The Cyprus Holding Company

Cyprus Holding Companies are perfect for management of investments - no taxation on exit profits

A Guide to the Advantages of Cyprus Holding Companies

Benefits of a Cyprus Holding Company for the management of subsidiaries, tax planning and advantages, segregation of liabilities, and more.

Updated on 27/02/2024

What is a Holding Company?

While we will focus on the benefits of a Cyprus Holding Company for the management of subsidiaries, tax planning and advantages, segregation of liabilities, and more further below, here is a short explanation about holding companies in general.

The business of a holding company is to own (to ‘hold’) and to manage

  • a majority or substantial stock of shares of one or more other companies,
  • assets such as intellectual property, real estate, securities, and other.

A holding company is typically taking part in the general management of its subsidiaries as well as supervising and controlling its subsidiaries governance. A holding company does not get involved in the day-to-day operational management of its subsidiaries.

Holding companies do often charge their subsidiaries for  management services provided.

Holding companies are typically responsible for the organization of a gr0up of companies and for the group’ general financial management.

Holding companies are used for the segregation of assets and liabilities and do thus provide a shield of protection. If a subsidiary goes bankrupt, the holding company as its shareholder may have to book capital losses, but creditor’s of the bankrupt subsidiary cannot legally pursue the holding company for compensation. 

You may read more about holding companies of the respective page of Investopedia.

About Cyprus as a Jurisdiction for Holding Companies

The Republic of Cyprus has established itself as the most attractive jurisdiction within the EU and globally for holding companies. Its investor friendly environment, business-friendly and unique tax system, EU membership and OECD compliance made Cyprus an ideal location for holding company. Its strategic location between Europe and the Middle East makes Cyprus an ideal place for holding companies with interest in the wider Eurasia region.

Due to this strategic location, Cyprus has been a hub for trade and commerce in the Eastern Mediterranean and the Levant since more than 3,000 years, becoming a true melting pot of cultures and customs, providing services as a bridge between East and West.

Today as an EU member state since 2004 and member of the Eurozone since 2008, Cyprus offers plenty of advantages to investors and trading partners.

Being full member of the EU, Cyprus participates in the European Single Market, which allows the free movement of goods, capital, services and labour between EU member states. 

During the last decades Cyprus has proven itself as a reputable international business and financial centre with a general corporate tax level of only 12.5 % on taxable income. Benefitting from specific, wisely shaped tax incentives, the overall effective rate of taxation may even be lower.

Cyprus has signed Double Taxation Treaties with more than 60 countries by now and it is in negotiations with several other countries.

Furthermore, Cyprus fully complies with all relevant regulations and directives of the EU, OECD, FATF and FSF. It is on the White list of OECD and has legally committed to the highest standards of transparency, which is an essential criterion for successful businesses in today’s world.

A Cyprus holding company may serve as a perfect gateway to the EU while receiving and paying dividends does not suffer from income tax (corporate tax) or withholding taxes.

The main advantages of a Cyprus Holding Companies:

  • The Corporate tax rate is only 12.5% of the taxable profits.
  • No withholding tax on dividends paid to non-residents shareholders (except to non-cooperative countries as per EU list);
  • No withholding tax on interest paid from Cyprus (except to non-cooperative countries as per EU list);
  • No tax on dividends received for a period of two years (2-year waver), provided that;
    – said dividends are not allowed as a tax deduction in the jurisdiction of the foreign paying company;
    – the dividend paying subsidy company must not engage directly or indirectly more than 50% in activities which lead to passive income;
    – or if the foreign tax burden of the dividend paying company is not lower than 6.25%;
  • No tax on dividend or income distribution received from a foreign permanent establishment (PE) of a Cyprus holding company; provided one of the following conditions are met:
    – The PE must not engage more than 50% directly or indirectly in activities which lead to passive income.
    – The foreign tax burden on the profit of the dividend paying company is not lower than 6.25%.
  • No withholding tax on royalties paid from Cyprus in respect of intellectual property exploited outside Cyprus;
  • No tax on disposal or trading of securities in general – securities include bonds, future contracts, option contracts, CFDs, ETFs, company shares and others;
  • Intellectual property: only 2.5% -4.5% effective taxation on profits from qualifying intellectual property (main condition: IP must have been generated or produced in Cyprus by the company which claims the tax discount; outsourcing of IP production is allowed, as long as the supervision and general management of the same remains in Cyprus);
  • Capital gain tax: Cyprus does not have a capital gain tax; profit from the disposal of securities in its widest sense, including company shares (listed of not), future or option contracts, CFDs, ETFs, and others;
  • Notional interest deduction upon the introduction of new equity.
  • The Cyprus Tax Authorities do not conduct onsite tax inspections, unless there are reasons for substantial suspicion. Auditors are bearing the responsibility for tax compliance.

Please note that dividend income in Cyprus is not subject to corporate tax but to Special Defence Contribution, a levy charged as a kind of capital gain tax, if applicable. The rate is 17%.

Important: Special Defence Contribution of 17% does not apply to dividends received by Cyprus companies, during the first two fiscal years. Furthermore, individuals benefiting from the Cyprus non-dom tax status are exempted from the liability to pay Special Defence Contribution of 17% on dividend income, for a period of 17 years.

In general, a Cyprus holding company structure may help to decrease or to eliminate the tax charged on dividend income and gains.

Although there are no restrictions on the legal form of a Cyprus holding company, the most commonly used form is the Cyprus private limited liability company.

Basic requirements of a Cyprus Companies

Share Capital: 

Legally, the minimum paid capital of a Cyprus Holding Company is the smallest payable amount, which is one Euro cent. However, as such a low capital would not make much sense, the usually authorized minimum capital is generally € 1.000,00.

But: a paid capital reflecting the actual business of a company is advisable for the financial standing of a company in general.


The minimum number of shareholders of a Cyprus private limited company is 1 and the maximum is 50. The shareholder may be natural or legal person. There is no restriction on nationality or residency. A Cyprus Company can be incorporated with 100% foreign ownership. The use of nominee shareholders is allowed, but not advised anymore in the today’s world of transparency and mandatory disclosure of beneficial owners.

Appointment of Directors: 

Under the Cyprus Companies Law a Cyprus private limited company must have at least one director. The location of the management and control of a company determines the tax residency of a company.

Therefore, in order to meet the requirements of the Cypriot tax legislation regarding the determination of tax residency, the director of a Cyprus holding company must to be resident of Cyprus, or the majority of directors must be resident of Cyprus.

In case of one resident and one non-resident director, the non-resident director needs to fly to Cyprus one or more times per year. and decisions must be taken during the presence in Cyprus, documented by board resolutions.

Secretary of a Cyprus Holding Company:

A company secretary must be appointed. It can be natural or legal person preferably residing in Cyprus.

Registered office of a Cyprus Holding Company:

A Cyprus holding company must have a registered office in Cyprus.

Bookkeeping and Audit of a Cyprus Holding Company:

All Cyprus Companies, including holding companies, must maintain proper bookkeeping and account and must prepare a full set of annual financial statements in accordance with International Financial Reporting Standards (IFRS). The books of a Cyprus Holding Company do not need to be kept in Cyprus by law, but they must be immediately accessible for the Cyprus Tax Authorities at any time, without any delay, which would require instant online access at any time.

The accounts of all Cyprus Companies must be audited by an auditor licensed in Cyprus.

Information regarding Cyprus company registration.

For more information and advise on how a Cyprus holding company could help to structure your business please contact us through the form below.

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