Creation of a Holding Company in Cyprus

A holding is an organizational form of company that controls other companies called subsidiaries. A holding company owns shares or a controlling interest in subsidiaries but does not manage its day-to-day operations. Instead, the holding provides strategic management, coordinates the activities of the subsidiaries, and makes decisions about their development and investments.

Holdings can have different forms of ownership. For example, they can be private or public companies, and they can be national or international. A holding can also include companies in different industries or similar activities.

One of the advantages of a holding company is the ability to diversify business and risk and to manage companies in a single structure more efficiently.

How to create a holding company in Cyprus?

The creation of a holding company in Cyprus includes the following basic steps:

1. Determine the structure of the holding company: decide on the legal form of the company, choose the tax system, and determine the goals and strategy of the holding company.
2. Determine the company name and check its availability.
3. Register the company according to Cypriot rules and legislation.
4. Get a tax number, register the company with the social insurance service, and register the company with the statistical authorities.
5. Open a bank account in a Cypriot bank.
6. Appoint the directors and the board of directors.
7. Identify the head office of the company and register it.
8. Register the holding shares.
9. Draw up a constitution and guidelines for the company.
10. Get all necessary permits and licenses.
11. Conclude contracts and agreements necessary for the operation of the holding company.
12. Draw up the corporate documents.
13. Register the holding company with the IRS and ensure you comply with all tax obligations.
14. Contract with auditors and legal advisors to ensure tax and legal compliance.
15. Submit the documents for incorporation and obtain a certificate of incorporation.

A holding company in Cyprus can be established using the services of legal consultants. Specialists of SPM Real Estate will help register all necessary documents and provide advice on tax and corporate law.

What factors are essential when choosing a jurisdiction to establish a holding company?

When choosing a jurisdiction to locate a holding company, the following factors must be considered:

• Tax system: tax rates, incentives, agreements, obligations, etc.
• A jurisdiction’s reputation — can influence the decision of clients and investors.
• Legal system — how is the design and how is it compatible with the rules of international business.
• The cost of setting up and running a company: the cost of setting up and running a company can vary from jurisdiction to jurisdiction.
• Regulation: some jurisdictions have stricter rules than others, which can affect business conditions.
• Geographic location — the company’s site can affect access to markets and customers.
• Infrastructure: it is essential to consider the availability of technology, energy, transportation, etc.

In addition, it is necessary to pay attention to the characteristics of each jurisdiction, such as language, culture, economic stability, conditions for employment, etc.

What are the advantages of establishing a holding company in Cyprus?

Setting up a holding company in Cyprus can have several advantages:

• Tax incentives: Cyprus is one of the most attractive jurisdictions for establishing holdings because of its tax policies. The country has double taxation treaties with most European countries and many countries in other parts of the world.
• Low taxation: It has one of the lowest levels of taxation in Europe. The income tax is 12,5%, which can significantly reduce the tax cost of the holding company.
• Convenient location: the island is located in the center of the Mediterranean, which provides good connections with Europe, Africa, and Asia. This can be an essential advantage for a holding company interested in different parts of the world.
• Loyal legislation: Cypriot law is characterized by its openness to foreign investors, which makes it an attractive place to establish a holding company. In addition, local laws willingly allow financial engineering tools such as mergers and acquisitions, which can be essential for holding companies.

These advantages make Cyprus an attractive place to establish a holding company, especially for those who have interests in different countries and wish to optimize their tax burden.

What are the tax benefits of holding companies in Cyprus?

Cyprus Holdings can enjoy several tax benefits that make this jurisdiction attractive for setting up such companies. Some of these benefits include:

• Tax exemption for gain on sale of shares of subsidiaries. If a holding company sells shares to a subsidiary, the profit from this sale can be completely exempt from taxation.
• No tax on dividends: holding companies in the country can receive dividends from their subsidiaries without paying taxes.
• No tax on interest on loans: companies can earn income from interest on loans issued by subsidiaries without paying taxes.
• Tax-Exempt Capital: Your company can earn income from selling assets without paying taxes.
• Low corporate income tax rates: Cyprus offers one of the lowest corporate income tax rates in the European Union, which makes it an attractive location for establishing a holding company.
• Double tax treaties: Cyprus has many double tax treaties with other countries, which allows holding companies to avoid double taxation and pay at the rates of only one country of residence.

Tax benefits may vary depending on the specific circumstances, so it is advisable to contact a tax and legal professional for detailed information. Our professionals will be happy to help you with this. They will advise you on implementing your business in the Republic of Cyprus.

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