Introduction:
Cyprus, due to its wide network of Double Tax Treaties and the most favourable Tax rates offered, in conjunction with the recent tax reforms has developed into the most attractive financial center for Holding and Investment Companies.

The case for Cyprus Holding and Investment companies:

1. Profit (or Capital gain) from the disposal of shares is not liable to tax: Regardless of the nature of the profit (capital or trading), from 2003 onwards it is not liable to income tax.
   
2. Exempt Dividend Income: Dividend income received by Cyprus Companies from non-resident companies is exempt from tax provided that the holding in the non-resident paying company is at least 1%. This exemption will NOT apply if both the following conditions are applicable: -
   
   A. The company paying the dividends engages more than 50% in activities which lead to investment income
   
   And
   
   B. The paying company’s foreign tax burden on its income is substantially lower than the tax burden in Cyprus.
   
   In order for the exemption NOT to apply both conditions need to be met. If one condition is met ONLY then dividend income is still tax exempt/
   
   Dividend income received from portfolio investments (referring to shareholdings of less than 1%) will be liable to 15% Special defence contribution. Credit relief for foreign tax paid is available.
   
3. Benefits arising from the operation of Cyprus Double Tax Treaties with Third Countries: Cyprus Companies may be used as investment vehicles or to provide finance and other financial services to third countries. Accordingly, the Interest and Dividend Articles of these agreements may be exploited to eliminate or reduce the withholding tax on outgoing interest and Dividend payments; that is to say that the Cyprus Company may be used to extract dividends and/or interest payments from such countries with none or minimum withholding tax. The wide network of Double Taxation Treaties of Cyprus with the countries of Central and Eastern Europe in conjunction with the Treaties signed with Western European countries render Cyprus as the most appropriate finance and investment vehicle for these countries. It is also important to mention the Treaties with Middle Eastern countries as well. (More Information on the different Treaties of Cyprus can be provided on request). Treaties currently in operation are listed in Table A of the appendix.
   
4. Dividend payments: Dividends paid by a Cyprus Company to Non-Cypriot residents are NOT subject to any withholding taxes.

APPENDIX
TABLE A: Countries with which Double Taxation Treaties are currently in operation:

Austria	Hungary	Singapore
Armenia (CIS)	India	Slovak Republic
Belarus	Ireland	South Africa
Belgium	Italy	Syria
Bulgaria	Kuwait	Sweden
Canada	Kyrgystan (CIS)	Tajikistan (CIS)
China P.R.	Malta	Thailand
Czech Republic	Mauritius	Turkmenistan (CIS)
Denmark	Moldova (CIS)	Ukraine (CIS)
Egypt	Norway	United Kingdom
France	Poland	USA
Germany	Romania	Uzbekistan (CIS)
Greece	Russia	Yugoslavia

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