Cyprus is the third largest island in the Mediterranean after Sicily and Sardinia.
Located in the north-eastern end of the Mediterranean Sea Cyprus is effectively a crossroads linking Europe, Asia and Africa.
It covers an area of 9,251 sq km and lies 65 km south of Turkey, 96 km west of Syria, 385 km North of Egypt and some 980 km south-east of Athens.
The capital is Nicosia. The second largest and the most economically developed city is Limassol.
The principal topographical features of Cyprusare the two mountain ranges running along the centre and north-east of theIsland, separated by a wide and fertile plain.
Cyprus has a pleasant climate with dry, hot summers and mild winters.
The population of Cyprus is about 956,800.
Greek Cypriots form the largest ethnic community representing approximately 75%; Turkish Cypriots comprise the second largest community representing 9% and the remaining 16% representing other minorities.
Cyprus became an independent Republic in 1960.
The political system is modelled on Western democracies in which individual rights are respected and private enterprise is given every opportunity to develop.
Under its Constitution, Cyprus has a presidential system of Government. The President is the Head of State and is elected for a five-year term of office.
The executive arm of the Government is the Council of Ministers to which the President appoints members.
The Ministers are responsible for the administration of all matters falling within the domain of their ministries and for the implementation of legislation.
Legislative power is in the hands of the House of Representatives, which consists of 56 elected members who hold office for a period of five years.
A multi-party system operates in Cyprus and the electoral system is based on proportional representation.
The legal system is based on that of the United Kingdom and all statutes regulating business matters and procedure are based on English Law.
Most laws are officially translated in to English.
Infrastructure and Economy
Cyprus is readily accessible by air and sea.
The major port facilities are those of Limassol and Larnaca, situated along the south coast of the Island.
The economy of Cyprus is based on a free enterprise system. The Government’s role is limited to regulation, planning and the provision of public utilities.
Greek, English and Turkish are the official languages of Cyprus.
English is widely spoken and understood, particularly in commercial and government sectors.
Type of Law
Civil with many English Common Law influences.
Principal Corporate Legislation
The companies’ law in Cyprus is the Cyprus Companies Law, Cap.113, which is based on the English 1948 Companies Act.
Single member companies were introduced by the Companies (Amendment) Act 2000 and other amending legislation was passed in 2000 and 2001.
Why Cyprus ?
Cyprus has developed a reputation as one of the most attractive European tax regimes ranking top for the stability of its tax law, consistency in interpretation of tax legislation as well as comparatively low tax rates.
The island holds a strategic location at the crossroads of three continents. Upon membership into the European Union, Cyprus is being transformed into a key outpost in the Eastern Mediterranean, facilitating partnerships and serving as a springboard for investments among Russia, CIS countries, Europe, Africa, Middle East and Asia. Providing the perfect gateway for businesses to penetrate new markets, Cyprus is a heaven for modern business.
In this respect, the island is increasingly becoming in our opinion, the best jurisdiction for the registration of Investment Firms (IF) with the most advantages, given that the applicant maintains a solid and serious operation: combination of low cost and low tax (flat 12,5% on profits and 0% dividends tax), as well as a reputation of adequate supervision and availability of compliance support.
The low taxation, the sophisticated legal framework based on the English Legal System, the extensive network of Double Taxation Treaties, the freedom of exchange controls, the Political and Economical stability as well as numerous other advantages offered, have brought Cyprus today as being one of the most sought after destinations for the establishment of International Business Companies.
More than 300,000 are currently active on the island. A number of these, operate from a fully fledged local office whereas many others use local Lawyers and Service Providers as their representatives.
- Lowest corporate tax in Europe of 12,5% on net profits, arrived at after deducting all business expenditure incurred. Capital allowances available.
- 19%VAT rate (the lowest in the EU)
- Foreign employees do not pay income tax if working entirely outside Cyprus and receive their salary through Cyprus. Their salary is taxed on a scale from 0 to 35% if working in Cyprus.
- Easily obtained residence and work permit for expatriate personnel and their dependents
- Capital gains tax of 20% is payable only on gains from disposal of immovable property situated in Cyprus.
- No contributions to local security schemes are payable in respect of foreign employees.
- Profits after tax remitted abroad easily.
- Large network of Double Tax Treaties with over 50 countries around the world and applicable EU directives ensures reduced foreign withholding tax.
- No withholding tax on dividends or interest paid to non residents.
- No estate duty is payable when shares of a company pass on death.
- Strategic location, convenient geographical position.
- Excellent telecommunication facilities.
- Modern banking services.
- Common Law system.
- Easy accessibility by air and sea.
- Low cost of living.
- Low set up and running costs of a company.
- Highly qualified professionals and well educated, competent labour force. High quality of services.
- English widely used in business.
- Pleasant Mediterranean climate.
- Constructive approach by authorities.
- Free zone and bonded warehouse facilities.
- Nominee / trustee services available.
Companies in Cyprus
|Type of law:||English Common Law|
|Shelf company availability:||Yes|
|Our time to establish a new company:||5 days|
|Government fees (excluding taxation):||€350|
|Double taxation treaty access:||VAT Rate: 19%|
|Share capital or equivalent|
|Recommended Minimum issued:||€1,000|
|Directors or Managers|
|Local required:||No, but advisable for purposes of tax residency|
|Publicly accessible records:||Yes|
|Location of meetings:||Anywhere, but Cyprus advisable for purposes of tax residency|
|Publicly accessible records:||Yes|
|Location of meetings:||Anywhere|
|Local or qualified:||No, but Cyprus advisable for residency and compliance|
|Requirement to prepare:||Yes|
|Requirement to file accounts:||Yes|
|Publicly accessible accounts:||Yes|
|Requirement to file annual return:||Yes|
|Change in domicile permitted:||Yes|
When wholly foreign-owned, a private company is referred to as an international business company.
On 1 st January 2003 the favorable tax regime previously available to IBC’s was abolished and all companies are now taxed on the same basis.
Type of Company for International Trade and Investment
Company Limited by shares which is subdivided into:
(a) Public companies and
(b) Private companies which are also subdivided into:
i. Exempt Private Company
ii. Limited Private Company
Company Limited by shares
Company Limited by guarantee
(c ) The Partnerships and Business Name Law, Chapter 116, also provides for two general types of Partnerships:
i. General Partnership
ii. Limited Partnership
Procedure to Incorporate
By submission of the Memorandum and Articles of Association to the Registrar of Companies, together with an affidavit before a Court and the appropriate registration fee.
The powers and objects of a Cyprus Company are contained within the Memorandum & Articles of Association and have to be specific.
Restrictions on Trading
Cannot undertake to the business of banking, insurance or the rendering of financial services to the public unless special permission is granted.
Companies cannot trade with resident individuals or companies situated in Cyprus other than in relation to the maintenance of premises, banking and professional services, unless they have special permission from the Central Bank of Cyprus.
Language and Legislation of Corporate Documents
English and Greek.
Registered Office Required
Yes, must be maintained in Cyprus.
Time to Incorporate
Approximately five days, subject to name approval.
The name of a company must be approved by the Registrar of Companies before the whole registration procedure commences.
Names of companies similar to existing company names are not approved. Likewise, names of a “general meaning” are not approved. Finally, names including words like “Royal”, “Queen”, “King”, “Saint”, “Common-wealth”, International”, “Bank”, etc, are not approved either.
Company names are approved in approximately in three working days time.
Company names must end with the word “Limited”.
It is advisable that a range of names is given to the Registrar of Companies to avoid unnecessary delay.
Our company maintains a list of already approved names by the Registrar of Companies. The registration of the company may therefore commence immediately if one of these names is chosen. The list of already approved names is available on request.
Any word that the Registrar considers undesirable.
Any name that is identical or similar to an existing company or sounds similar.
Any name that implies illegal activity or implies royal or government patronage, the following words or their derivatives: asset management, asset manager, assurance, bank, banking, broker, brokerage, capital, credit, currency, custodian, custody, dealer, dealing, deposit, derivative, exchange, fiduciary, finance, financial, fund, future, insurance, lending, loan, lender, option, pension, portfolio, reserves, savings, security, stock, trust or trustees.
If the word “Group” is to be used in the company name the minimum number of corporate shareholders are two.
Language of Name
Names may be expressed in Greek or any language using the Latin alphabet if the Registrar is in receipt of a Greek or English translation and the name is not considered undesirable.
Names Requiring Consent or Licence
The following names or their derivatives require consent or a licence:
“Asset Management” “Asset Manager”, Assurance”, “Bank”, “Banking”, “Broker (s) / Brokerage”, “Capital”, “Credit”, “Currency (ies)”, “Custodian(s)”, “Custody”, “Dealer(s)” “Dealing”, “Deposit(s)”, “Derivative (s)”, “Exchange”, “Fiduciary (ies)”, “Finance”, “Financial”, “Fund (s)”, “Future (s)”, “Insurance”, “Lending”, “Loan(s)”, “Lender(s)”, “Option(s)”, “Pension(s)”, “Portfolio”, “Reserves”, ‘Savings”, “Security(ies)”, “Stock”, “Trust”, Trustees” their foreign language equivalents or any name that the Registrar considers may have a connection with the aforementioned
No mandatory requirement but is permitted and generally used.
Disclosure of Beneficial Ownership to Government Authorities
The identity of the beneficial owners of a Cyprus Company may remain confidential if corporate shareholders are engaged to act as the shareholder on behalf of the ultimate beneficial owners.
With the use of nominee shareholders together with the appointment of a nominee director one can ensure complete confidentiality and anonymity of the beneficial shareholders.
Authorised and Issued Share Capital
The share capital usually expressed in Euros.
The usual authorised share capital of a Cyprus IBC company is € 5,000 and the recommended minimum issued capital is € 1,000.
Classes of Shares Permitted
Registered shares of par value, preference shares, redeemable preference shares and shares with no voting rights.
The minimum number of directors is One.
They may be natural persons or bodies corporate, be of any nationality and need not be resident in Cyprus.
All Cypriot companies must appoint a company secretary, who may be a natural person or body corporate.
It is advisable to appoint a resident company secretary.
The minimum number of shareholders is One.
Cyprus’ a well established international centre, has been critically assessed as constituting an attractive location for holding companies from a tax perspective, among others. This is due to the accession of Cyprus to the European Union (EU) and the enactment of the new Cyprus tax legislation, which is now compatible with the acquis communautaire. Cyprus laws and practices are now harmonised with the EU Laws and Directives, the Code of Conduct and the Organization for Economic Cooperation and Development’s recommendation on Harmful Tax Corporation.
By virtue of special provisions in the Cyprus Income Tax Laws, the net chargeable profits of Cyprus IBC Companies are taxed at a rate of 12,5%.
Double Taxation Agreements
Cyprus has concluded 43 double tax treaties with: Austria, Bulgaria, Belarus, Belgium, Canada, China, the Czech Republic, Denmark, Egypt, France, Germany, Greece, Hungary, India, Ireland, Italy, Kuwait, Malta, Mauritius, Norway, Poland, Romania, Russia, (including most of the CIS countries, i.e. Azerbaijan, Armenia, Kyrgyzstan, Moldova, Uzbekistan and Ukraine), Singapore, Slovakia, Slovenia, South Africa, Sweden, Syria, Thailand, United Kingdom, USA and the former Yugoslavia.
Financial Statement Required
Amendments made in 2003 to the Companies Law as part of the EU accession process included the following changes:
- Every company must prepare a full set of financial statements in accordance with International Financial Reporting Standards, and every parent company that has one or more subsidiaries, other than a company which is itself a wholly owned subsidiary, should present consolidated financial statements
- Under article 120, every company must complete an annual return within a period of 42 days from the date of its Annual General Meeting and must file immediately with the Registrar of Companies, a copy of the annual return, signed by a director and the company secretary. Under article 121, the annual return filed with the Registrar of Companies must be accompanied by the full set of financial statements
Companies need to be audited every year and to:
– Submit financial statements to Registrar of Cyprus Companies in Greek language
– Submit an annual company income tax return to the Inland Revenue. The Inland Revenue has the right to request the actual audited financial statements and tax computations of the company.
The audit must be carried out by a Cypriot firm of auditors in accordance with the International Accounting and Auditing Standards.
Unlike other countries in Europe, a Cyprus Holding Company must only hold a minimum 1% of the share capital of a foreign subsidiary in order to receive the tax benefits awarded by the new tax reform.
According to the new tax regime which applies in Cyprus since the 1st of January 2003, a company is a resident for tax purposes in Cyprus if the management and control of the company is carried out in or from Cyprus.
Management and control is taken to mean the ‘effective management’ of the company (e.g. that all important decisions regarding the Company are taken in Cyprus, all Board meetings take place in Cyprus – which would easily be facilitated if the majority of the Board of Directors are Cyprus residents).
Cyprus tax resident companies pay annual corporate income tax on their annual taxable profit. This taxable profit is arrived at after deduction of business related expenses and other relevant tax adjustments.
A uniform 12,5% corporate tax rate, applicable to the worldwide income, is levied on all resident companies. This is the lowest corporate tax rate in the European Union and thus the most advantageous standard rate of corporation tax for Cyprus.
The taxation status on Company is residence-based. A company is only ‘resident in the Republic’ if its business is centrally managed and controlled in Cyprus. Therefore, a resident corporation is taxable on its worldwide income accrued or arising from sources both within and outside Cyprus if it is managed and controlled from Cyprus.
In view of the new tax legislation, the Holding International Business Companies operating fromCyprus are now in a much more beneficial position because they can enjoy the benefits deriving from the tax exceptions as well as the corporate tax benefits by virtue of the new tax legislation.
There are tax exemptions on the transfer of assets (including shares) under a reorganization (merger / de-merger / transfer of assets).
Gains on shares and Capital Gains Tax
Profits from buying and selling shares are exempt from tax. Furthermore, there is no capital gains tax except for the 20% capital gains tax applying on gains accruing from disposal of immovable property held in Cyprus and shares in non-listed companies, which own immovable property in Cyprus.
Profits from activities of Permanent Establishment abroad
The profits from a permanent establishment abroad are exempt from taxation. The exemption does not apply if (i) the Permanent establishment directly or indirectly engages in more than fifty per cent (50%) in activities that produce investment income, and (ii) the foreign tax burden is substantially lower than that in Cyprus.
Cyprus Branches of Companies
With the accession of Cyprus in the EU, double taxation relief will be available to all Cyprus branches, of companies resident in other member states in the European Union, since there is no discrimination between the companies’ resident in a Member state and the branches of such companies’ residence in another member state.
Distributions by Cyprus Holding Companies
Dividends paid to non-resident shareholders are exempt from withholding tax. In fact,Cyprus does not impose withholding taxes on payments of dividend, interest and royalties (provided the intellectual property rights are not used inCyprus) to non-resident recipients.
Carry forward of Losses
Tax losses may be carried forward 5 years losses incurred abroad by a permanent establishment of a Cyprus company can be offset against profits of the Cyprus Company.
The Group relief rules are now enacted, providing for group relief of tax losses between a holding Company and its subsidiaries in the event where the Holding Company owns at least 75% of the Subsidiary directly or indirectly and/or otherwise among companies of the same group for the whole year. However, losses brought forward will not be available for Group Relief.
By virtue of the said rules a company is considered as a member of a group if it is at least a 75% subsidiary of the other, or both companies are at least the 75% subsidiaries of a third company.
Cyprus, one of the smallest European low tax jurisdictions, is a suitable place for locating an intermediary company due to the island’s combination of tax treaties and low-tax regime.
Dividends can flow through the Cyprus company totally tax free and the company can be used to take advantage of the extensive network of double tax treaties.
For incorporation queries in this jurisdiction, please complete and return to us our Company Formation Questionnaire.
For further information on our services provided in this jurisdiction and for the list of our currently available self-companies in this jurisdiction, please Contact Us.