Tax Regime
Unlike other countries in Europe, a Cyprus Holding Company must only hold a minimum 1% of the share capital of a foreign subsidiary in order to receive the tax benefits awarded by the new tax reform.
New Tax Legislation
A uniform 12,5% corporate tax rate, applicable to the worldwide income, is now levied on all resident companies. This is the lowest corporate tax rate in the European Union and thus the most advantageous standard rate of corporation tax for Cyprus.
The new taxation status on Company is residence-based. A company is only ‘resident in the Republic’ if its business is centrally managed and controlled in Cyprus. Therefore, under the new rules, a resident corporation is taxable on its worldwide income accrued or arising from sources both within and outside Cyprus if it is managed and controlled from Cyprus.
In view of the new tax legislation, the Holding International Business Companies operating from Cyprus are now in a much more beneficial position because they can enjoy the benefits deriving from the tax exceptions as well as the corporate tax benefits by virtue of the new tax legislation.
Cyprus Branches of Companies
With the accession of Cyprus in the EU, double taxation relief will be available to all Cyprus branches, of companies resident in other member states in the European Union, since there is no discrimination between the companies’ resident in a Member state and the branches of such companies’ residence in another member state.
Distributions by Cyprusn Holding Companies
Dividends paid to non-resident shareholders are exempt from withholding tax. In fact, Cyprus does not impose withholding taxes on payments of dividend, interest and royalties (provided the intellectual property rights are not used in Cyprus) to non-resident recipients.