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Cyprus Companies - Cyprus Company Formation in Cyprus

As trustees, we are able to assist you with structuring your business or holdings in or through Cyprus.  The Mediterranean island of Cyprus presents significant opportunities for international business and financial activity in the context of Cyprus's benign corporate tax system.  Profits of Cyprus companies are taxed at 10%.

ClarisGlobal's subsidiary Claris Trustees & Fiduciaries Ltd, we are able to provide tax and legal assistance to EU and non-EU clients seeking to take advantage of Cyprus as a tax-efficient European business base offering a sophisticated financial and legal system and advanced telecoms and e-commerce infrastructure.

New Tax System

Cyprus implemented a new tax reform in 2003 as a step towards its entry into the European Union in 2004. The new domestic tax regulations combined with the implementation of European directives have made Cyprus a highly attractive location for holding/intermediary companies.

Cypriot legislation does not offer a specific regime or provisions for holding companies, but tax legislation contains features that make the jurisdiction a favourable holding jurisdiction.

Cyprus is commonly used as an intermediate holding jurisdiction in the following circumstances:

  • By international or local groups, companies or private investors who are investing outside of Cyprus, aiming to stream dividends cheaply and easily.

  • For holding subsidiaries, which hold significant values and may be sold off in the future.

  • To benefit from the favourable tax provisions of the Double Taxation Treaty network, as well as from EU directives.

  • Where it may be important to achieve a tax-exempt winding-up of the holding company in the future.

Share Capital and Capital Duty

There are no legal requirements regarding the minimum or maximum share capital of a Cypriot company.

Capital duty is payable upon registration as a fixed amount of CYP 60 plus 0.6% on the nominal value of the authorised share capital. There is no capital duty on the share premium. Therefore the capital duty may be minimised by having a small authorised share capital and a high share premium.

Corporate Tax Rate

The corporate income tax rate for a Cypriot resident company is 10%. The taxable income under the income tax law is calculated based on the accounting profits as defined by the International Financial Reporting Standards (with some adjustments)

Incoming Dividends

Cyprus applies a participation exemption regime on received dividends. It applies to dividends received from a resident subsidiary as well as dividends received from a non-resident subsidiary (subject to conditions outlined below).

Dividends received from a Cypriot resident subsidiary

Dividends received by a Cypriot resident company from its Cypriot resident subsidiary are tax exempt.

Dividends received from a non-resident subsidiary

Dividends received by the Cypriot company from a foreign subsidiary are exempt from corporate income tax, but subject to the so-called Special Defence Contribution (“SDC”) with a rate of 15%.

However, dividend income is exempt from SDC, if the company receiving the dividend is resident in Cyprus or a company which is not resident in Cyprus but maintains a permanent establishment in Cyprus, and owns at least 1% of the company paying the dividend. This exemption does not apply if (a) more than 50% of the activity of the paying company results directly or indirectly in investment income and (b) the foreign tax burden is significantly lower than the tax rate payable in Cyprus.

In addition, the above criteria imply that both conditions have to be met for the exemption not to be applicable. For example: if a foreign trading company is held more than 1% by a Cypriot holding company and the foreign company pays a dividend to the Cypriot company, the dividend will be exempt from any tax even if its tax burden is substantially lower than the Cypriot tax burden (the corporate income tax rate in Cyprus is 10%), as less than 50% of the foreign company results in investment income (the foreign company being a trading company). Since both (a) and (b) of the criteria have to be met for the exemption not to apply, the exemption is almost always satisfied. This results in the non-taxation of the foreign-source dividend.

The above exemption mechanism is applicable to dividends received from EU resident subsidiaries as well as from subsidiaries resident outside of the EU.

A dividend received by a Cypriot company from a non-resident subsidiary where a foreign withholding tax has been levied, and if such dividend is liable to taxation in Cyprus, the tax paid abroad may be credited against the tax payable in Cyprus.

Outgoing Dividends

Outgoing dividends distributed by a Cypriot resident company are tax exempt. This applies to payments to resident shareholders as well as to non-resident shareholders regardless of their country of residence or the existence of a Double Taxation Treaty with that country. (An individual resident shareholder is subject to SDC at 15% on the dividend received).

Cypriot corporate legislation contains regulations regarding deemed distribution of dividends.

Incoming Interest

Interest received as a result of the ordinary activities of the company, or activities closely related thereto, is not considered to be interest for SDC purposes. Such interest is considered to be trading income and is subject to corporate income tax.

Interest received by a Cypriot resident company is subject to income tax at 10% on 50% of the interest received, and to SDC at 10% of the whole amount of interest received. This results in an effective and combined tax rate of 15%.

If foreign withholding tax has been levied, the tax paid abroad may be credited against the tax payable in Cyprus.

Outgoing Interest

Cyprus does not impose withholding tax on interest payments made by a resident debtor to a resident creditor or to a non-resident creditor, regardless of the jurisdiction the interest is paid to.

Thin capitalisation regulations

Cypriot tax legislation does not contain any thin capitalisation rules.

Incoming Royalties

Depending on the jurisdiction of source, no withholding tax or reduced withholding tax is often available either under a Double Taxation Treaty or the EU Interest and Royalty Directive. The Cypriot network of Double Taxation Treaties offers low or zero rates of withholding tax on royalties in most cases.

Outgoing Royalties

Cyprus does not impose withholding tax on royalties paid by a Cypriot company, if the rights are exercised outside of Cyprus by the Cypriot company. This applies irrespective of the location of the non-resident beneficiary of the royalty payments.

When the royalties are connected with use in Cyprus, a 10% withholding tax is levied, subject to the provisions of any treaty or directive.

Tax Treatment of the Participation

Costs relating to the acquisition of participation

The cost of investment relating to the acquisition of participation is not tax deductible. This is in line with the tax exemption on gains from sale of shares in Cyprus.

The value of the shares in the subsidiary

The value of the shares held in a subsidiary or any shares held should be written down for financial reporting purposes. Financial statements for Cypriot companies are subject to International Financial Reporting Standards, which allow the written value not to reflect the actual market value but the initial cost price.

Capital gains and losses

Capital gains are tax exempt, except for gains arising from the sale of immovable property located in Cyprus, or from sale of shares in non-listed companies that own immovable property in Cyprus. The tax rate is 20%.

Capital losses relating to immovable property can be offset against capital gains relating to immovable property, and therefore reduce the taxable amount subject to capital gains tax.

Controlled Foreign Companies legislation

Cyprus does not have any controlled foreign company legislation (CFC).

Tax rulings

A ruling may be obtained from the Cypriot tax authorities. The timeframe is usually one month from submitting the request. The ruling is binding on the tax authorities as to the facts presented but can be overturned by a court.

Disposal of shares

Gains on the sale of shares are tax exempt provided that the disposed shares comply with the definition of “securities” under the Cypriot income tax law. “Securities” are defined as “shares, bonds, debentures, founders’ shares and other securities of companies or other legal persons, incorporated under a law in the Republic or abroad and options thereon”. The only exemption is if, and to the extent that, the company holds real estate located in Cyprus, as mentioned in the above section on capital gains and losses.


A Cypriot holding company may cease operations and distribute the assets to its shareholders as proceeds on liquidation are tax exempt (subject to the company not having any undistributed dividends from any year, in accordance with the deemed distribution regulations).

Consolidated Tax Treatment

A holding company may not opt for the consolidated tax treatment of its subsidiary. However, Cypriot tax legislation provides for losses to be offset against profits within the same group of companies during the same year of assessment.

Companies are considered to be in the same group if they are resident in Cyprus and have a 75% direct or indirect holding relationship: one company is owned 75% (of the ordinary share capital with voting rights) by the other, or if both companies are owned 75% by a third company throughout the whole year of assessment, and if that shareholder is beneficially entitled to not less than 75% of the profits available for distribution and any assets that would be available for the shareholder upon winding-up thereof.

Company A would not be considered to be the owner of 75% of Company B if any of the profit upon a sale of the share holding that Company A holds directly or indirectly in Company B would be considered as a trading receipt for Company A.

Company losses may be carried forward indefinitely and offset against future profits.

Reorganisation regulations

Cypriot income tax law introduces regulations regarding company reorganisations, which strictly comply with the regulations of the Merger Directive, but with a wider application. The regulations apply to domestic reorganisations, cross-border reorganisations with both EU and non-EU member states as well as to reorganisations abroad with tax implications in Cyprus. There are no tax consequences on income or capital from a Cypriot holding company involved in a reorganisation.

The reorganisation has to qualify as a reorganisation under Cypriot law.


Due to the fact the VAT is a tax on consumption, the Cypriot holding company will not be subject to VAT legislation, or entitled or obliged to register for VAT purposes, if the activity of the Cypriot holding company is restricted to merely holding assets.

If the company has business activities or provides management services which fall under the scope of VAT, it may be required to register for VAT purposes if the value of the taxable supplies in the last 12 months exceeds CYP 9,000. If the value is lower than CYP 9,000 the holding company may register voluntarily.

The standard rate of VAT is 15%.

Stamp Duty

Stamp duty is a tax on contracts documenting transactions in Cyprus. The tax becomes payable upon execution of some corporate documents and most contracts.

The stamp duty on corporate documents is various fixed amounts of minor value. The stamp duty payable on execution of contracts is levied on the value (consideration), and the rates are CYP 1.50 for every CYP 1,000 for contracts of the value of up to CYP 100,000, and CYP 2 for every CYP 1,000 for contracts of the value of over CYP 100,000 up to CYP 5,000,000 where stamp duty is capped to a maximum of CYP10,000.

Income tax

Individuals resident in Cyprus are taxed on their worldwide income. Non-Cypriot residents are taxed on their Cypriot-source income only.

Rates of the individual income tax:

From CYŁ0 to CYŁ10,000 is 0%, from CYŁ10,001 to CYŁ15,000 is 20%. from CYŁ15,001 to CYŁ20,000 is 25% and for CYŁ20,001 and over 30%.

Income tax for expatriates:

Non-resident individuals, who take up residency and employment in Cyprus, are liable to income tax as shown in the above table, but they are entitled to tax relief of 20% on their total income, up to a limit of CYP 5,000 per year, for the first three years following the year the employment commenced.

Our Service

  • Company formation & registrations

  • Virtual office services

  • Confidential shareholding services through licensed Nominee Company

  • Bank account opening & admin services, credit facilities & project finance

  • Company secretarial service

  • Book-keeping, Accounting & (external) Audit services

  • Location of commercial property/office space on sale or for rental in Cyprus

For more detailed information, please contact our Corporate Services Unit  [contact info here]




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Claris Trustees & Fiduciaries Ltd. (Reg. No. C-39315) is licensed and regulated by the
Malta Financial Services Authority in terms of the Trusts & Trustees 2004, as amended.

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