Cyprus is now a superior competitor for the classic European Holding Jurisdictions, as The Netherlands and Luxemburg. Cyprus’ exceptional international clientele grows directly proportional to the fact that Cyprus is increasingly being preferred as a holding jurisdiction to other traditional jurisdictions. A more prudent approach has proved the combination of a Cyprus Holding Company with other jurisdictions’ Holding Companies such as the retaining of Netherlands and Luxembourg holding companies, rather than by substituting them.

There are several EU Directives enacted into Cyprus Law (effectively “copied” – transposed into Cyprus Law and their benefits are extended to residents of Third Countries):

1.         The Parent/Subsidiary Directive (no withholding tax on payment of dividends, no transitional period [immediate effect], no minimum participation [shareholding limits], no minimum holding period, dividend exempt subject to conditions, tax credit for tax withheld abroad).

2.         Interest/Royalties Directive (no withholding tax on interest paid to non-residents, no transitional period [immediate effect], 25% minimum participation [shareholding] required only in the case of royalties, no minimum holding period, interest taxed depending on nature, royalties subject to corporation tax, tax credit for tax withheld abroad).

3.         Merger Directive (involves resident and Non-Resident Companies, leads to elimination of the tax consequence of any reorganization, merger, division, transfer of assets, and exchange of shares). We have carried out such mergers and acquisitions numerous times in jurisdictions such as Romania, Bulgaria, Hellas, The UK, Luxemburg, and Jersey.

Cyprus Double Tax Treaties Network

Cyprus has a wide and beneficial Double-Tax Treaty (DTT) Network. There are currently 45 DTTs in force and 39 others being negotiated. Compared to other competing EU Jurisdiction, Cyprus has fewer DTTs, but in many cases they are more beneficial than Cyprus’ competitors’ treaties such as those with Russia, Romania, Yugoslavia and the whole of Eastern Europe and the Middle East. The existence of these treaties, combined with the low overall tax paid by Cyprus Companies, offer significant possibilities for international tax planning through the island.

The significant number of double tax treaties concluded by Cyprus, lowers or eliminates foreign withholding taxes on dividends, interest and royalties or capital gains paid out from or arising in the contracting states. Some of the Treaties also include particularly beneficial tax sparing credit provisions for dividends, interest and royalties. Tax Sparing Credit provisions can be found in the treaties concluded with Canada, China, Czech and Slovak Republics, Denmark, Egypt, Germany, Greece, India, Ireland, Italy, Malta, Mauritius, Poland, Romania, Russia, Syria, Thailand, UK and former Yugoslavia.