Types of Cyprus companies

A number of International business activities can be found in Cyprus, taking advantage of the favourable tax regime and other benefits of the Island. These activities include but are not limited to the following:

Cyprus International Business Company (IBC)

There are different types of entities in Cyprus

Types of entities may include:

  • International Business Companies (IBC’s), which may take the following legal form:
    • Limited company
    • Partnership
    • Branch
  • International Trusts
  • Other entities

The most commonly used form of incorporation is the limited liability company (LTD) which is regulated by the Companies Act Ch. 113.

We can incorporate for you International Business Companies of different types in Cyprus. Furthermore, our experienced consultants can provide you with wide range of professional services to facilitate the management and administration of your operations.

For the procedure of registering a company in Cyprus: read more

Cyprus Holding Companies

A Cyprus holding Co. is widely used as a vehicle to eliminate or minimize the taxes arising on the distribution of Dividends or the gain on the sale of shares in subsidiaries. Uses of Cyprus holding companies include:

  • Groups holding overseas subsidiaries generating dividend income streams.
  • Holding subsidiaries for sale in the future.
  • Taking advantage of the zero taxation on the payment of dividends, interest and royalties.
  • Utilising the extensive network of Cyprus DTT and EU Parent-Subsidiary directives.

Cyprus Royalty Companies

royaltycompanies

On the 14th of October 2016, the amendments to the Income Tax Law of Cyprus as to the new IP regime have been passed by the House of Representatives and subsequently, the amendments were published in the Official Gazette on the 27th of October 2016.

The provisions of the new IP regime are in line with the latest international developments on the taxation of IP income and OECD’s action plan on fighting base erosion and profit shifting (BEPS) and allow for the current IP regime to phase out by 30th of June 2021.

The “grandfathering provisions” allow for the provisions of the current IP regime to remain in place until 30/06/2021 for intellectual property existing as of 1/1/2016 or developed or acquired from non-related persons or acquired from related persons between 2/1/2016 to 30/6/2016.

The new IP regime introduces the idea of qualifying profits that are eligible for the 80% tax exemption which are calculated based on a “nexus approach” and relate to intellectual property which is eligible for the new regime (qualifying assets). The “nexus approach” is based on R&D expenditure incurred to develop the qualifying assets. The qualifying assets are described in the new provisions of the legislation and include amongst others patents, copyrighted software programs and other intangible assets that are non- obvious but exclude trademarks and other copyrights.

The new IP regime applies to Cyprus tax residents, non –tax residence with permanent establishment in Cyprus as well as foreign residents who are subject to tax in Cyprus.

Furthermore, under the new regime there is no income tax imposed on capital gains arising from the disposal of a qualifying asset and the capital gains arising of such disposal are not included in the qualifying profits.  Additionally, the newly amended Income Tax Law introduces capital allowances for all intangible assets, excluding goodwill and assets qualifying for the existing IP regime.

Cyprus Finance Companies

As in the case of holding or a royalty companies, international finance companies offering loan facilities to other companies can take advantage of the Cyprus double tax treaties and reduce or eliminate in full withholding taxes on interest payments.

A Cyprus Financing Co. is commonly used to finance the operations of EU and DTT operating subsidiaries. Using equity capitalization, the foreign investor can benefit of the following:

  • Interest expense is deductible in the operating subsidiary (thin cap rules may apply)
  • The Cyprus Finance company is eligible Notional Interest Deduction (NID) on equity introduced (which includes share capital and share premium)
  • Zero or low withholding tax on interest paid to the Cyprus Finance company (EU Interest & Royalties Directive / DTT)
  • No withholding tax on dividend payable from Cyprus to the foreign investor
  • Profit is taxable in Cyprus at the rate of 12,5% but can be reduced to as low as 2,5% due to the NID on equity of the Cyprus Finance company

Transit trade, re-invoicing and transfer pricing

Order can be placed and received from any country by a Cyprus IBC, goods can be stored in Cyprus bonded warehouses and finally exported to any destination. Goods and services may be re-invoiced to take advantage of the Cyprus tax incentives. Certificates of origin, legalization of documents and other formal documentation can be done through the Cyprus Chamber of Commerce.

 

Regional Headquarters

Multinational companies wishing to take advantage of the Cyprus strategic position may establish their regional offices in the island.

 

Shipping and ship-management

The strategic position of Cyprus, together with tax and non-tax incentives, contributed to the success of the island as an established international shipping centre.

 

Captive insurance

Many captive insurance companies have registered in Cyprus mainly because of the important tax beneficial regime and exemptions provided by the government.

Personnel recruitment and training

Foreign nationals may be employed by a Cyprus IBC to work internationally, thus taking advantage of the tax exemption given by a number of countries if their nationals are paid by another country for their work abroad.

Other business activities conducted by IBC’s in Cyprus include:
  • Property ownership
  • Service companies
  • Leasing
  • Electrical and mechanical engineering
  • Construction and engineering companies
  • Hotel ownership and management
  • Advertising and graphics
  • Fund management