A holding company based in Cyprus must detain more than a 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 business on its own. These two types of holding companies are known as the pure holding company and the operating holding company.
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 at least one shareholder and the minimum share capital that has to be deposited is at least 1,000 Euro. 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.
A holding company may keep its accounts in a foreign currency, but the Annual Accounts must be in Euro. The Annual Accounts must be submitted to the Central Bank of Cyprus no later than 15 months since the Annual Shareholder Annual Meeting. The Accounts must meet the International Accounting Standards.
The Annual Return must also be filled every year in a holding company 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 at the Cyprus Inland Revenue Dept.
Another reason the foreign companies choose to hold companies in Cyprus is the advantageous tax system. For example, the incomes coming from selling or buying the shares are not taxable.
For locally managed companies, the corporate tax is 10%. The profits above 1 mil. Euro are subject to a special corporate tax of 15%. The locally managed companies in Cyprus may also benefit from the Double Tax Treaties provisions. For this, the majority of the Board must reside in Cyprus.
In a Cypriot holding company, 50% of the income is free to Income Tax and balanced is taxed at 10%. Also the incomes are subject of 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 to income tax and the rest of the 50% is taxed at 10% income tax. The whole sum is subject to pay 10% Defense tax.
The holding companies are preferred in Cyprus because of the small administration prices and the small risks that are involved. For more informations in this matter please contact our law firm in Cyprus.
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