This article will be mainly useful for entrepreneurs who have reached the heights of the national market at home and are planning to expand their business abroad. If you are looking for an attractive region offering low tax rates and benefits as well as the prestige and economic stability of an EU member, you should consider opening a company in Cyprus. Imperial & Legal’s experts will outline all the advantages and disadvantages of setting up a business in this country.
„Pitfalls” might be a bit dramatic expression but still, you might encounter some difficulties when registering a company in Cyprus.
Since the country is a famous Mediterranean resort and revenue from tourism is the main source of currency income to the budget, the following areas might be especially attractive for an aspiring entrepreneur:
Additionally, IT and finance companies as well as Forex trading firms are also flourishing in Cyprus. Shipping companies are profitable too as their activities are not subject to corporation taxes.
Your choice of the legal structure depends on your objectives. In Cyprus, you have a lot of legal entities – we will list only those that are especially popular with international entrepreneurs.
As the name suggests, the liability of the founders is only limited to their share in the authorised capital.
A company of this type should have at least one director, one to fifty shareholders, and at least one secretary. Both natural and legal persons of any nationality and residence can act as founders and secretaries in a private limited company. Every company of this type should have a physical office in Cyprus.
Note that you can use nominee shareholders for confidentiality purposes; it is completely in line with Cyprus’ regulations.
Such companies can issue bearer shares, and unlike private companies, public companies can trade their shares on a stock market. Shareholders’ liability is limited to the actual value of the shares they hold.
The most crucial requirements for public limited companies include 2 directors and 7 shareholders; the minimum authorised capital should be at least EUR 25,629.
Comparison of public and private limited companies
Public Limited Company
Liability of the shareholder(s) is limited to
Actual value of the shares held
Number of directors
At least 2
Number of shareholders
At least 7
Minimum authorised capital
Entrepreneurs often choose either of these forms for tax optimisation as partnerships are not subject to taxes. The revenue received from the activities of a partnership is distributed among the partners who should then pay the income tax in the country of their tax residence. In an unlimited partnership, the founders are liable for the company’s debts with all their assets.
In a limited partnership, at least one general partner should be appointed who would be liable for the company’s performance with their overall assets. Such risks are compensated by an extensive authority: a general partner is not only the one running the company but also a decision maker when it comes to dividend distribution.
Unlike general partners, limited partners usually do not take part in running the company. However, if the company has debts, their liability will be limited to their share in the authorised capital. For a limited partnership to run smoothly, there should be at least one general and one limited partner.
It is a special legal structure allowing a foreign company to be registered with the Companies Registrar and start operating in Cyprus. It is the headquarters of the company outside of Cyprus that will be liable for the subsidiary’s debts. As a rule, a subsidiary in Cyprus has the same name as the headquarters if it does not contradict any local rules.
Entrepreneurs who have experience in running a company in the UK might notice that the incorporation process in Cyprus is similar to the one in Great Britain:
The costs of starting a business in Cyprus depend on what you are doing – setting up a company from scratch, buying an existing company, acquiring the majority stake, etc., and also on the legal structure. As an example below, we list the government fees to be paid when registering a private limited company in Cyprus:
Fee for checking and approving the company name
Stamps for posting the HE1 form
Fee for processing a company incorporation application
The list above does not include costs of delivery, translation into English (if you are starting an international company) and services of a professional lawyer. However, if you use our company registration services, all these fees and costs will be included in a single package.
To start working, you need a corporate account in a local bank. The banking system in Cyprus is well developed so you should not face any challenges when signing an agreement with a trustworthy financial institution.
To avoid overpaying for banking services, as well as online banking fees and international transfers, you should research the market to choose the most suitable bank for your company.
As you can see, starting a business in Cyprus is not extremely difficult. However, to avoid wasting your time and paying to re-apply, you will need expert support.
With the help of Imperial & Legal in London, you will not only be able to open a company in Cyprus quickly, but you will also choose the most suitable legal structure for your business. Besides, our team can advise on annual financial accounts, bookkeeping, VAT filing and much more. To find out more, book a consultation with our advisors.
Some standards for doing business in Cyprus that had existed before the early 2000s became invalid once the EU regulations were introduced. Even if a company in Cyprus operates exclusively abroad, it still cannot be considered offshore. However, the laws regulating commercial activities allow business owners to make it similar to an offshore company. Judge for yourself:
From a legal perspective, there is no difference between these companies. However, to avoid confusion, the terms “resident company” and “non-resident company” are used.
Listing all the mistakes will require a whole article, so we will only share the most absurd one.
As you already know, in Cyprus you first need to have the name of your company approved. If you use words like “international”, “euro”, “bank”, “trust”, “national” or similar terms, the Commission will later ask you to explain why these terms were used. In other words, you will have to provide an explanation of the words used in the name alongside the application for registration. If such words were used, only “for show” as they call it, you would only waste your time clarifying the matter and the proposed company name would most likely be rejected.
There is currently no minimum share capital requirement for private companies in Cyprus. However, there is a common trend to have €1,000 of authorised capital (1,000 shares of the company with a nominal value of €1). This is not mandatory and it is up to the founders to decide what the share capital of their private company will be.
As a rule, running a partnership in Cyprus is the role of general partners as they are liable for the company’s performance with their assets. However, it is legally possible for a limited partner to make a managerial decision and bepersonally liable for it, and this is recorded in the partnership documents (for example, in the shareholders’ meeting minutes).
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