CYPRUS: The Ideal
Holding Company Location
Cyprus has evolved during the last decades into a strong business centre. The relations of Cyprus with the European Union have evolved gradually from an Association Agreement in 1972, to a Customs Union Protocol in 1987, followed by the application for full membership in July 1990. The wealthy and healthy economy of Cyprus always helped the country to have very good relations with the European Union. Following a very long period of negotiations Cyprus managed to be part of the enlarged European Union.
The agreement for the accession of the Republic of Cyprus to the E.U. was signed on 16 April 2003, and Cyprus became a full member on 1st May 2004. Cyprus is already in the final course for its accession in the Eurozone. On 10 July 2007, the exchange rate for the Cyprus Pound-Euro was fixed, which will be adopted as the Cyprus currency as from 1.1.2008. The conversion rate is 1 Euro = CY£ 0,585274.
The Cyprus legal system is based on the English counterpart. English case law is closely followed and all statutes that control business issues are based on English laws. A large number of Cypriot lawyers are members of the United Kingdom’s Inns of Court or graduates of British Universities. The judiciary in the Republic is independent from the executive and legislative authorities on the island.
This section outlines the various forms of business organizations that exist in Cyprus and the necessary registration procedures required by the government.
A business that wants to operate in Cyprus must meet some regulations and requirements set by the government. A major part of these regulations is common to all kinds of business.
Since 1 January 2003 Cyprus has a new legislation that also fulfills the organization for Economic Cooperation and Development criteria and it is also in compliance with the EU directives.
The uniform corporate rate is 10% for all companies. The term “offshore” company has ceased to exist ever since.
In order for the above to apply, the “residency rules” should be followed:
1.A company is resident if and only if the management and control of the company is exercised in Cyprus
2.For individual to be considered resident they should spend more then 183 days in Cyprus
3.The residents should be taxed on their worldwide income
Nonresidents pay NO dividend tax in Cyprus.
Types of organization:
A business may be conducted under the following forms:
- sole proprietorship - business names
- branch
- company
- partnership
I would like now to present graphically two very good examples on how a Cyprus Holding Company can be used with Romanian Subsidiaries or other property companies in EU:
As a conclusion, let us summarize the tax benefits of using a Cyprus Holding company:
Tax benefits:
- Access to tax treaties
- Tax free reinvestment of profits
- Deferral of tax on disposals
- Minimisation of withholding taxes
- Minimisation of tax on income and gains
- Deductibility of financing costs
- Availability of debt pushdown strategies
