The benefits of proper tax planning are substantial. Cyprus has stable tax system with lots of tax incentives. The most commonly used types of companies are the Cyprus Holding, Financing, Trading and Royalty companies.
Cyprus Holding Companies Advantages:
- Dividends are exempt from tax in most of the cases
- No tax on disposal of shares
- No withholding taxes on distribution of dividends outside Cyprus
- Benefit from wide Cyprus Double Tax Treaties
Cyprus Financing Companies Advantages:
- Small margin on back to back loans is required and tax at 12.5%, however, transfer pricing study may be needed
- Profits are reduced in countries with higher corporation tax rates
- No withholding taxes on payments of interest outside Cyprus
- Benefit from wide Cyprus Double Tax Treaties
Cyprus Trading Companies Advantages:
- Profits reduced in countries with higher tax rates
- Profit in Cyprus is taxed at low rate of 12.5%
- No withholding taxes on payments of dividends outside Cyprus
Cyprus Royalty Companies Advantages:
- Profits reduced in operating country
- Use of treaty network
- Credit in Cyprus for withholding tax in 3rd country (if any)
- Small margin taxable in Cyprus at 12.5%
- No withholding taxes on payments outside Cyprus
