holding company oversees the governance of these companies and may oversee other assets, such as real estate, intellectual property, and securities. The benefits of using a holding company provide not only legal protection but also financial security in case one of its controlled companies fails or grows beyond its original scope.
Holding companies have come a long way since their humble beginnings. They are now tools that are in use in modern economies and invaluable to many fields. There is some strategic use for them, such as organizational and financial management of the group or as a safety net of limited liability in industries that are affected by volatility, such as investment banking and real estate.
After Brexit, many well-known British and European resident companies opted to establish subsidiaries in more favorable tax and business jurisdictions. One of the most prominent is Cyprus. This establishment comes with many legal and tax incentives, as well as other locational benefits such as a skilled workforce, quality-of-life, and global connectivity/accessibility.
Legal and Tax benefits of incorporating a Holding Company in Cyprus
Cyprus is a well-established international hub due to its location (which connects three continents) and the steady rise of investments coming into the country. This Mediterranean jurisdiction is an attractive location for the registration of a Cyprus Holding Company.
Cyprus is a member of the European Union, so a Cyprus holding company gives you access to the EU single market of 500 million consumers.
Additionally, it can take advantage of the provisions of the Parent-Subsidiary Directive and act as an EU-parent company for foreign companies without the tax burdens and regulations of other locales. Cyprus has made various efforts to establish transparent tax laws for residents and shareholders residing in Cyprus to be in compliance with the EU (European Union) and the OECD (Organization for Economic Co-operation and Development).
A Cyprus Holding Company can help to minimize exposure to potential liabilities arising from the activities of the subsidiary companies. This is because the liability of shareholders in a Cyprus company is limited to their investment in the company. So, if one of the subsidiaries was to become liable for damages, the shareholders’ assets would not be at risk.
Cypriot IP Box companies can take advantage of many tax benefits, which will let them increase financial profits and protect their intellectual property. In most cases, they will be able to achieve to mitigate the total tax rate to as low as 2,5%.
A Cyprus holding company enjoys a very low Corporate Income Tax Rate of 12.5%, which is one of the lowest rates in Europe. To be treated as a Cyprus tax resident holding company, the management and control of the company must be exercised in Cyprus. Non-resident companies are taxed separately, according to the income they produce in the country.
Cyprus is a great jurisdiction for holding company registration. There are many tax benefits to moving the headquarters operations to this country.
Other benefits of establishing a holding company in Cyprus:
- For securities that are sold or traded, there is no capital gains tax.
- Dividends from foreign companies are exempt from both corporation tax and Special Defence Contribution Tax, provided that they meet certain requirements.
- There are no withholding taxes on dividend income earned from a company in the European Union, as mandated by the EU Parent-Subsidiary directive.
- Profits from a Permanent Establishment abroad are exempt from Corporate Income Tax, subject to anti-avoidance rules.
- Non-resident shareholders of a Cypriot company don’t have to pay withholding taxes on dividends or interest.
- No withholding taxes will be applied on royalties paid from Cyprus-based companies when the intellectual property is being used outside of Cyprus.
- There is no better place in Europe to run a company with an IP-related income than Cyprus. The total Tax burden on IP income can be as low as 2.5%
- With full group tax relief, losses of one company in the group can be set off by the profits of another company.
- Beneficial Tax Treaties with over 60 Countries
- Cyprus pays total respect to all regulations of the EU, FATF, FSF, and OECD and it has a continuous commitment to transparency and high standards.
Cyprus, The Perfect Choice for Headquarters Relocation
Under European Union and Organization for Economic Co-operation and Development guidelines, companies are advised to set up a headquarters with local substance in the country of incorporation in order to enjoy the tax benefits offered.
The Cypriot government continues to promote growth through a variety of inward investment and residency programs. As a result, they have taken numerous measures to improve the country’s infrastructure and business environment while simplifying the process of establishing and running a company.
Many international groups have already used the benefits of Cyprus, including its strategic geographical position (acting as a junction to Asia, Africa, Europe, and the Middle East). This makes it easy for them to get the help they need from affordable lawyers, accountants, and other business service providers on the island.
The international attention has also been accompanied by a boom in office space development, increasing the availability of desirable spaces in the heart of financial hubs and allowing more flexible Headquartering opportunities.
Not only does Cyprus provide 20 internationally-recognized universities and a Top Class Educational System, but it also has a large population of highly-skilled foreign residents. Thus, organizations with a Cyprus holding company are able to take advantage of both: the educated workforce and the diverse culture.
With a Cyprus holding company, your company is not only granted inclusion in the EU market but also full protection under EU laws, making Cyprus an ideal place for HQ.
Setting up a Cyprus Holding Company
A Cyprus Holding Company can be a great way to protect your assets and minimize your tax burden. Here’s what you need to know about setting up a Cyprus Holding Company:
The first step is to choose a corporate name for your Cyprus Holding Company. The name must be unique and cannot be the same as any other company registered in Cyprus. You can search the Cyprus Registrar of Companies website to make sure your chosen name is available.
Once you have chosen a name, you will need to register your Cyprus Holding Company with the Cyprus Registrar of Companies. This can be done online or through a paper application. You will need to provide some basic information about your company, such as its registered address, directors, and shareholders.
After your Cyprus holding company has been registered, you will need to open a bank account in the company’s name. This account will be used for the daily transactions of the company. You will also need to obtain a tax registration number from the Inland Revenue Department.
Now that your Cyprus holding company is set up, you can start transferring assets into it. These assets could include property, shares in other companies, or cash. By holding these assets in your Cyprus holding company, you can minimize your personal liability and taxation on these assets.
Our team is on hand to help you establish your Holding Company and Headquarters in Cyprus.
We would love to talk to you about how creating a Cyprus Holding Company could benefit your Group business.