COUNTRY

Cyprus is an independent democratic republic and member of the Commonwealth. It is prosperous, with a GDP per head of US$ 23,320 (2016). The economy is based around services, with tourism particularly important. Unemployment is slightly above the world average, at 10.8% as of June 2017.

The Cypriot government has worked hard to create a favourable offshore tax regime while maintaining a normal-looking domestic economy with low rates of taxation. The success of this programme is attested to by the tens of thousands of offshore companies that have registered in Cyprus since 1975. However, the island’s entry to the EU in 2004 led to a restructuring of the tax regime, which took place on 1st January 2003. Domestic and offshore companies alike now pay 12.5% tax.

Cyprus has double-tax treaties with more than 50 other countries and territories, including most major Western ‘high-tax’ countries, and many Eastern European states. This unusual feature for offshore financial centre means that Cyprus is a very effective place for holding and investment companies aimed at emerging markets.

Cyprus has a decent, European-standard business infrastructure, and English is very widely spoken. On the other hand, it is a relatively expensive jurisdiction for offshore operations, and many documents need to be filed in Greek. The legal system predominantly derives from English law and provides for various types of trust.

In 1974, right-wing Greek Cypriots staged a coup, demanding unification with Greece. Turkey responded by sending troops in to protect their interests. After the cease-fire, a UN Buffer Zone was set up, dividing the island into Greek Cypriot and Turkish Cypriot zones. The Greek area is internationally recognised as the Republic of Cyprus; the Turkish zone is considered Turkish-occupied territory of the Republic, though it has declared itself to be the Turkish Republic of Northern Cyprus. However, this delicate political situation does not greatly impede commercial or offshore operations, particularly not in the Greek zone.

In November 2002, the United Nations presented a plan for a two-state federation with a view to solving the problem before Cyprus’s 2004 admission to the EU. The European Commission and the US vigorously the UN’s Annan Plan for reunification, but it was rejected by a Greek Cypriot referendum in April 2004. As a result, only the Greek-held part, the Republic of Cyprus, acceded to the EU in April 2004.

The island’s listing by the FATF in June 2000, as one of 15 offshore jurisdictions with inadequate defences against money-laundering hastened a process of adjustment to international standards of banking supervision and information exchange. After the EU finally agreed its Tax Directive in June 2003, Cyprus announced that it would implement the ‘information sharing’ provision of the Directive on entry to the Union in 2004. This means that when nationals of other EU countries receive information about savings returns in Cyprus, it is passed on to the tax authorities in the individuals’ home countries.

In late 2003 the government also announced plans to weaken previously tight banking confidentiality, although these were strongly resisted by the banks. In April 2009, Cyprus was placed on the OECD’s ‘white list’ of jurisdictions which have ‘substantially implemented’ the internationally-agreed standards for tax cooperation.

The April 2017 referendum in Turkey gave the demagogue Recep Erdoğan sweeping powers, putting paid to Turkey’s EU ambitions. It also means that Greek and Turkish Cypriots will have to resolve their differences themselves. Negotiations started again in June 2017.

TAXATION

  • Headline tax rates: CIT 12.5%, PIT 20-35%, VAT 18%
  • Treaty Jurisdictions: Armenia, Austria, Azerbaijan, Belarus, Belgium, Bulgaria, Canada, China, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Kuwait, Kyrgyzstan, Lebanon, Malta, Mauritius, Moldova, Montenegro, Norway, Poland, Portugal, Qatar, Romania, Russia, San Marino, Serbia, Seychelles, Singapore, Slovakia, Slovenia, South Africa, Sweden, Syria, Tajikistan, Thailand, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan

Cyprus LLC’s treated as foreign entities for tax purposes pay no corporate taxes. However, U.S. citizens and everyone residing in countries who tax global income are required to declare all income to their tax authorities.

An IBC (Cyprus International Business Company) with no control or management in Cyprus and no source of income within Cyprus is considered a non-resident company which is exempt from all taxes. This means that all its directors reside outside of Cyprus. Dividends paid to shareholders are also exempt from taxation.

Note, U.S. citizens and taxpayers from countries taxing worldwide income must declare all income to their tax agency.

BUSINESS

  • Suitable for: Wealth Management, Treasury Management, Shipping, Yachting, Intellectual Property/Licensing, Holding Companies, Property Ownership
  • Company Types: Limited companies, public limited companies, branches, general partnerships, limited partnerships, sole proprietorships and trusts
  • Formation Cost: 2800 – 4600 USD
  • Formation Time: 5 – 9 days
  • Maintenance cost: 1600 – 2200 USD

INCORPORATION

There are three types of business forms available to foreign companies in Cyprus. Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to Cyprus and the planned business activity.

Private Limited Corporation

Investment Capital Requirements

There are no minimum or maximum share capital requirements.

A private limited liability company must have between one and 50 members. The right to transfer shares is restricted and shares or debentures cannot be subscribed to the public.

Management

A minimum of at least one director and one secretary is required. If there is only one member, that member may act as the director and the secretary. There are no nationality requirements imposed on directors. The company’s memorandum of association may specify that directors have unlimited liability for the debts/obligations of the company.

Incorporation process

As stated before, incorporation of a Cypriot entity can only be undertaken by a licensed lawyer and/or service provider under Cypriot law.

Approval of a company name

The lawyer or service provider that the applicant has engaged will fill in the name application form (i.e., proposed company name, scope of business, applicant’s contact details, etc). After confirming from the Registrar’s website that the proposed name doesn’t already exist, he or she fills and submits the form online and pays the application fee electronically.

It is noted that some lawyers or service providers typically maintain a number of “shelf names” – company names already approved by the Registrar. These are offered to clients whose needs are time-sensitive and who are indifferent of the actual name of the company. This means that the applicant can have an approved company name in virtually no time. In any case, it is always possible to change a company name once the company is incorporated, although this may require some additional time and cost for a registered company.

Agency: Registrar of Companies

Time: Approximately 1 month (2-5 working days under the accelerated procedure)

Cost: €10 (€30 if the accelerated procedure is selected)

Lawyers to prepare the Memorandum and Articles of Association

The Registrar of Companies has no standard form for the Memorandum and Articles of association. The Companies Law provides a general template applicable for any kind of activities.

It is a statutory requirement to have lawyers prepare the Memorandum and Articles of Association, who are also required to sign the relevant declaration.

The following information is typically required:

  •  A brief description of the main objects of the company, unless the standard Memorandum and Articles of Association are to be used. (Eventhough it is usual for law firms to use standard M&A for holding companies, some other lawyers may adopt Table A of the Company Law or may draft the M&A according to clients’ instructions);
  • The amount of nominal share capital (i.e., €1000) and how it is divided (i.e., 1000 shares of €1 each). If the company to be incorporated is a public company there is a minimum share capital of €25.629.
  • The names, addresses, passport details of the proposed directors and secretary of the company;
  • The proposed registered address of the company;
  • Certified copies of the passports of the ultimate beneficial owners of the company;
  • Bank or other references on the good standing of the ultimate beneficial owners;
  • The chain of ownership behind the Cyprus Company up to and including the ultimate beneficial owners.
  • Any other information necessary to satisfy the requirements of the Know Your Client requirement “KYC” in order to comply with the Anti-Money Laundering Law and other corresponding guidelines.

Cost: Varies, approximately  €1,000

Time: 1 day on average

Submission of documents at the Companies Section of the Department of Registrar of Companies and Official Receiver

The legal representative is required to submit four forms at the Registrar of Companies:

  • Declaration Form (HE1)8
  • Declaration Form concerning the registered office address (HE2)9
  • Form containing details on the Company Directors and Secretary (HE3)10
  • Original Memorandum and Articles of Association which should be signed by:(a) the subscribers to the Memorandum whose signatures must be attested by at least one witness; and (b) the lawyer who has drawn up the same.

Agency: Companies Section of the Department of Registrar of Companies and Official Receiver

Time: 2 working days

Cost: Approximately €205 registration fees + 0.6% on the authorized capital. A full list of Registrar fees can be found here.

After the Registrar processes the application and, provided all the information and documentation submitted is complete and accurate, the company will be issued with a Registration Certificate.

Other registration procedures 

All companies must register with the Cyprus Inland Revenue Department and obtain a tax identification number. They may also need to register for VAT, as well as with the employers’ register of the social insurance services. Each registration process should take approximately 1-2 working days, provided that the applicant submits the necessary information and documentation without errors or omissions.

Other matters

From 2011 onwards, the Cypriot Government has also imposed an annual levy of €350 which has to be paid by 30th June each year by every limited liability company that is registered in Cyprus. A penalty is imposed if the fee is not paid within the prescribed period and it increases accordingly to the time of delay of payment. If the fee is paid within 2 months from the appointed date then a penalty of 10% is imposed which increases to 30% if the fee is paid within 5 months from the appointed date. However, if the fee is not paid within the aforesaid time limits then the Registrar of Companies will strike the company off the register. A company struck off as aforesaid may be reinstated in the register within a period of 2 years from the strike off with the payment of a fee of €500 and after the lapse of two years from the strike off with the payment of €750.

Further information about business entities and the incorporation process in Cyprus can be found here.

Public Limited Corporation

Companies wishing to list on the Cyprus Stock Exchange are required to set up a public limited corporation. In addition to the legislation applicable to limited liability companies, they have to conform to the provisions of the Cyprus Stock Exchange and Cyprus Securities and Exchange Commission regulations.

Investment Capital Requirements

A public limited liability company must have at least seven members. Shares may be transferred and shares and debentures may be offered to the public. The minimum capital requirement for a public limited liability company whose shared are offered for subscription is EUR25,629.

Management

A minimum of at least two directors and one secretary is required.

Accounting / auditing requirements for Cypriot entities

All limited liability Cypriot companies are required to submit audited financial statements to the Registrar of Companies in Greek or English (excluding small sized companies, as defined under Cypriot law).

These financial statements must be prepared on an annual basis, except for the first financial statements of a company which can cover a period of up to eighteen months from the date of the company’s incorporation. Companies having subsidiaries and are not exempted from International Financial Reporting Standards or from the Cyprus Companies Law, Cap. 113, Section 142 are required to file their consolidated financial statements.

Incorporation process

As stated before, incorporation of a Cypriot entity can only be undertaken by a licensed lawyer and/or service provider under Cypriot law.

Approval of a company name

The lawyer or service provider that the applicant has engaged will fill in the name application form (i.e., proposed company name, scope of business, applicant’s contact details, etc). After confirming from the Registrar’s website that the proposed name doesn’t already exist, he or she fills and submits the form online and pays the application fee electronically.

It is noted that some lawyers or service providers typically maintain a number of “shelf names” – company names already approved by the Registrar. These are offered to clients whose needs are time-sensitive and who are indifferent of the actual name of the company. This means that the applicant can have an approved company name in virtually no time. In any case, it is always possible to change a company name once the company is incorporated, although this may require some additional time and cost for a registered company.

Agency: Registrar of Companies

Time: Approximately 1 month (2-5 working days under the accelerated procedure)

Cost: €10 (€30 if the accelerated procedure is selected)

Lawyers to prepare the Memorandum and Articles of Association

The Registrar of Companies has no standard form for the Memorandum and Articles of association. The Companies Law provides a general template applicable for any kind of activities.

It is a statutory requirement to have lawyers prepare the Memorandum and Articles of Association, who are also required to sign the relevant declaration.

The following information is typically required:

  •  A brief description of the main objects of the company, unless the standard Memorandum and Articles of Association are to be used. (Eventhough it is usual for law firms to use standard M&A for holding companies, some other lawyers may adopt Table A of the Company Law or may draft the M&A according to clients’ instructions);
  • The amount of nominal share capital (i.e., €1000) and how it is divided (i.e., 1000 shares of €1 each). If the company to be incorporated is a public company there is a minimum share capital of €25.629.
  • The names, addresses, passport details of the proposed directors and secretary of the company;
  • The proposed registered address of the company;
  • Certified copies of the passports of the ultimate beneficial owners of the company;
  • Bank or other references on the good standing of the ultimate beneficial owners;
  • The chain of ownership behind the Cyprus Company up to and including the ultimate beneficial owners.
  • Any other information necessary to satisfy the requirements of the Know Your Client requirement “KYC” in order to comply with the Anti-Money Laundering Law and other corresponding guidelines.

Cost: Varies, approximately  €1,000

Time: 1 day on average

Submission of documents at the Companies Section of the Department of Registrar of Companies and Official Receiver

The legal representative is required to submit four forms at the Registrar of Companies:

  • Declaration Form (HE1)8
  • Declaration Form concerning the registered office address (HE2)9
  • Form containing details on the Company Directors and Secretary (HE3)10
  • Original Memorandum and Articles of Association which should be signed by:(a) the subscribers to the Memorandum whose signatures must be attested by at least one witness; and (b) the lawyer who has drawn up the same.

Agency: Companies Section of the Department of Registrar of Companies and Official Receiver

Time: 2 working days

Cost: Approximately €205 registration fees + 0.6% on the authorized capital. A full list of Registrar fees can be found here.

After the Registrar processes the application and, provided all the information and documentation submitted is complete and accurate, the company will be issued with a Registration Certificate.

Other registration procedures 

All companies must register with the Cyprus Inland Revenue Department and obtain a tax identification number. They may also need to register for VAT, as well as with the employers’ register of the social insurance services. Each registration process should take approximately 1-2 working days, provided that the applicant submits the necessary information and documentation without errors or omissions.

Other matters

From 2011 onwards, the Cypriot Government has also imposed an annual levy of €350 which has to be paid by 30th June each year by every limited liability company that is registered in Cyprus. A penalty is imposed if the fee is not paid within the prescribed period and it increases accordingly to the time of delay of payment. If the fee is paid within 2 months from the appointed date then a penalty of 10% is imposed which increases to 30% if the fee is paid within 5 months from the appointed date. However, if the fee is not paid within the aforesaid time limits then the Registrar of Companies will strike the company off the register. A company struck off as aforesaid may be reinstated in the register within a period of 2 years from the strike off with the payment of a fee of €500 and after the lapse of two years from the strike off with the payment of €750.

Further information about business entities and the incorporation process in Cyprus can be found here.

International Business Company (IBC)

A Cyprus International Business Company (IBC) does not manage or control the company in Cyprus. It is a classic offshore company. One advantage of owning a Cyprus IBC is membership in the European Union (EU) opens doors for doing business with other EU countries and companies. Cyprus IBC’s are separate legal entities resembling a private limited liability company.

Cyprus IBC Company Name

  • Every Cyprus IBC must have a company name different from existing or reserved company names in Cyprus.
  • Company names can be in Greek, English, or any other language using the Latin alphabet.
  • The IBC company name must end with the word “Limited” or its abbreviation “Ltd”. Some companies have obtained permission to use the initials “IBC”.

Registration

  • A licensed Cypriot lawyer must prepare the Memorandum and Articles of Association and file them at the Office of the Registrar of Companies. The Articles of Association sets forth the rules and regulations governing the internal affairs and management of the company. The Memorandum sets forth the type of business activities that the company may engage in.
  • Registration also includes filing the names, addresses, and citizenship of the registered shareholders with the Registrar of Companies. In addition, the names of the beneficial owners along with their nationalities and addresses must be filed. However, they can choose to appoint nominee shareholders to keep their names anonymous.

Limited Liability: Shareholders are only liable up to their contributions to the company.

Shareholders

  • The IBC may have from 1 up to 50 shareholders. If only one shareholder, the Memorandum and the Articles of Association must include a provision declaring only one shareholder in the company.
  • Shareholders can be residents and citizens of any country. Shareholders can be companies or natural persons. Nominee shareholders are allowed for increased privacy.

Bearer shares are prohibited.

Directors and Officers

  • A minimum of one director is required who can reside in any country and can be a corporation or natural person.
  • The Registrar maintains a Director’s Register which is a public record.
  • A company secretary is required who can be a natural person or a corporation.

Accounting and Auditing

  • Every IBC must file accounts records with the Registrar of Companies and Tax Authorities. The first audited accounts must be filed within the first 18 months from its incorporation date. Afterwards, annual account filings will be mandatory.
  • The only required audited account filing is for the initial one. Afterwards, audited account filings are not required.
  • The filing of annual tax returns are not required.

Registered Office: Every IBC must maintain a local office address.

Minimal Share Capital: The required minimum share capital is 1,000 Euro (or in any equivalent currency). The minimum issued capital is 1 Euro which does not need to be paid up or deposited into the company account.

Representative Office

This is the easiest and least expensive type of foreign investment structure to set up and has no registered capital requirements. The defining characteristic of an RO is its limited business scope. An RO is generally forbidden from engaging in any profit-seeking activities, and can only legally engage in purely marketing or informational activities relating to commercial, financial and economic matters but does not actually conduct any actual business.

ROs are not considered to be a separate legal entity and are not permitted to carry out economic activity in Cyprus. Representative offices may conduct activities, including research, liaison and promotion.

Registration with the tax authority and other agencies may be required.

Branch

Foreign corporations operating in Cyprus can operate as a branch office without the need to incorporate. However, it is generally advisable to incorporate rather than set up a branch office in Cyprus, given the numerous drawbacks associated with having a branch office. Having said that, foreign enterprises wanting to set up a branch in Cyprus for lower levels of activity are allowed to do so.

Branch Investment Capital Requirements

No minimum capital requirements.

The parent company is fully liable for the liabilities of the branch.

Incorporation process

The incorporation process is largely similar to that for corporations.

A branch must apply for registration with the Registrar of Companies or the “One Stop Shop” (for expedited applications) within 30 days of being established in Cyprus. Registration is generally complete within one month, or within one week under the expedited service.

Management

A Cyprus resident must be appointed who is authorised to accept notices etc that need to be served on the company.

Other Types

Other types of entities or arrangements that may be considered for operating in Cyprus include:

  • Partnerships (General/limited)
  • International trust (typically used for tax planning purposes as opposed to business reasons)
  • European Company (Societas Europeas)