The issue

We were approached by a foreign advisor in relation to a Cypriot financing structure created a number of years ago.

The structure included Cyprus international trusts, Cypriot holding and financing companies and underlying foreign subsidiaries.

Effectively, the structure was created to own the foreign subsidiaries and finance their operations. The financing was historically structured in the form of back to back loans routed via the Cyprus companies. Although this was a working structure in the past, nowadays is a very risky strategy as foreign tax authorities deny the treaty reduced withholding tax rates by arguing that the financing company is merely a conduit.

The solution

Having analyzed the options available, we advised the client to take advantage of the Cypriot NID provisions. We carried out a restructuring step plan and recalculated the range of the annual tax liability that could incur via the NID provisions. Once this was accepted by the client, we carried out the restructuring plan and assisted the Cypriot legal counsel to carry out the necessary steps.

Result

The restructuring resulted in a less risky tax structure achieving however the same tax efficiencies as before.

Contact us

Should your circumstances resemble the above, we are at your disposal to assist you and discuss your own circumstances.

Constantinos Markou
Director
Head of Tax Services
markou@atca.com.cy
+357 25661717