The Cyprus tax policy positions Cyprus as an ideal jurisdiction for Holding Companies.

In summary, a Cyprus Holding Company offers the following tax advantages:

• lowest corporate tax rate in the European Union at 10%
• one of the lowest top statutory personal income tax rate at 30%
• extensive double tax treaties network with over 40 countries, enabling lower withholding tax rates on dividend or other income received from the subsidiaries abroad
• no withholding tax on dividend income received from subsidiary companies abroad under certain conditions
• no withholding tax on dividends received from EU subsidiaries
• no withholding tax on capital gains and income on the disposal of neither the shares of the subsidiary's share capital nor the shares of the Cyprus holding company
• no tax on capital gains or income on the liquidation of the Cyprus holding company
• no withholding tax on distribution of profits
• outward dividends by the Cyprus Holding Company to its non-resident shareholders are exempt from any withholding taxes
• profits earned from a permanent establishment abroad are fully exempt from Cypriot tax, subject to certain conditions
• a diversified group of Cyprus companies belonging to a Cyprus holding company can set off Group relief for the utilisation of tax losses
• no minimum holding period
   

Cyprus offers a unique opportunity for experienced individuals or financial companies that can quickly incorporate (within 2-3 months) and operate a private fund with minimum expenses.

 

Private funds are not registered under the Cyprus Securities and Exchange Committee but through the Central Bank of Cyprus. The Fund can offer its units to a maximum of 100 experienced investors. The fact that Private Funds are registered through the Cyprus Central Bank resolves to a much simpler procedure rather than going through the SEC. This process is actually a vetting procedure of the Fund Directors as well as having the required functions in place (Fund Manager, Administrators, Auditors, Custodian etc).

 

A Private Fund is basically a company with 2 classes of shares. Management shares have voting rights and are owned by the Fund Directors and Participating shares are issued to the experienced investors at a premium price. This minimizes the capital duty.

 

Just as any other Cyprus company, the fund's income will be taxed in Cyprus at 10% (tax credit is provided against any tax paid abroad) and dividends will be distributed to the unitholders at 0% withholding tax based on the Local Income Tax Law. Furthermore, the fund can exploit the extensive Double tax Treaty network in order to attract dividends, interest and royalties from its operating countries at lower rates than normal. For example, a fund investing in e.g. UK, Russia or Ukraine will attract a 0% WHT on the profits paid to the Cyprus Fund after invoking the DTT between Cyprus and the respective countries.

 

Such Private Funds are favoured for investment in movable, immovable or intellectual property. The Fund administrators must be a Cyprus registered and regulated administration company; the custodian to the assets of the fund must be a local bank;

 

Should you require any further clarifications please contact us

 

Cost reduction is an active and prudent ingredient of any company's strategy that wishes to compete on an EU level. The new initiatives by the European Commission to create a Single Euro Payment Area (SEPA) where all individuals and corporations will have the ability to mimimize payment costs offers a new business opportunity. As of January 2008, Banks participating in SEPA (and any will as they see an opportunity to gain market share in the payments sector) will now be obliged to offer cross border payment services at the same rate as local payments.

 

This creates an opportunity for corporations operating cross border within the EU to consolidate their payments in one country and use even one bank for all EU payments. However, consolidation of payments entails centralized systems.

 

Furthermore, based on the Cyprus Company Law 124(I)/2006 companies can redomicile their Head Quarters to Cyprus and benefit from reduced taxation of 10%. And indeed this is now the trend starting with Marfin Popular Bank which has transferred its Head Office to Cyprus.

 

In the near future corporations are expected to gain on economies of scale by concentrating their backoffice operations and management in jurisdictions that will allow them to exercise administrative and management control at lower costs exploiting the benefits offered by the SEPA and still be within the EU.

 

Should you require any further clarifications please contact us

 

No doubt’ that Cyprus will join on January 1. Cyprus Finance Minister Mr. Sarris expressed his satisfaction over European Commission's decision to recommend the accession of Cyprus to the European Monetary Union (EMU) on January 1 2008.
Mr. Sarris has expressed his satisfaction after EU Commissioner for economic and monetary affairs Joaquin Almunia announced that he would recommend to the the European Council and the ECOFIN , the accession of Cyprus and Malta in the euro area.
Finance Minister pledged that his Ministry will work for the smooth introduction of the Euro in Cyprus and Cyprus entry to the Eurozone will help the further integration of Cyprus' economy, adding however that the adoption of the Euro does not mean that discipline for fiscal policy is alleviated.
 

Eurobank starts to offer banking services in cyprus

The Greek banking giant EFG Eurobank is ready to start full banking operations in Cyprus as early as next month, with corporations and high-net worth individuals among the first to be targeted.

Eurobank Cyprus CEO, Mr. Michalis Louis, will open for business in June while the Group’s second office in Limassol will start in the first half of 2008.
The recruitment is proceeding according to plan “We are building a fantastic team of experienced, highly educated, talented and young bankers,” stated by Mr. Louis.