George Coucounis outlines the advantages of forming a company in Cyprus through which to purchase property.
A major advantage of forming a company in Cyprus is tax incentives. A limited liability company owned by non-Cyprus residents is entitled to buy any number of properties without any restrictions whatsoever. Therefore, there is a pro compared to individuals who need a permit and still there are restrictions in purchasing more than one property. The company can purchase not only houses and apartments, but also plots and pieces of land of whatever extent.
The tax payable is only on net profit earned at the rate of 10%. Therefore, another pro is that when the company re-sells a property it will pay 10% income tax on profit made instead of 20% capital gain tax. So it is advantageous to form a company when purchasing properties rather than purchasing in the name of individuals. The difference is 10%.
The income earned from rents etc. is on net income minus all other expenses, plus 3% on capital allowances on the building cost. The profit is assessed as in England.
Another pro is the fact that, when a company issues dividends to the shareholders who are not Cyprus residents, there is no defence tax payable. Therefore, there is no tax payable. In the case of Cyprus residents who are shareholders and receive dividends there is a defence tax payable at 15%. Again another big advantage to clients from UK to register a limited company in Cyprus.
A company can transfer its share instead of transferring the property owned. In such a case, there are no transfer fees payable, i.e. another pro, though there will be capital gains tax payable on the profit made by selling the shares, i.e. a con. However, in many cases it is preferable to sell shares instead of transferring the property.
When a company re-sells properties without title deeds, there are no transfer fees payable and no capital gains tax. Therefore a big advantage exists in favour of purchasing properties in the name of the company rather than in the name of individuals.
Directors in a company who receive a monthly salary are obliged to declare their income in the UK. There is of course no need for directors to receive salaries, they can be shareholders receiving dividends without paying tax.
There are some more pros, however these are the main ones.
I see no cons other than the small one mentioned above, and I hope you can now see the advantages of forming a company in Cyprus through which to purchase property.
George Coucounis is an experienced lawyer practicing in Larnaca, Cyprus.
Educated at University College (London) and Thessaloniki University (Greece), George is fluent in English and has been practicing law in Cyprus since 1982.