- Cyprus Finance Tax Structure -

A Cyprus finance company may be used very effectively for international tax planning purposes. This is through the use of the Cyprus Domestic Tax Incentives, EU Directives and Treaties for the avoidance of double taxation (DTT). In the example shown, an EU or other non-resident company is using a Cyprus Finance Company as a vehicle to finance a project in France.

Based on the EU Interest/Royalty Directive the French Company will be able to pay interest to the Cyprus Company at 0% interest tax rate provided that the French Company fulfills the EU Interest/Royalty requirements [i.e. minimum 25% participation of the Cyprus Company in the French company]. If participation requirements are not fulfilled, then the interest will be taxed under the DTT at 10% withholding tax prior to distribution of interest to Cyprus. Interest income of the Cyprus Finance Company  will not be taxed as the Cyprus Tax Authorities will provide a credit against the 10% Corporate Income Tax. The Cyprus Finance Company can then distribute interest/dividends anywhere in the world with 0% withholding tax based on a domestic law.

The Cyprus Finance company is not required to demonstrate any substance requirements and there are no  dept-equity restrictions. There is no Capital Gains or income tax for the disposal of shares or liquidation of the Cyprus Finance Company. Furthermore corporations whose the main activity is to hold investments do not need and are not obliged to register with the VAT Ta Authority. For further information please contact us.