A Limited Company in Cyprus, whose control and management is located outside of Cyprus, is treated as a non tax-resident company and pays 0% taxes in Cyprus on its profits from business outside of Cyprus. However, if this company consucts business in Cyprus, it will pay 10 % Corporate Tax on the income from such business.

Non tax-resident companies are often refferred to as IBCs  (International Business Unit) or, mistakenly, as Offshore Companies, a relict from the old times of offshore legislation.

The dividends of a non-taxable company must be fully taxed as income in Germany (or any other country being the state of residence of the shareholders).

Non tax-resident Cyprus Companies must proof to the Cyprus Tax Authorities that tax is paid on its profits in the shareholders’ country of residence. As a result of this, a wise structure would be a Seychelles CSL Company as sole shareholder of the Cyprus company (see “Seychelles” under “Offshore Companies” under “Other Jurisdictions”).

The double taxation agreements between Cyprus and other countries are not applicable to non tax-resident Cyprus Companies.

Nominee or trustee shareholders and directors can be appointed.

From the perspective of the Cyprus Tax Authorities, the majority of the management of a Cyprus Company has to be in Cyprus in order to be recognized as a tax-resident company. The majority of the management of the company is deemed as given if the majority of directors is resident of Cuprus. Tax-resident companies pay 10% corporate tax on its profits. EU Directives and tax treaties are fully applicable.

Dividends of a tax-resident company paid to non tax-resident shareholders (residing abroad) of a tax-resident company are not taxable in Cyprus; the dividends may be hold on an account in the name of the shareholder with a Cyprus bank.

If the recipient of the dividends in Germany or another EU country is a legal person (company), then the dividends can be collected without tax reliability on the level of the other company because of the EU Parent-Subsidiary Directive. Tax liability occurs in the form of Income Tax upon distribution of dividends by the German (or EU) company.
In Germany: As a result of the EU Freedom of Establishment and the correspondingly modified § 8, Paragraph 2a of the German Foreign Tax Act, a taxation of foreign sourced income does not apply. The taxpayer has to pay taxes on the dividends from the Cyprus Company, paid to him by the German Company, with a flat tax of 25%.
If the recipient of the Cypriot dividends is a natural person, the dividends received from Cyprus are directly taxable with 25% flat Capital Gain Tax (in Germany).

As a summary, a Cyprus company benefits from the following advantages:

• - Corporate Tax only 10% instead of 25% in Germany
• No business tax
• Better depreciation of operating costs
• 25% Capital Gain Tax versus 43 or 48% income tax (in Germany)
• Special bonuses to directors of the Cypriot company are not taxable in Cyprus (and not in Germany)
• The double taxation agreement between Cyprus and Germany is fully applicable
• A branch or representation may be operated in Germany (or elsewhere).
  

Nominee or trustee shareholders and directors can be appointed.

 

Those who wish to conduct business in the name of their own EU company but not appearing themselves as shareholder and also not wishing to appoint a nominee shareholder fort he Cyprus Company, may appoint an Offshore Company as shareholder of the Cyprus Company. We recommend an Offshore Company in the Seychelles or Belize.

Advantages:

• Anonymous registration of the Offhsore Company possible (bearer shares)
• Nominal Directors, if desired
• No statutory bookkeeping for the Offshore company
• No taxes at all for the Offshore company
• Offshore Company recognized as shareholder of a Cyprus Company
• Bank accounts of the Offshore Company may be hold with a bank in Cyprus (thus being easily managable from in the EU)
• Still no withholding tax on dividends paid by the Cypriot company to an Offshore company
• You would control the Cypriot Company and officially conduct your business through it
• Corporate income of the Cypriot company, only 10% instead of 25% in Germany
• No business tax
  
  

Alternative to further minimize tax burden:

Cyprus Company with a “Special License Company” (“CSL”) in the Seychelles as sole Shareholder

• “Special License Companies” (“CSL”) in the Seychelles are not Offshore Companies but specially licensed local companies.
• CSLs have to pay corporate tax on their profits, the rate is 1,5 %.
• CSLs are covered by the Doble Taxation Treaty between Cyprus and the Seychelles. That means that: a non tax-resident Cyprus Company with a CSL as sole shareholders will not be reliable for any tax on its income (= zero tax in Cyprus), because tax liability is deemed as given on the level of the CSL parent company in the Seychelles. In the Seychelles, the tax rate on the dividends received from the subsidiary in Cyprus is only 1,5 %.
• CSLs have to keep books in the Seychelles and annual reports have to be submitted to the Authorities in the Seychelles (they are not made public).
• CSLs have to have at least two shareholders and two directors.

Please contact us for further details.

 

Here we will publish, from beginning of April 2011, interesting information about the advantages of an European Economic Interest Grouping (EEIG) with a Cyprus Company as Member.

Your Shanda Consult Team

 

Cyprus provides excellent regulations for holding companies and established itself as a holding domicile in an advantageous competition with Ireland and the Netherlands.

A company structure with a Holding involved describes the ownership of a foreign (eg. German) subsidiary by a holding company based in Cyprus, which itself is owned by the (actual) parent company.
Many multinational corporations already enjoy the benefits of Cypriot holding companies.

The Cypriot Holding provides many options for structuring, which can not be all described here. Some important features are listed below:

• Cyprus provides an unspoilt privilege for Holdings: There is no tax on dividend income.
• If a Cypriot holding company holds at least 15% of an another EU company, for example a German limited liability company, then the dividend related to this participation will be transfered tax-free from the German company to the holding company. The dividend income remains tax-free also on the level of the Cyprus Holding Company, provided it holds at least 1% of the shares of the subsidiary.
• The distribution of dividends by the holding company to its shareholders not resident of Cyprus is free of any tax burden in Cyprus. Cyprus does not levy a withholding tax, regardless of the existence of a double taxation treaty and independently from the EU Parent-Subsidiary Directive.
• There is also no tax liability on the level of an EU parent company that receives dividends from a Cyprus Holding Company. From the German point of view, dividend income is always deemed as active income.
• Dividends received by the Cyprus Holding Company may be collected at the Holding Company and then be reinvested.
• If the Cyprus Holding Company sells shares of a subsidiary, the income generated therefrom is exempt from corporation tax.
• Income of the holding company that did not derive from dividends will be subject to 10% corporate tax.
• A Holding Company may also be useful for risk diversification. Holding Companies are often being placed over "operational" companies in Cyprus to reduce liability. If you operate, for example, in different business sectors or projects, it may be advisable to incorporate a company for each business or each project, in order not to peril the other businesses and projects. The various companies are then organized under the umbrella of the Holding.

We suggest to contact us for further information in accordance with your requirements.

 

 

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Your Shanda Consult Team

This page is currently in the progress of refurbishing and
will be online soon.

Please visit us again.

Your Shanda Consult Team