Through proper structuring and by efficiently utilizing the benefits of the Cyprus Tax system[1], the use of a Cyprus Company can significantly improve the profit margin of entities operating in or through Greece. Specific types of businesses can especially benefit by employing a Cyprus Company:
Service Companies: There is a wide range of services that can be offered using a Cyprus Company and benefit from the very low Cyprus Corporate Tax Rate (12.5%). The most popular are: IT and Internet Services, e-commerce services, employment services, marketing, market research, investment consulting and generally any kind of consulting services.
Extra care should be given to “transfer pricing” rules in cases that services are offered through a subsidiary with physical presence in Greece.
Real Estate Companies (including Hotel Management Companies): If structured correctly, a Cyprus Company that has direct ownership and exploitation of Greek real estate can have significant tax benefits even after deducting the associated costs of maintaining a Cyprus Company.
Real estate holders also benefit in terms of siginificantly lower transfer costs/fees in case the real estate is owned by a Cyprus Company.
Import / Export Trading Companies: Companies that are active in the commerce sector can reduce their tax burden and increase their profit by using a Cyprus company for performing their importing/exporting activities.
Intellectual Property (Royalty) Companies: Cyprus offers a very efficient tax jurisdiction for companies managing copyrights, patented inventions and trademarks.
Under Cyprus Tax Law, 80% of any profits or royalty income generated from IP owned by Cypriot resident companies is exempt from taxes. If one also takes into account the low corporate tax (12.5%) the maximum effective tax rate is 2.5%. This can be further reduced since any direct expenses are tax deductible.
What is even more important is that the IP’s need not to be registered in Cyprus to utilize the beneficial Cyprus tax regime.
Holding Companies: Backed by its tax friendly tax regime and the large number of Double Tax Treaties (around 50), Cyprus is the preferred holding jurisdiction of many multinational Groups. Cyprus Holding companies are considered amongst the most tax efficient vehicles for collecting Dividends and Interest from subsidiaries which can subsequently reinvested in other Group projects or can be forwarded to the ultimate beneficial owners.
Cyprus Holding Companies can be used either by Greek Investors looking to explore investment opportunities outside Greece or from international investors looking to invest in Greece.
[1] For a more detailed analysis of Cyprus Tax Advantages please refer to article “Cyprus, an Ideal hub for International Investors”