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Cyprus Companies for Portfolio Holding

If you are looking for a jurisdiction to structure your investments, then you may want to consider Cyprus. Offering a simple, stable, and tested fiscal regime with a very attractive tax system to structure your portfolio investments, Cyprus is the perfect place to set up your portfolio holding company.

In today’s environment of increased transparency and negative reputation associated with the use of the traditional offshore jurisdictions, investors may prefer to structure their investments through EU companies. Cyprus is the ideal location for such entities, offering a multitude of benefits:  
  • EU and Eurozone Member State
  • Well known and established Financial Centre
  • Pool of qualified professionals and business services providers
  • Whitelisted jurisdiction by international organisations
  • Low maintenance costs compared to other EU jurisdictions
  • Strategic location
  • Highly competitive and attractive tax system
An added benefit of using a Cyprus company for your portfolio holding is that Cyprus companies can open bank accounts, use brokers, and investment managers from any jurisdiction. Swiss banks as well as other EU banks are widely used by our clients.

Injecting funds into the company

Capital (cash or in-kind), may be injected in the Cyprus company either via debt or equity without any tax implications in Cyprus.
  • Individual investors can inject funds into the company in exchange of shares of an equal value
    • Shareholders can contribute capital to the company without a respective issuance of shares
    • Issuance of new shares does not attract any Cyprus taxes
    • Shares can be ordinary or redeemable in order to facilitate the extraction of funds later on
  • Investors can inject funds into the company in the form of debt
    • Debt can be interest free or interest bearing without any Cyprus tax implications
    • The Debt can be in various forms (e.g. secured, unsecured, fixed, etc)

Tax benefits – How are portfolio profits taxed in Cyprus?

  • Dividend income received by a Cyprus company from instruments is generally tax exempt
  • Capital gains or trading profits from the disposal of shares and other qualifying titles (listed at the end of this article), are exempt from Cyprus taxation. Where the exception does not apply, the profits will be subject to 12,5% corporate income tax on net profits
  • Interest from active sources is taxed at a rate of 12,5% on net profits
  • Passive interest derived from passive sources is not taxed under income tax but under special defence contribution (SDC) tax at the rate of 30% on the gross amount

There are many ways to extract capital or profits from the company, below are the most popular with our clients:

  • Dividend distribution
  • Loan repayments
  • Interest repayments
  • Reduction of capital
  • Liquidation
If you wish to discuss how opening of a Cyprus company can help you manage your portfolio investments get in touch with us and one of our expert advisors will contact you for a complimentary consultation.

Qualifying titles

Financial instruments that are qualifying titles for the tax exemptions:
  • Shares
  • Debentures
  • Bonds
  • Options
  • Short positions on titles
  • Futures/forwards on titles
  • Swaps on titles
  • Index participations
  • Depositary receipts
  • Rights on claim of bonds and debentures
  • Repurchase agreement
  • Units in open-end or closed-end collective investment schemes

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