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Investing in immovable property through a Cyprus Company
Investing in Immovable property in Bulgaria, Czech Republic, Greece, India, Poland, Romania, Ukraine and the United Kingdom through Cyprus
The plan
Foreign investors wishing to set up a Company in a favourable tax jurisdiction (i.e. Cyprus) to invest in immovable property in Bulgaria, CzechRepublic, Greece, India, Poland, Romania, Ukraine and the United Kingdom.
Steps
Tax and general consequences
1) Establishment/ funding
Negligible capital duty on authorised and issued share capital.
2) Dividend income i.e. rental income
Taxability in Cyprus
Income tax
Dividends received by a Cypriot tax resident company from a non-Cypriot tax resident company exempt from Income Tax in Cyprus.
Special defence contribution
In accordance with the provisions of the Special contribution of defence law, dividend income received by a Cypriot tax resident company from a non-Cypriot tax resident company is also exempt from defence contribution.
The exemption from defence contribution will not be available if:
– The dividend-paying company engages, directly or indirectly, more than 50% on activities which give rise to investment income; and
– The foreign tax burden on the dividend-paying company’s income is significantly lower than the tax burden on the Cypriot company. Significantly lower is taken to mean less than 6,5%.
No minimum holding period is required.
Conclusion:
Under the assumption that the activities of the foreign entities will be of a trading nature or be subject to at least 6,25% tax, the dividends to be received by Cyprus Company from these entities will be exempt from both income tax and special defence contribution in Cyprus.
Taxability in foreign countries – Withholding taxes
Taxability in foreign countries will be subject to the provisions of each country’s double tax treaty concluded with Cyprus.
3) Disposal of shares
Cyprus
According to the Cyprus domestic law, the disposal of the shares of a company will not result in any taxes in Cyprus irrespective of the provisions of a double tax treaty.
Taxability in foreign countries – Disposal of shares
Taxability in foreign countries will be subject to the provisions of each country’s double tax treaty concluded with Cyprus.
4) Cyprus Companies Outflows
Dividend payments to CypCoA and CypCoB
Therefore the dividend payments from CypCoB to the CypCoA and from CypCoA to non-Cypriot resident recipients will not suffer any withholding tax in Cyprus.
5) Capital reduction and liquidation proceeds of CypCoA
Due to the fact that the shareholders of CypCoA are not a Cypriot tax resident, the income that the shareholder will receive in terms of capital reduction or liquidation proceeds will not be subject tax in Cyprus.
Contact us
For more consultation please contact us on:
Email: info@pkf-nic.com
The authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication.
Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances.
PKF Cyprus firms are member firms of the PKF International Limited network of legally independent firms and do not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.
