We were approached by a foreign advisor in relation to a Cypriot financing structure created a number of years ago.
The structure included a BVI entity, 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, today it creates various tax risks as foreign tax authorities can deny the reduced treaty withholding tax rates by arguing that the financing company is merely a conduit.