Head of International Corporate Law and Fintech Practice
Expert in fintech, crypto, and international corporate law with over 20 years of experience. Specializes in crypto licensing (VASP/CASP), iGaming business support, and international structuring, asset protection, and OSINT analytics for risk assessment and due diligence.
CREATION OF A HOLDING COMPANY IN CYPRUS
Holding structure – it is an organizational and legal form of a company that controls other companies that are called subsidiaries and owns controlling stakes in such companies.
Holding companies can have forms of ownership, for example, they can be private or public companies, and they can be national and international.
What are the advantages of the holding structure?
One of the advantages of the holding is the possibility of diversification of business and risks, as well as more effective management of the companies united in the structure.
Also, an advantage is the possibility of preparing consolidated reporting for a group of companies, which is very convenient from the point of view of controlling the activities of the group.
How to create a holding company in Cyprus?
The creation of a holding structure includes certain steps:
- Determine the structure of the holding: decide on the legal form of the company, choose the tax system, and determine the goals and strategy of the holding.
- Determine the name of the company and check its availability.
- Register your company in accordance with Cyprus regulations and legislation.
- Get a tax number, register the company with the social insurance service, and register the company with the statistics authorities.
- Open a bank account in a Cyprus bank.
- Appoint directors and board members.
- Determine the main office of the company and register it.
- Develop the charter and guiding principles of the company.
- Obtain all necessary permits and licenses.
- Enter into contracts and agreements necessary for the functioning of the holding.
- Create corporate documents.
- Register the holding with the tax service and make sure that you comply with all tax obligations.
- Contract with auditors and legal advisors to ensure compliance with tax and legal requirements.
- Submit your registration documents and receive your registration certificate.
What tax benefits are provided for holding companies in Cyprus?
Creating a holding company in Cyprus can have several tax advantages:
- Tax exemption from the sale of shares of subsidiary companies. If the holding company sells the shares of the subsidiary company, then the profit from this sale can be completely exempt from taxation.
- No Tax on Dividends: Holding companies in the country can receive dividends from their subsidiaries tax-free.
- Tax-free interest on loans: Companies can earn income from interest on loans issued by subsidiaries without paying taxes.
- Capital Tax Exemption: Your company can receive income from the sale of assets tax-free.
- Low corporate income tax rates: Cyprus offers one of the lowest corporate income tax rates in the European Zone, making it an attractive location for setting up a holding structure.
- Double Taxation Agreements: Cyprus has many double taxation agreements with other countries that allow holding companies to avoid double taxation and pay rates in only one country of which it is a resident.
Tax benefits vary depending on specific circumstances.
- Tax incentives: Cyprus is one of the most attractive jurisdictions from the point of view of taxation. The country has double taxation agreements with most countries in Europe and many countries in other parts of the world.
- Low level of taxation: it has one of the lowest levels of taxation in Europe. The income tax is 12.5%, which can significantly reduce the tax costs of the holding company.
- Convenient location: the island is located in the center of the Mediterranean, which provides good connections with Europe, Africa, and Asia. This gives an advantage to a holding that has interests in different parts of the world.
- Loyal law: Cypriot law is open to foreign investors, making it an attractive place to set up a holding company. In addition, local laws readily allow the use of financial engineering tools, such as mergers and acquisitions, which can be important for holding companies.
These advantages make Cyprus an attractive place to set up a holding company, especially for those who have interests in different countries and wish to optimize their tax burden.
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The corporate tax rate in Cyprus was raised to 15%. Doesn't this create problems for Ukrainian business?
On the contrary, it is a strategic advantage. The Tax Code of Ukraine provides for exemption from CFC taxation if the effective rate in the foreign jurisdiction is at least 13%. The 15% rate in Cyprus automatically allows legally exempting the profit of a Cyprus company from additional taxation in Ukraine.
How does the updated IP Box regime for IT companies work?
The Cyprus IP Box applies the Modified Nexus Approach, where the benefit depends on actual development costs. If a company develops software locally, 80% of qualifying profit is exempt from taxes. The 15% corporate tax applies only to the remaining 20% of profit, giving an effective tax rate of 3%.
Is it necessary to pay tax on undistributed profit and the annual company levy?
No. The Deemed Dividend Distribution (DDD) rule was completely abolished for profits generated from January 1, 2026. The annual fixed Annual Levy of €350 was also abolished starting in 2024.
Can I get Cyprus tax residency as a business founder?
Yes, the “60-day rule” applies to business founders. It allows you to obtain tax resident status by staying in Cyprus for only 60 days a year if you own or rent housing, have business ties to the country, and are not a tax resident of another state.
What is Notional Interest Deduction (NID) and who is it suitable for?
NID is a powerful incentive for capital-intensive businesses (e.g., industrial or investment holdings). It allows deducting notional interest on the amount of new equity capital introduced from the taxable base. The deduction amount equals the yield of 10-year government bonds of the country of investment plus 5%. This tool can reduce taxable profit by up to 80%.
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