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Cyprus Tax Exemption on foreign dividends
Cyprus holding companies benefit from one of the most attractive corporate tax regimes within the EU. Furthermore Cyprus has a particularly favourable double taxation arrangement with Russia. Although for the foreseeable future the stability of the Cyprus banks is in question, the tax benefits of using Cyprus companies continues and is applicable even if corporate banking arrangements are made outside Cyprus until all capital controls in Cyprus are lifted.
Cyprus holding companies are exempt from paying Cyprus corporation tax on foreign source dividends. For example, the tax exemption applies to dividends paid by a foreign subsidiary of a Cyprus holding company.
Tax exemption - who does it affect?
Such dividends may be liable to a "Defence Tax" (Special Contributions for Defence Tax) at the rate of 17.5%, however a Cyprus holding company will be exempt from the Defence Tax provided that the dividend-paying company generates less than 50% of its income from passive investments, and provided also that the foreign tax burden on the dividend-paying company's income is not substantially lower than the Cyprus corporation tax rate.
Cyprus holding companies can utilise the EU Parent/Subsidiary Directive or a Cyprus double tax treaty to mitigate or eliminate the incidence of source withholding taxes on non-Cyprus source dividends.
We can tell you what you need to know about Cyprus tax exemption...
We can advise on any particular scenario involving Cyprus holding companies receiving non-Cyprus source dividends.
Cyprus holding companies: Cyprus tax exemption for capital gains realised from the sale of non-Cyprus assets.
Capital gains realised by a Cyprus holding company from the disposal of non-Cyprus assets such as non-Cyprus real estate, or foreign share capital, are exempt from tax in Cyprus.