Cyprus taxation on various types of reorganisation
1. Types of reorganisation
The European Directive on cross-border mergers adopted in 2005 aims to facilitate mergers and acquisitions activity across the European Union Transfers of assets and liabilities between companies can, subject to conditions, be affected in a tax neutral manner within the framework of a qualified reorganisation, Reorganisations include:
- Divisions and partial divisions
- Transfer of assets
- Exchange of shares
- Transfer of registered office of a European company (SE) or a European cooperative company (SCE)
2. Possible favourable considerations and consequences as a result of a reorganisation
- Tax losses may be carried forward by the receiving entity.
- Tax relief in the form of an exemption from Cyprus taxes i.e., Cyprus corporation tax, capital gains tax, and stamp duty. Equally, a relief from the Special Contribution to the Defense Fund, as this would have otherwise been applicable in cases of company liquidations as per the deemed dividend distribution provisions as well as from land transfer fees imposed on land transfers.
- Cyprus Cross-Border Mergers are exempt transactions of the Cyprus VAT legislation.
- Avoidance of possible publicity, delay, and expense in case of liquidation including legal proceedings. The transferor company is automatically dissolved on the merger taking effect, furthermore, there is no need to undergo a separate liquidation process following a merger, and therefore costs and timescales are reduced
3. Cyprus transfer-in transfer-out (Transfer of Company’s Seat)
Cyprus may even extend the meaning of the Cross-Border Mergers in countries outside the EU subject to certain conditions.
4. Possible favourable considerations and consequences as a result of a transfer-in transfer-out
- Generally, the existing corporate identity of the migrating company is retained;
- Companies within a group registered in, non-EU countries may transfer their registered seat in Cyprus, subject to fulfillment of certain requirements. The transfer may prove to be more beneficial especially in restructuring cases seeking to achieve greater transparency;
- Employment contracts, contracts with suppliers and other contracts, agreements or instruments) are transferred to the surviving company;
- For a large group with complex assets and liabilities, the cross-border merger regime constitutes a more efficient way to merge the businesses of two companies rather than a traditional transfer of the individual assets and liabilities;
How Can We Help
Please contact us to share any questions you have about the above topic
Tel. +357 22 340000
Email: [email protected]
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.