If your business is successful in your home country, there is an opportunity to open a representative office abroad. Imperial & Legal’s specialists recommend opening a company in Cyprus to avoid unnecessary costs when entering the large and prosperous European market. This country was considered a tax haven until recently, but nowadays it is a completely “white” jurisdiction with many advantages for foreign entrepreneurs. Cyprus is a full member of the European Union and the Schengen area.
A favourable tax regime is a key advantage of Cyprus. This jurisdiction has one of the lowest corporation tax rates in the EU — only 12.5%.
All income is taxed, regardless of its source. However, if a company has been doing business abroad for so long that it is recognised as a tax resident of another country, it is only taxed on income that originates in Cyprus.
There are tax exemptions for business activities in Cyprus which allow you to reduce the tax burden by up to 80%.
Foreign entrepreneurs can also use another tax planning tool which is numerous double taxation treaties.
If you need to know more about how to use the preferential tax regime in Cyprus for a particular source of income, please contact our specialists.
The strong Cyprus economy with a stable European currency euro allows entrepreneurs to look forward with confidence and plan for the long term.
Cyprus is located at the crossroads of trade routes between Asia and Europe. As we have already mentioned, this jurisdiction is part of the European Union. It means that a company can register for VAT and freely distribute its products or services to other 26 countries of the European Union.
There are no foreign exchange controls in Cyprus, so your company can carry out transactions in any currency. The funds of your company can be deposited in one of the reliable banks. By the way, unlike other European countries, a founder does not need to be present in person to open a corporate account in Cyprus.
As the country has to comply with EU directives, information about shareholders and directors of companies opened in Cyprus is openly accessible in public registers. However, if a foreign entrepreneur wishes to stay private, they can use nominee services, for example, a nominee director.
If you are not afraid of competition in the limited Cyprus market and plan to operate on the island, you will appreciate the convenient business infrastructure and the hardworking, qualified local workforce. Almost everyone speaks English fluently there.
The Cyprus authorities are interested in attracting foreign entrepreneurs and investors. Therefore, they have made the process of registering a company in Cyprus simple and relatively straightforward. If you consult a competent advisor from the beginning, running a new business will not take much time and money.
Cyprus is on a par with other modern European countries; an entrepreneur can choose the most suitable legal form of incorporation to start a business on the island. To choose the right type of company, you need to answer the following questions.
Here are the most popular types of companies in Cyprus.
The liability of the shareholders for the debts of such an organisation is limited to the amount of their contribution. A private limited company cannot issue and sell shares on the stock market.
The corporate law of Cyprus does not regulate the amount of the share capital but sets the minimum nominal value of one share, which is €1.
There are restrictions on the number of shareholders, directors and secretaries in a limited company in Cyprus:
The founders and directors can be of any nationality and tax residence. The authorities recommend that the secretary’s role should be performed by a resident of Cyprus.
The company must have a registered office in Cyprus and file annual accounts. The word “Limited” or the abbreviation “Ltd” must be used in the name of such company.
Compared to an Ltd, a public limited company can issue bearer shares. Consequently, the liability of shareholders in this type of company is limited to the market value of shares. The minimum capital of a Cyprus public limited company is €25,629.
Such organisations are also required to have a secretary and at least two directors. There must be at least seven shareholders in a public limited company.
This special type of Cyprus company allows the use of pass-through taxation, where shareholders pay taxes on their income. If partners are foreign citizens and the profit is generated outside Cyprus, it is possible to save significantly on fiscal payments.
To establish a partnership in Cyprus, it is enough to have one partner. At least one director and one secretary must be appointed in a partnership.
There are two types of partnerships according to the division of liability between the partners:
General partners are directly involved in the management of the company and decide on the distribution of profits among the shareholders. However, general partners are also liable for their management decisions with all their assets.
Limited partners risk only their share in the limited partnership’s share capital. They also have the opportunity to participate in the management of the company if the following two conditions are fulfilled:
This type of legal form is chosen to register a representative office of an existing business abroad. The name of the Cypriot branch is usually the same as that of the parent company abroad. There are exceptions to this rule but only if there is an existing company with the same name in the country or if the name in any way violates the requirements of the Registrar. Under the law, the head office abroad is responsible for the debts of its branch.
As a relic of the past, Cyprus has a similar procedure of registering a new company as in the UK. It is easy and quick to start a business in Cyprus. It is enough to approve the name, fill in three official forms on the government website correctly and upload the incorporation documents of the future company.
There are five steps in the process of incorporating a business in Cyprus:
If you get help from experienced advisors, the right type of company will not only simplify your work in the future but will also allow you to save significantly on taxes.
It takes up to three working days to approve the name of the future company with the Cyprus authorities. As in other jurisdictions, you won’t be allowed to use the name of an existing company in the country or certain words and expressions. Moreover, the Registrar of Companies would be suspicious of those entrepreneurs who use the words “international”, “national”, “trust” or “bank” in the name of their future company to make it look more solid. You will have to explain the use of these terms in writing, which, on the one hand, will take additional time, and, on the other hand, may be a reason for refusal if your explanation is considered insufficiently convincing. If you want to get approval in one day, choose an easier way.
Approval of the company structure and preparation of incorporation documents:
The beneficiary pays the registration and other fees. The Registrar of Companies needs to be provided with the following information:
If the Cyprus authorities have no doubts about an applicant, a company is officially registered in the Commercial Registry and a founder is provided with a certificate of incorporation. If needed, an entrepreneur can request other documents such as certified copies of the Articles of Association and Memorandum of Association, Shareholders’ Certificate, etc. for an additional fee.
It takes 1 to 3 days for the company’s name to be approved. If you have all the necessary documents and have already paid the registration fee, it will take 4 to 7 working days to receive a certificate of incorporation. Therefore, it is possible to open a company in Cyprus in just 7-10 working days.
An important condition for a quick turnaround is competent legal support at all stages of the registration process. A good corporate advisor will not only prepare the paperwork of the future company but also give comprehensive advice on tax planning and help with opening an account in a local bank.
The amount of money required to start a business in Cyprus depends on several factors:
The only thing that remains the same is the government fees that you will need to pay to register a business in Cyprus. When registering a limited company, you will pay the following fees:
All government fees are usually included in the price of our services. The final cost of company registration will depend on your requirements and will be charged upon request.
As we have already mentioned, a consultation with experienced advisors will not only help you save time and money when registering your business in Cyprus but also optimise your taxes.
A specific feature of partnerships in Cyprus is that they do not pay the corporation tax. The revenue is distributed among partners who, in turn, report and pay income tax in the country where they are tax residents.
Such a business structure is considered non-resident, since it does not have “substance” — a physical and commercial presence on the island. And it definitely won’t be offshore, since companies opened in Cyprus pay corporate tax on any profit, regardless of where it originates, and information about directors and shareholders is entered into public registers.
You must register your company for VAT with the Cyprus tax authorities if the total business turnover in the last 12 months exceeds €15,600. The company can also register for VAT in advance if it forecasts its turnover to reach €15,600 in the next 30 days.
The standard VAT rate in Cyprus is 19%. However, for some areas of activity, there are reduced or even zero VAT rates. If you want to find out which types of businesses can benefit from a lower rate, please contact our advisors.
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