Cyprus Holding Company

Cyprus, a long established international financial centre within the European Union since May 2004, has emerged into one of the most attractive holding regimes worldwide. Cyprus has gained this enviable position through its favourable tax regime while ensuring compliance with EU requirements and to the OECD requirements against harmful tax practice. Featured with a substantial number of Double Tax Treaties with other States and enhanced with one of the most business-friendly legislative frameworks, helping to maximize after tax returns to investors.

Dividends Received

All dividends received from foreign corporations are totally exempt from corporation tax. This exemption does not apply if:

  • The company paying the dividend engages more than 50% in activities that lead to investment income and
  • The foreign tax burden on the income of the company paying the dividend is substantially lower than the tax burden of the company that receives the dividend.

Dividends received from abroad are not subject to the Special Defence Contribution.

Interest

  • Interest received by a corporation is tax exempt; however the whole amount is subject to the special defence contribution at the rate of 30%.
  • This exception applies where the interest earned in not in the ordinary course of business. Therefore a banking or finance institution would be taxed at the Corporate Tax rate of 12.5%.
  • Where a company is engaged in group lending activities and uses borrowed funds to fund those activities, the taxation authorities have implemented a policy under which they consider that the market rate of interest on the loans granted to be that which provides a minimum margin (ranging from 0.125% to 0.35% depending on the value of the loan) over the cost of borrowings. Where the actual interest rate provides a lower margin an adjustment will be raised for tax purposes.

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