Company Registration: The Cyprus Holding Company Regime


The firm provides for legal advice and assistance to clients wishing to register any type of Cyprus Company in order to benefit from the tax incentive regime of Cyprus as well as its wide network of Double Tax Treaties.

This work is undertaken taking into consideration changes and amendments in the international and European corporate business legal framework which have led to the following:

  • A new way of using tax-planning
  • A need for compliance based on ‘risk approach’, enhanced KYC & due diligence procedures and adapted software.
  • A need for substance build-up 

COMPANY REGISTRATION: THE CYPRUS HOLDING COMPANY REGIME
The firm provides for legal advice and assistance to clients wishing to register any type of Cyprus Company in order to benefit from the tax incentive regime of Cyprus as well as its wide network of Double Tax Treaties. LINK Taxation
This work is undertaken taking into consideration changes and amendments in the international and European corporate business legal framework which have led to the following:

Below is information on the following:

  • The Cyprus Company
  • The Cyprus Holding Company
  • Company Registration
  • Nominees, Tax residency & Confidentiality
  • Types of Cyprus companies

The Cyprus Company of Limited Liability

  • The liability of its members is limited to the amount, if any, unpaid on their respective shares.
  • There is no more ‘offshore’ status in Cyprus; there is now only one form of Cyprus Company which can have activities in or out of Cyprus or both.
  • The Company can be owned at 100% by Europeans or non-Europeans.
  • There is a general tax of 12, 5% on all Cyprus Companies and full exemption on disposal of securities
  • The Company can have 1 shareholder owing 100% of shares.
  • The Company can benefit from a large Double tax treaty network.
  • The Memorandum must state the name and objects of the company, the fact that the liability of its members is limited and its share capital.
  • The Articles of Association contain the regulations governing the administration and functioning of the company: changes in the statutes of the company are made by special resolutions, private companies may have only one member and the maximum number is limited to fifty, private companies are prohibited from inviting the public to subscribe for any share or debentures. A private company can become public and vice-versa; private companies are required to restrict the right to transfer their shares.
  • Capital: The usual authorized/nominal share capital is € 2000.The usual issued share capital is € 2000 but in practice it is not paid up/subscribed for as the payment done by the beneficiary to register the Company is considered by the local authorities to cover the € 2000.The usual value is € 1.00 per share. When the Company has a physical presence in Cyprus with its own offices and staff the paid up capital must reflect the nature of the activity in Cyprus, which usually increases the issued share capital to a minimum of € 5000.

The Cyprus Holding Company

1. Taxation in Cyprus of Dividends received in Cyprus.

Dividend income received by a Cyprus tax resident company from a Cyprus tax resident company is tax exempt provided that the dividend is not indirectly received after a four year period following the end of the year which relates to the rise of the dividend income.

Dividend income received in Cyprus from a foreign corporation is wholly exempt from corporation tax in Cyprus and not subject to Special Defense Contribution Tax of 17% as long as the company receiving the dividend owns shares in the company paying the dividend, even if the shareholding is less than 1%. However, this does not apply if more than 50% of the paying company’s activities result in investment income (passive income such as interest from companies, bank accounts, royalties which does not derive from trading, commercial, manufacturing or similar activities) and the foreign tax is significantly lower than the tax rate payable in Cyprus in other words less than 5%.

2. Taxation in the foreign jurisdiction of Dividends paid to Cyprus.

Taxation in the foreign jurisdiction of Dividends sent to a Cyprus Holding Company by its subsidiary can be lowered or fully exempted in various ways. Furthermore, the investor can then repatriate income from Cyprus without any witholding tax in Cyprus.
(i) The EU Parent Subsidiary Directive: Its application in Cyprus abolishes withholding taxes upon the subsidiary for dividends paid to its mother Company resident in any member state, as long as the mother Company has its tax residence in a member state and possesses 1% or more of the shareholding of its subsidiary for any period of time (the original EU Directive implies 25% and a time period of a few years).
(ii) The Double Tax Treaties: Their purpose is to avoid the double taxation of the income of a Company in the two states jurisdictions related to the incoming Dividends. Most Double Tax Treaties provide full exemption or low taxation in the foreign jurisdiction for incoming dividends to Cyprus. In order for double taxation to be avoided the Cyprus Holding Company or individual must be a tax resident in Cyprus or both contracting states. In Cyprus the criterion for tax residency is for the management and control of the Company to be in Cyprus, in other words for the Company to have a majority of Cyprus resident directors and in the event where both state jurisdictions would dispute the tax residency the applicable criterion would be where the effective management of the Holding Company applies.
(iii) Unilateral Tax Credit Relief: In practice this means that a tax credit is given in Cyprus on any tax including Special Defence Contribution Tax and Income Tax for any tax paid in the foreign state jurisdiction including underlying local trade tax paid by the subsidiary company or withholding tax on outgoing dividends to Cyprus.

3. Taxation in Cyprus of Dividends paid from Cyprus.

(i) There is no withholding tax in Cyprus on dividends paid by the Cyprus Holding Company to its non Cyprus resident shareholders, whether the shareholders are holding their shares in the company directly or via nominees.

(ii) There is no withholding tax in Cyprus on dividends paid by one tax resident Cyprus Company to another tax resident Cyprus Company.

(iii) There is 17% withholding SDC tax in Cyprus on dividends paid by one tax resident Cyprus Company to the beneficiary individual who is resident of the Republic of Cyprus.

However, since 2015 Cyprus has a new concept of ‘non-domiciled tax-resident’ where foreign individuals classed as tax-resident under the day-counting basis and living in Cyprus qualify as non-domiciled tax-residents unless they have been Cyprus tax resident for 17 years out of the last 20 or, if born in Cyprus. These foreign individuals considered to be non-domiciled tax-residents will be exempted from the following taxes:

  • 17% SDC (Special Contribution for Defense) on dividends
  • 30% SCD on interest bank deposits
  • 25% (3% on 70%) SCD on rental incomes

4. Gains from disposal of securities: full exemption from capital gains tax and income tax
There is no taxation on the profits from the disposal of securities for all the companies and individuals that are tax residents of Cyprus irrespective of whether the gain is of capital or revenue. It allows the Cyprus Holding Company to dispose of the shares in a subsidiary with no tax in Cyprus, and allows the disposal of shares of a Cyprus Holding Company with no tax in Cyprus irrespective of the provisions of a relevant Double Tax Treaty.

According to the new Law 118(1)2002 which applies since January 1rst 2003, securities include shares, debentures, government bonds, founder’s shares or other securities of companies or other legal entities incorporated in Cyprus or abroad and stock options thereon. It solely refers to buying and selling securities and does not include promissory notes. It allows 0% tax on profits made from the sale of shares bought before or after 1/1/2003 from another company abroad, with the sale of the shares taking place after 1/1/2003, and without affecting the value of shares.

5. Tax advantages applying to the Cyprus Holding Company.

Tax advantages referred to in the Taxation and Tax-planning webpage applying to Cyprus companies also apply to the Cyprus Holding Company.

Company Registration

In order to proceed with the registration of the Cyprus Company we shall need shall need the following information from the beneficiary owner:

  • a list of 2-3 names as different from each other and as unusual as possible by order of preference for the name application of the company, unless the beneficiary client decides to take a readymade shelf company name in order to avoid the one week delay needed to get the approval for the name. The list of available company names is on our website www.indianos.com.cy
  • As it takes around 3-4 days to register the company, we also propose the option to take one pre-registered readymade shelf company the list of which is in our website.
  • Certified true copy of the passport of the ultimate beneficiary owner by a Notary Public, Embassy, Consulate or High Commission, or Apostil.
  • Original recent utility Bill i.e. electricity bill (max 3 months old) bearing name and address of the beneficiary.
  • Original reference letter from a professional (e.g. Attorney or Accountant) and/or from a Bank;
  • Curriculum Vitae (CV) of the ultimate beneficiary owner.
  • Number of shares per shareholder. One shareholder can have 100% shares.
  • Object/activities of the Company: the simple mention of ‘…….’ activities will not be enough.

We need a complete description of the ‘business plan’ of the company as the Registrar of Companies needs to know the activity, products & services related to the company, the type of clients, to which countries the transactions will relate, etc. Furthermore when the activity of the Cyprus Company is only holding we need the activities of the company into which the Cyprus Holding Company will invest. Both the Registrar & Banks need it.

  • Whether the company belongs in a group structure: in such case, please provide the name of the mother company and its line of companies as well as supporting diagram/documents.
  • Whether the beneficiary needs a nominee shareholder for confidentiality.
  • Tax return / identification number of the beneficiaries and supporting documents.
  • The source of funds funding the new business of the Company and supporting documentation.
  • The expected origin of funds of the company: name countries and business counterparts.
  • The destination of funds of the company: name countries and business counterparts.
  • The expected annual turnover of the company.
  • The expected average amounts related to the ingoing & outgoing transactions.
  • Whether the company belongs in a group structure? If yes, please provide the name of the mother company and its line of companies.
  • The relevant correspondence courier address.
  • Confirmation by e-mail that the beneficiary owner will sign & return to us the Nominee Agreements & Deed of Indemnity (if nominees are used) attesting the company shall not deal in any illegal matters and exempting our Law Firm of any responsibility for the actions of the beneficiaries as the main purpose of cooperating with and providing nominees services to clients is tax residence & confidentiality.
  • The beneficiary will receive from us: the ‘Trust deed’ attesting that he is the real legal owner of the Company, the Memorandum & Articles of Association of the Company, Certificates of incorporation, registered address, directors & secretary, shareholders, and the Nominee Agreements & Letter of Indemnity (see above) as well as the Register of Members, 1st Minutes of Board of directors and Share Certificates. Please note that in the event that the beneficiary fails to sign the Nominee Agreements & Letter of Indemnity and return them to us within reasonable time delay, we shall have to stop providing nominee services.

Note: The personal data collection of the beneficiary is requested for specific, explicit and legitimate purpose being the obligation of compliance, the amount of data requested from the beneficiary and the delay for which the data is kept are proportional to the level of compliance needed for business to proceed, a high level of back up security is maintained in relation to all personal data held, and all is applied according to relevant laws and regulations.

Nominees, Tax residency & Confidentiality

Under Cyprus Law, in order for the Company to secure tax residency in Cyprus and benefit from low taxation and the Double Tax treaty network, the company must have its management & control in Cyprus and this secured by the signature of the most important contracts/agreements in Cyprus, therefore unless the beneficiary can travel each time to Cyprus to act as director in the Board Meeting, it is necessary to appoint resident ‘nominee’ directors (always members of our Law Firm) to act on behalf of the company.
The Cyprus Company can have 1 or more shareholders. The beneficiary can appear as shareholder, but if he wants confidentiality and does not want to appear as shareholder, we can provide him with a ‘nominee’ shareholder, which in practice is a company belonging to our Law Firm holding the shares of the Cyprus company ‘in trust’ for the beneficiary. The client in return will receive the ‘Trust deed’ document attesting he is the real owner of the Cyprus Company.

Types of Cyprus Companies

The firm provides for the incorporation of Cyprus Companies which may be formed for any kind of business as the following non-exhaustive list shows: Holding Companies, Trading Companies, com / e-business / on-line companies, Royalty Companies, Re-Invoicing Companies, Employment Companies, Leasing Companies, Management Companies, Sales Companies, Investment Companies, Advertising & Marketing Companies, Architecture & Engineering Companies, Construction & Drilling Companies, Magazines & Newspaper Companies