Company law: Foreign investors may establish any of the following legal entities in Cyprus by registering at the Department of the Registrar of Companies and Official Receiver in Nicosia:
- Company: The Companies Law (as amended) provides for two categories of companies: A Private Company: requiring one or more founding members, is limited to 50 shareholders, but cannot offer shares for public subscription nor does it have the right to transfer shares. A Public Company: The main feature of a public company is the power to extend an invitation to the public to subscribe to its shares and the existence of a minimum of seven members.
- Partnership: General Partnership: Every partner is individually and collectively accountable for the liabilities of the partnership, including all debts and obligations of the partnership incurred while he is a partner. Limited Partnership: One or more general partners are individually and collectively accountable for the liabilities of the partnership and one or more limited partners whose accountability for such liabilities is limited to their contribution to the partnership.
- European Company SE: The registration of a European Company is in line with the Council Regulation (EC) No 2157/2001. The main objective is to allow companies incorporated in different member states to merge or form a holding company or joint subsidiary, while avoiding the legal and practical constraints arising from the existence of fifteen different legal systems.
- Branch: A Branch does not constitute a legal entity different to that of its founding company. There are two kinds of Branch Companies in Cyprus: Branch of a Local Company: No special requirements other than those applying to the company itself. Branch of a Foreign Company: Overseas companies may establish a branch in Cyprus, provided that they file with the Registrar within 30 days of such an establishment. Branches of foreign corporations may be required to file further information upon registration (i.e. company's memorandum of association, list of directors, etc).
Tax Policy : While Cyprus tax system has been reformed to comply with the EU Acquis Communautaire, the appropriate actions have taken place to maintain Cyprus’s competitiveness as an international business centre and enhance its attractiveness as a suitable jurisdiction for holding companies.
All companies are subject to a uniform tax rate of 10%, the lowest corporate tax rate in the European Union. Based on Eurostat's statistics (May 2006), Cyprus does not only exhibit the lowest corporate tax rate, but also one of the lowest top statutory personal income tax rate at 30%.
The standard VAT rate of 15% applies to Cyprus; the lowest rate permitted in the EU. Cyprus also applies reduced VAT rates, on specific goods and services, of: 8%, 5%, and 0%.
Moreover, Cyprus has developed a wide network of Double Tax agreements with over 40 countries; ensuring that the same income is not taxed in more than one country.
Overall, 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 utilization of tax losses
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