CYPRUS – AN IDEAL HOLDING COMPANY LOCATION
OVER the fifty years since it achieved independence, Cyprus has developed into one of the world’s major financial and business centres. Cyprus has always been an excellent location for
holding companies for myriad reasons, including its
transparent legal system, excellent communications
and world-class professional and banking services. It
has a market economy and no restrictions on capital
movements. Its tax system is fully compliant with EU
and OECD requirements, and it is on the OECD’s “White
List” of tax jurisdictions meeting international
standards.
THE REQUIREMENTS OF A HOLDING COMPANY JURISDICTION
From a tax perspective, three things are required from
a holding company:
l first, the holding company must have the ability
to receive income streams from and the proceeds
of disposal of the operating company with no, or
at least the lowest possible, tax “leakage” in the
operating company’s jurisdiction;
l secondly, the dividends and the proceeds of sale
the holding company receives should not be
subject to tax in the holding company jurisdiction;
l thirdly, it should be possible to extract dividends
from the holding company without giving rise to
any charge to tax in the holding company
jurisdiction. This has generally been the most
difficult step in practice.
HOW WELL DOES CYPRUS MEET THESE REQUIREMENTS?
Cyprus meets all three requirements very well indeed.
l Cyprus-resident companies enjoy the benefits of
the EU Parent-Subsidiary Directive, which
eliminates double taxation of dividends between
double tax treaties, covering most major
economies;
