Cyprus Company Registration
International Business Company (IBC) – Definition
In simple terms, an international business (offshore) company (IBC) is a normal limited liability company which is used as a tool, legally, by corporations and individuals throughout the world to direct profits out of high tax countries into offshore jurisdictions or international financial centers thus taking advantage of low or zero tax and double tax treaties. The beneficial ownership and business activities of the international (offshore) enterprise in general lie outside the country of its registration.
Osys Corporate and Administrative Services:
Our firm can offer you advice about the structure most suited to your needs. This depends on type of business you want to perform and the geographical area where those services will be provided. Our formation service is rapid and efficient.Read more about the process of registering a Cyprus company. We provide comprehensive management facilities for companies including the provision of a registered office, company secretary, directors and nominee shareholders.Our services can include a full secretarial, accounting and management service ensuring the maintenance of a company in good standing in the country of incorporation, keeping the books of account and full statutory records. Where we provide directors for a company, we shall conduct the entire business of the company liaising, of course with the company’s owners where appropriate.
Important criteria for choosing a jurisdiction:
The choice of a suitable jurisdiction is an important decision and requires careful considerations. The most important aspects to be examined may be outlined as follows:
- Political and economic stability of the jurisdiction
- The availability of a modern and flexible legislative framework>
- Simple incorporation and filing requirements
- The availability of Double Taxation Treaties – this is very important in order to minimize withholding taxes on the payment of dividends and royalties from contracting states
- The availability of good calibre professional advisers
- A good banking system
- Good telecommunications
- Reputation (some “tax havens” are viewed with suspicion).
Important Note: Professional advise should always be sought before acquiring an offshore entity so that you are aware of any restrictions and reporting requirements.
The key condition of incorporating the IBC by a non-resident is the presence of the treaties for the avoidance of double taxation between the country of registration and the countries where the IBC or its subsidiaries will have activities.Cyprus has concluded 34 double tax treaties which apply to 40 countries. The existence of these treaties, combined with the low tax paid by a Cyprus company offer the possibilities for effective international tax planning. The main purpose of these treaties is the avoidance of double taxation on income earned in any of these countries. Under these agreements, a credit is usually allowed against the tax levied by the country in which the taxpayer resides for taxes levied in the other treaty country and as a result the tax payer pays no more than the higher of the two rates. Further, some treaties provide for tax sparing credits whereby the tax credit allowed is not only with respect to tax actually paid in the other treaty country but also from tax which would have been otherwise payable had it not been for incentive measures in that other country which result in exemption or reduction of tax.Read more about the advantages of the Cyprus tax regime.
Why set-up a Cyprus Company?
Cyprus offers one of the world’s most globally oriented and business friendly enviroments for establishng corporate structures within the European Union.More specifically the owner of an international enterprise is expected to enjoy the following advantages through the operation of his company:
- Significant tax savings (low or zero taxation)
- A greater degree of privacy and confidentiality
- Reduced operating costs
- Protection of personal wealth
- Less bureaucracy
Over the past 10 years Cyprus has moved from being an offshore to an onshore jurisdiction. Accession to the European Union obliged Cyprus to reform its tax system and bring it into line with the EU requirements and the OECD initiative against harmful tax practices. Cyprus is no longer considered a tax haven. It is actively involved with the OECD and part of its “white list”.
Malta Company Registration
The general requirements of a Malta limited liability company comprise of the following:
A company must prepare annual audited financial statements. The default accounting standard is the International Financial Reporting Standards (IFRS) though companies with certain characteristics may apply the General Accounting Principles for Smaller Entities (GAPSE). The audited accounts have to be submitted to the Registrar of Companies together with the Annual Return of the Company.
The Malta Trading Company
Profits from trading activities are effectively taxed at a rate of 5% which is the lowest tax rate in Europe. This is due to the 6/7 tax refund to the Shareholder, of the 35% tax paid by the Malta Company as explained here (make link to the Malta Tax Enviroment). VAT registration maybe required depending on the countries of trading. Below, there are examples of a Basic Trading Structure, a two tier Trading Structure as well as Triangular Trading Structure. These structures as well as the 6/7 refund is also applicable to Companies providing services in addition to their application to Companies trading goods.
(a) Basic Trading Structure using a Company registered in Malta
(b) Two-Tier Trading Structure using Malta Companies.
A double tier structure is typically used to mitigate any potential tax risk to the foreign Shareholder and for increased confidentiality purposes.
(c) Malta Trading Company in Triangular Trading
The structure above features the following: Malta Trading Company purchases goods from a Foreign Company in Country A, at cost price. Then sells goods to another Foreign Company in Country B, at the market price leaving the profit in Malta to be effectively taxed at 5% due to the 6/7 refund system on distribution of the dividend(as explained in Page 4 above).
The Malta Holding Company
The Malta Holding Company is used widely as a holding of overseas investments. The use of the Malta Company as a Holding Entity is ideal due to the beneficial tax regime, the application of the EU Parent-Subsidiary Directive and the wide network of double tax treaties. Below there are illustrations of Malta as a Holding Company of Overseas Investments as well as tax optimised illustrations of entry and exit routes of dividends in Europe.
For more information on the taxation of a Malta Holding Company, please see the Malta Tax Enviroment
(a) Malta Company – Holding of Overseas Investments
(b) Entry Route into the EU
BVI Company (BVI1) derives its income from interest from fixed deposits and therefore cannot satisfy any of the anti-abuse provisions. In this respect if such company was held by Malta PH Company dividends received by the BVI Company would be liable to taxation in Malta at 35%. By inserting a second BVI Company (BVI2) between the first BVI Company and the Malta Holding, the anti-abuse provisions are immediately satisfied as the holding of shares does not fall under the definition of passive interest or royalties. Further, dividends received from BVI2 are fully exempt from Corporate Taxation in Malta.On dividend distribution by the Malta Company to its EU Holding Company there are no withholding or other taxes payable in Malta.
(c) Exit Route from the EU
The investment in the EU Subsidiary qualifies as a Participating Holding. No withholding tax on dividends paid by the EU Subsidiary to the Malta Holding Company given that the Parent-Subsidiary Directive conditions are met. Dividend income received by the Holding Company from the EU Subsidiary is exempt from taxation in Malta. There is no Withholding Tax in Malta on dividends paid to the non-EU Shareholder. Effective tax rate in Malta is 0%.
Malta Group Finance Companies
Group Financing Companies are exempt from the requirement of obtaining a license insofar that such Companies’ financing activities are to Group Companies, that is to companies that share the same holding company. It must be noted that there are no thin capitalisation rules or other limitations with regards to the amount that a Malta Company may either receive or grant as financing making back-to-back loan structures possible.
Interest received by the Malta Group Finance Company is considered as trading income and is subject to 35% tax on net profits. On distribution of dividends to the Shareholder of the Malta Group Finance Company, the Shareholder is entitled to a 6/7 refund of the tax paid by the Malta Group Finance Company. Illustration of the Malta Group Finance Company may be found below.
The Creditor finances the Malta Group Finance Company and the Malta Group Finance Company finances the Group Company. Interest rates of the back-to-back loans observe the arm’s length principle. No or low withholding tax on interest received from the Group Co due to the use of the Interest and Royalties Directive or the double tax treaty network. Net profit made by the Malta Group Finance Company taxed at 35% but Shareholder is entitled to a 6/7 refund. There is no withholding tax in Malta on the interest payable to the Creditor.
Malta Intellectual Property (IP) Holding Company
The introduction in Malta of the Qualifying Patent scheme whereby profits from IP Malta Companies Holding Qualifying Patents are fully exempt from taxation increased the appeal of the Malta Company being used as an IP Holding Company. Most recently the application of the exemption has been extended to Qualifying Copyright.
For more information on the taxation of a Malta Holding Company, please see the Malta Tax Enviroment
Illustrations of the Malta IP Companies are shown below:
Malta IP trading Company
(b) Qualifying Patent Holding Company
For more information please contact us