A Cyprus Holding Company offers the following advantages in relation to the major tax considerations:
Further opportunities : A scenario case study
A Cyprus Holding Company's primary purpose is, owning shares in other companies. Such a Holding Company is used as a vehicle to benefit from tax advantages.
Cypriot Tax Resident group Finance Companies can be employed for intra-group financial management functions such as granting of loans for project financing or working capital requirements. These structures are particularly attractive for loan granting in high tax countries where high debt structures are used.
A Cypriot Group can be used to interpose between a holding and an operating company in a foreign treaty location. It then advances interest bearing loans to fund the operating company. When the ultimate financing is from a tax efficient jurisdiction the interest expense is fully deductible from the operating company and thus avoids tax charges in the holding company jurisdiction.
In most cases there is absence of foreign withholding tax on interest or royalty income (under Double Tax Treaty or EU Interest and Royalty Directive.)
Ability to deduct interest and royalty expense from taxable income.
There is an absence of "thin capitalization" rules or they are inapplicable in the case of "back to back" Financing.
Securities Trading Companies
Profits and gains made by a Cyprus Tax Resident Company, on the trading of securities such as shares and bonds, are exempt from Cyprus tax.