A holding company in Cyprus offers a multitude of benefits, making it an appealing choice for businesses looking to optimize their corporate structure and financial strategies. From its favorable tax regime to its membership in the European Union (EU) and robust legal framework, Cyprus provides an ideal backdrop for companies seeking to streamline operations, protect assets, and leverage international opportunities. In this comprehensive guide, we will delve into the world of holding companies in Cyprus, exploring the key advantages, legal requirements, tax considerations, and practical steps involved in setting up and managing a Cyprus-based holding company.
Our Cypriot lawyers can help you open a business, either through a holding company or through any business form you choose.
| Quick Facts | |
|---|---|
| Legal entities used |
– private limited liability company, – public company |
|
Incorporation method |
With the local Companies Register |
|
Incorporation time |
7 to 10 days |
| Types of assets owned by the holding |
– real estate, – financial assets, – intellectual property rights, – shares in other companies, etc. |
| Requirement for local bank account (Yes/No) |
Yes, a Cypriot holding company must have a local bank account. |
| Residency requirements for the founder(s) |
No, the founder does not need to be a resident of Cyprus. |
| Advantages |
– easy to set up, – low maintenance fees, – various tax advantages, – possibility to invest in multiple assets, etc. |
| Precautions |
There are no special precautions to consider when opening a holding company in Cyprus. |
| Shareholding structure |
The holding company must have at least one shareholder, national or foreign. |
| Minimum capital | Approx. 26,000 EUR when created as a public company |
| Taxation |
Standard rate of 12.5% |
| Control |
The control of a holding company can be fully foreign, fully national, or a combination of the first two. |
| Registered agent requirements |
There is no need for a local agent, however, the company must appoint a secretary. |
| Accounting and reporting |
Holdings must file annual accounts and financial statements in Cyprus. |
| Number of double taxation treaties | Cyprus has 65 double tax treaties. |
| Legal system | Cyprus operates under a legal system based on English common law principles. |
|
Holding company definition |
A business entity that doesn’t engage in the production of goods or services itself but instead owns shares of other companies. It controls other companies by owning a majority of their voting stock. |
|
Share Capital Requirements |
The typical authorized minimum capital is usually set at €1,000.00 for a holding company in Cyprus. |
| Government fee |
– Company name approval: €30; – Stamps for form HE1: €52; – Company registration fees: €485; – Optional Articles of Association & Memorandum in English: €240; – Courier Fees: €35. |
| Dividend income tax |
Dividends received by a Cyprus holding company are usually exempt from taxation. |
| Intellectual property (IP) rights |
Cyprus offers robust protection for intellectual property rights. |
| Holding real estate assets |
Cyprus holding companies can hold real estate assets both locally and internationally. |
| Transfer pricing regulations |
Cyprus follows OECD transfer pricing guidelines for transactions between related entities. |
| Corporate governance standards |
Cyprus adheres to EU corporate governance standards, ensuring transparency and accountability. |
| Employment regulations | Cyprus has flexible employment regulations, making it easier to manage human resources. |
| Holding company formation costs |
Formation costs for a holding company in Cyprus are relatively low compared to other jurisdictions. |
| Residence and work permits |
Cyprus offers residency and work permits for foreign investors and skilled professionals. |
| Exit strategies |
Holding companies in Cyprus have various exit strategies available, including mergers and acquisitions. |
| Regulatory compliance |
Cyprus holding companies must comply with anti-money laundering (AML) and anti-corruption regulations. |
| Legal assistance regarding incorporation | Our Cyprus-based lawyers can guide you through the holding company incorporation process, ensuring compliance with the Cypriot laws. |
Table of Contents
Step-by-step guide to opening a holding company in Cyprus
Cyprus has become an attractive choice for establishing holding companies due to its welcoming atmosphere for investors, business-friendly environment, distinctive tax system, membership in the European Union, and adherence to OECD standards, collectively rendering it an excellent location for holding companies. Setting up a holding company in Cyprus involves several steps and legal requirements. It’s essential to seek advice from our lawyers who are experienced in company formation to ensure compliance with local regulations and tax laws. However, a general incorporation guide by our Cyprus lawyers is also provided below:
- Engage our professional services: Begin by hiring our Cyprus-based lawyer to assist you with the incorporation process. They will guide you through the legal and financial aspects of opening a holding company in Cyprus.
- Choose a name: Select a unique name for your holding company and ensure it is not already in use by another entity. Your chosen name must comply with Cyprus naming regulations. Our lawyers can help you select a name for your company.
- Registered office: You must provide a physical address in Cyprus to serve as the registered office of your holding company.
- Share capital: From a legal perspective, a Cyprus holding company can have a minimum paid-up capital as low as one Euro cent. However, it is commonly authorized to have a minimum capital of €1,000,00. Nevertheless, the financial stability and credibility of the company should maintain a paid-up capital that aligns with its actual business operations.
- Memorandum and Articles of Association: Draft the Memorandum and Articles of Association for your holding company.
- Appoint directors and shareholders: Appoint the directors and shareholders of the company. Cyprus allows a single-member company, and directors can be individuals or corporate entities. If you need further information about the company structure, you are welcome to consult our Cyprus lawyers.
- Tax residency: Ensure that your company qualifies for tax residency in Cyprus, which may entitle it to certain tax benefits, including favorable double taxation treaties. Please note that Cyprus has over 60 double tax treaties in 2023.
- Bank account: Open a bank account for your company in a reputable Cyprus bank. You will need to provide relevant documentation, including the company’s incorporation certificate.
- Registration with the Cyprus Registrar of Companies: Submit your company’s registration documents to the Cyprus Registrar of Companies. This includes the Memorandum and Articles of Association and details of the directors and shareholders.
- Tax compliance: Comply with Cyprus tax regulations, including Value Added Tax (VAT) and corporate income tax. Cyprus offers a competitive tax regime, but it’s crucial to understand and meet your tax obligations. The services of our lawyers are at your disposal regarding understanding the Cyprus tax system. They will ensure that your holding company adheres to all local laws and regulations, including corporate governance, reporting, and compliance with EU directives.
Please keep in mind that Cyprus’ company formation requirements and regulations may change over time, so it’s essential to work closely with our lawyers in Cyprus about the latest legal and tax developments. Additionally, your specific situation and objectives may require customized approaches to company incorporation and structuring.
Accounting requirements for a holding company in Cyprus
Cypriot holding companies are required to uphold meticulous record-keeping practices and are obligated to generate a complete set of financial statements in compliance with International Financial Reporting Standards (IFRS). According to the law, it is not mandatory to maintain these records physically within Cyprus; however, they must be readily accessible to the Cypriot tax authorities upon request, without any undue delay. Furthermore, all Cyprus-based companies must undergo an audit by a licensed auditor based in Cyprus.
A holding company may keep its accounts in a foreign currency, but the annual accounts must be in euros. These accounts must be submitted to the Central Bank of Cyprus no later than 15 months after the Annual Shareholder Annual Meeting. The Annual Return must also be filled every year in a holding company in Cyprus.
If you need any help regarding accounting for your company, you are welcome to avail the services of our lawyers. Besides practical assistance, if you have any questions about updated accounting rules, our lawyers are here to answer.
Requirements for owning a holding company in Cyprus
An entrepreneur must be aware of the requirements that must be accomplished before holding a company in Cyprus. First of all, the name must contain the abbreviation “Ltd” or the word “Limited” at the end of it.
There must be a shareholder and the company must appoint a director (of any nationality) and a secretary. A local registered office is required for performing the business. The major decisions are taken by the General Meeting of the Shareholders.
The residency in Cyprus of the shareholders is not mandatory but it is advisable because of the benefits that may occur from that. The control and management in Cyprus are easy to prove if some actions are performed in Cyprus: the board meetings must be held in Cyprus, the invoices must be raised in Cyprus, all the contracts must be signed here, the bank account must be controlled by local directors and the residence of the director is preferably to be in Cyprus. If these criteria are met, certain advantages may occur, especially financially.
You can also rely on our lawyers for trademark registration services in Cyprus.
Registration procedure for a holding company in Cyprus
The incorporation of a holding company is the same as any other Cypriot business. The Articles of Association are the most important documents to be filed for registration with the Companies Register alongside information on the shareholder(s) and director(s). A local bank account is also mandatory if the company is a domestic business. The company must also be registered for taxation purposes. VAT registration is not mandatory for the holding unless it engages in other activities than those of owning assets in its subsidiaries.
The timeframe to incorporate a holding company in Cyprus is approximately 5 working days, however, it should be considered that opening a bank account can take longer.
Legislation on holding companies in Cyprus
Holding companies fall under the same regulations as all other businesses in Cyprus, however, the most employed type of entity used for this vehicle is the company limited by shares or limited liability company. The main particularity of setting up such an entity is its role, which implies ownership of various assets in other enterprises called subsidiaries.
A holding company in Cyprus can own from shares to real estate and even intellectual property in its subsidiaries. Compared to other jurisdictions, in Cyprus there are no restrictions on completing other operations, however, these will be treated accordingly. This is an important aspect to mention, as the holding in its pure state benefits from several tax advantages.
Should you want to open a holding company, get in touch with our Cypriot lawyers who are at your disposal.
Besides this, our well-rounded lawyers can also offer you assistance regarding marriage in Cyprus.
The main uses of a Cypriot holding company
A holding company based in Cyprus must detain more than half of the stocks of another company so it may control its actions. The parent company may only exist to perform activities through its subsidiary or may also operate the business on its own. These two types of holding companies are known as the pure holding company and the operating holding company. Please note that holding companies can be regarded as vehicles used for various purposes, among which:
1. owning assets in its subsidiaries, however, the minimum ownership is established at 1% to meet the holding requirement;
2. this structure can also be used to invest in multiple industries, thus it can be seen as a diversification vehicle;
3. it can also be used as a tax minimization entity.
For a holding to be an efficient tax minimization vehicle, it must be both registered and managed from Cyprus. This way, it can benefit from the low corporate tax (when applicable), as well as from EU directives that apply to them.
Dissolution of holding companies in Cyprus
The dissolution of a Cypriot holding company may be requested only by a general meeting of the shareholders. An announcement must be made in the Government newspaper and the decision must be registered at the Company Registrar of Cyprus. The final accounts must be submitted to the Cyprus Inland Revenue Dept.
Tax advantages for a Cypriot holding company
In most cases, the holding company is used for its beneficial tax treatment which implies:
- no withholding tax on income from dividend payments;
- no capital gains tax on the sale of shares;
- the profits obtained through permanent establishments in other countries are also exempt from taxation in Cyprus;
- distributions to non-resident shareholders are also free from taxation.
- Apart from these advantages, it is also worth noting that:
- a holding company in Cyprus can benefit from the EU Parent-Subsidiary Directive 2011/96/EU;
- the net income from other activities is levied at Cyprus’ corporate tax rate of 12,5%, which is one of the lowest in Europe;
- a holding can also benefit from one of the lowest intellectual property-related levies that range from 0% to 2.5%;
- the holding has access to more than 60 double tax treaties worldwide.
Also, the holding can be re-domiciled to other countries if the law of the respective state allows it, such as in the case of Malta. It can also be listed on any stock exchange outside its home country if it operates on the Cyprus Stock Exchange.
The registration and administration costs of a Cypriot holding company are also quite low compared to other jurisdictions. Our lawyers can offer more information on why you should choose Cyprus for setting up such a vehicle.
Advantages of owning a holding company in Cyprus
Another reason the foreign companies choose to hold companies in Cyprus is the advantageous tax system. For example, the income coming from selling or buying the shares is not taxable.
For locally managed companies, the corporate tax is 10%. The profits above 1 mil. Euro is subject to a special corporate tax of 15%. The locally managed companies in Cyprus may also benefit from the double tax treaty provisions. For this, the majority of the Board must reside in Cyprus.
In a Cypriot holding company, 50% of the income is free from income taxes, and the balance is taxed at 10%. Also, the incomes are subject to the Defense tax of 10%. If the company is based on loans, the company must pay a 9% interest charge at the Cyprus Inland Revenue. 50% is free of income tax and the rest of the 50% is taxed at 10% income tax. The whole sum is subject to pay 10% Defense tax. If you need more details about the taxes that must be paid by a holding company our Cyprus tax attorneys.
Holding companies are preferred in Cyprus because of the small administration prices and the small risks that are involved. For more information on this matter please contact our law firm in Cyprus.
Moreover, if you are planning to buy a property in Cyprus, our expert lawyers can help you with matters related to due diligence and purchase agreements.