News: Company Formation in Cyprus

COMPANY FORMATION IN CYPRUS

The Republic of Cyprus is a former British colony and a current member state of the European Union. It is located in the Mediterranean Sea bordered by Turkey (to the south), Syria (to the west) and Kastellorizo (a Greek Island to the east) with a population of 1.2 million people. Cyprus’s capital and financial hub is Nicosia. Its official languages are Greek and Turkish, although English is widely spoken due to the past British colonial rule. 

The Euro (EUR) became it’s official currency in the year, 2008 with its economy strongly dependent on the service sector (that is equivalent to 4/5 of the country’s GDP). Tourism is the main part of the country’s service sector, with about two (2) million visitors every year; then you have the financial and asset management sector.

Cyprus is one of the most favourable European environment to start or set up a company or business, and so, it is referred to as the gateway of the European common market due to the favourable tax policies, economy and other foreign investment laws.

It is chosen by many non-EU companies and serves as a portal of investment from the western world into Russia, the Middle east, Asia and South America. It is also a shipping hub with the Cypriot registered vessel, the fourth largest in the world and a large revenue provider. The Republic of Cyprus is an exporter of citrus fruits, cement, potatoes, clothing and pharmaceuticals.

Many entrepreneurs/businessmen are eager to start up offshore company in Cyprus, but however, it is important to know that Cyprus is not an offshore zone in a traditional sense because companies in Cyprus must undergo the state registration process, submission of financial statements and hold annual shareholders' meetings.

ADVANTAGES OF OFFSHORE COMPANY REGISTRATION IN CYPRUS

1. Cyprus has a far more stronger international reputation in comparison to other classic offshore jurisdictions. It is not on the "black list" of world offshore companies.
2. Cyprus has signed agreements on double taxation with 60 countries.
3. The financial statements in Cyprus are submitted in accordance with international standards.
4. Cyprus has one of the lowest corporate tax rates in Europe.
5. Many categories of expenses can be referred to prime cost.
6. Extremely favourable conditions for the development of holding companies (there is no consolidation tax, and activity of a controlled foreign company is not regulated) with the main activity related to control of assets in other Cypriot companies.
7. No tax on international/external dividends, on capital gains, on income from sales of securities.
8. Simplicity of the registration procedure, and the low cost of maintaining the company.
9. Possibility to trade with European companies (obtaining the VAT number).
10. Convenience to operate with loans via Cyprus offshore company.
11. No currency control.
12. If foreign experts of an offshore company in Cyprus work beyond the jurisdiction, they pay an income tax varying from 0% to 2%.
13. Non-resident of Cyprus, who is the successor to the estate, is not subject to taxation.
14. The possibility of using nominal service.
15. Losses can be rolled over to subsequent tax periods until they are covered by income.
16. Enhanced protection offered to its shareholders from a privacy point of view.

REGISTRATION REQUIREMENTS OF COMPANY IN CYPRUS

Organizational Requirements

These are the organizational registration requirements for the formation of a new company in Cyprus. They include:

1. A minimum of one director;
2. A minimum of one shareholder;
3. An individual can be both a shareholder and director;
4. A registered and verified Cyprus address is required;
5. The company must have a secretary (the individual can be a resident or non-resident);
6. The use of nominal service is allowed.

If the following requirements are not met, there are certain restrictions placed on business activities which involves banking, insurance, financial services and much more without obtaining a special permit.

Requirements of Company Name

1. A company name can be prepared in any language with the use of Roman or     Greek alphabet, provided that the translation into Greek or English is submitted.     At the same time, the name should be officially recognized as euphonic.
2. It is prohibited to use names similar or analogous to existing ones.
3. The names containing hint of illegality or connection with the patronage of     royal families will not be registered.
4. The companies with names containing such words as "trust", "bank",     "insurance", "reinsurance" are subject to licensing.
5. The name should end with the word “Limited (Ltd)”.

Documentation Requirements

There are certain documentation requirements that must be met for the incorporation of a company in Cyprus. They include:

• Certificate of incorporation (English/Greek);
• The Director’s certificate; 
• The Secretary’s certificate;
• The Shareholder’s certificate;
• The Registered Address certificate;  
• Passport copies of the shareholders (must be notarized)
• Apostille of binded copies of Constitutive documents 
• The Memorandum and Articles of Association of the company (must be notarized too);
• Excerpts from the first Meeting of the Board of Directors; 
• Non Trading Warranty;
• Company’s chosen name approval from the Trade Register;
• Bank statement indicating the deposit of the share capital of the business.

MANAGEMENT OF A COMPANY IN CYPRUS

In accordance with the norms of the legal system of Cyprus, control over the activities of an enterprise is carried out via voting at the shareholders' meeting. At the same time, entitling documents retain the right to daily control over the board of directors.

In order to steer clear from illegal actions of the director, the shareholders of a company are entitled to impose restrictions on his authority.

In order to retain the status of an offshore company in Cyprus, the enterprise must conduct business activities, and shareholders’ meetings should take place beyond the jurisdiction.

It is important for resident company that all decisions are made within the territory of Cyprus.

Peculiarities of the company in Cyprus:

• Information about beneficial owners or shareholders is public and stored in the central bank of the Republic of Cyprus.
• If the identification of the owner of the company can lead to any negative consequences, it is necessary to preserve the anonymity of the data. This can be achieved by applying mechanism for the use of bearer shares or trust declaration.

TAXES IN CYPRUS

The Cyprus company pays the income tax of 12.5% (the rate was set in 2013). 

In Cyprus, there are no inheritance, real property, net wealth and municipal taxes. There is an immovable property transfer tax up to 8%. Value-added tax is 19%. The income from dividends and transactions with securities are not subject to taxation.

COMPANY REPORTING

Offshore in Cyprus should annually submit:

1. Tax return;
2. Financial statements containing report of an independent auditor;
3. Financial report compiled in Greek;
4. Annual report containing information on shareholders, secretaries, directors.

The first three types of reporting are submitted to the Tax Department of Cyprus, and the report in Greek to the Registration Chamber.
Even in the absence of dynamic activities of the company and lack of accrued taxes, an offshore company in Cyprus must submit reports certified by the auditor.

WHAT TYPES OF COMPANIES CAN BE OPENED IN CYPRUS

When planning to open a company in Cyprus. These are the various types of companies that can be opened in Cyprus.

1. Limited Liability company. This could either be a private limited liability company or a public limited liability company.
2. Partnership (General and limited partnership).
3. A branch of a foreign company. It’s possible to open a branch or a foreign office in Cyprus.
4. Sole Proprietorship.

CYPRUS COMPANY FORMATION FAQS

• How long does it take to register a new company in Cyprus?

Cyprus company registration could take up to 30 days.

• How much does it cost to register offshore in Cyprus?

The cost of registering a company in Cyprus costs $1995 but from the second year, it will cost $1990.

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