All gains from trading in securities are tax exempt. This exemption makes the Cyprus holding companies very attractive and popular.

The term “Securities” is defined as shares, bonds, debentures, founders’ shares and other securities or companies or other legal persons, incorporated in Cyprus or abroad and options thereon. A circular has been issued by the Tax Authorities in 2008 further clarifying what is included in the term Securities. According to the circular the term includes, among others, options on Securities, short positions on Securities, futures/forwards on Securities, swaps on Securities, depositary receipts on Securities (ADRS, GDRS), rights of claim on bonds and debentures (rights on interest of these instruments are not included), index participations only if they result on Securities, repurchase agreements or Reports on Securities, units in open-and or close-end collective investment schemes). The circular also clarifies specific types of participation in foreign entities which are considered as Securities. In cases where it is not certain whether a specific financial instrument falls under any of the categories included to the circular a request for a ruling may be submitted to the Commissioner of Income Tax.

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