The Cyprus Companies Law has recently introduced new amendments that apply to companies incorporated in Cyprus. With new changes, Cypriot […]Read more
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Main characteristics for registration in Cyprus
Company Registration in Cyprus
The Republic of Cyprus is a Mediterranean country that offers a fantastic quality of life alongside with its attractive business opportunities. It is an emerging destination for the development of your business due to its cost-effective registration and operation services, favourable tax regime, highly-skilled employees as well as tax benefits for high-earning managers and high net-worth individuals.
Below we briefly discuss essential points on how to register a company in Cyprus and benefits that you enjoy from doing business in Cyprus.
Foreign companies and citizens may register the company in Cyprus in the following types:
- Limited Liability Company: this is the most commonly used type of legal entities and can be public or private. A public limited liability company must have at least seven members and its minimum capital requirement is EUR 25,629. A private limited liability company must consist of 50 members. No minimum capital requirement applies.
- Partnerships: there are three types of partnerships: general partnership, limited partnership, and limited liability partnership.
- Trusts: it is commonly used for international tax planning purposes and is not used for business purposes as a general rule.
- Sole proprietorship
- Branch: a subsidiary of foreign company with no requirement as to the authorized capital.
Company registration documents to be submitted depend on the type of legal entity.
Prior to the registration of an entity, company name must be approved by the Department of Registrar of Companies and Official Receiver. The applicant should submit three proposed names with an indication of preferred one to register a company name in Cyprus. The company name approval is processed within 10 business days. Upon approval, the company name is reserved in Cyprus for a period of 6 months, during which you need to submit documents for company set up.
Before you submit proposed names, it is necessary to check the official list of registered companies for any existing or similar names. Cyprus provides standard requirements for company names:
- company name cannot be identical or closely similar to other existing company names registered in Cyprus;
- company name can be rejected by the Department of Registrar of Companies and Official Receiver if the name is general (without distinctive characteristics);
- company name cannot be offensive or deceptive;
- it cannot offend country or religion;
- company name cannot contain the name of country or official body;
- it is allowed to use “national” or “international” in limited cases;
- use of some words like trust, depositary, brokerage or any other financial activities is subject to special license.
Tips: Due to the above mentioned requirements and since there is a large amount of previously used names, we recommend you to present a few names in advance and conduct a preliminary search. Company name check with our company will help you avoid any rejections.
Limited liability companies are administered by the annual general meeting. Public limited liability companies must have at least two directors and one secretary. A private limited liability company must have at least one director and one secretary. If there is only one member, that member may act as a director and secretary. There are no nationality requirements for directors. The memorandum of association may specify that directors have unlimited liability for the debts/obligations of the company.
Tips: Though there is no residency requirement for director in Cypriot company, for tax resident purposes it is required that the director is tax resident or citizen of Cyprus. The resident is an individual residing in Cyprus for more than 183 days during the year. Nominal services are allowed.
In Cyprus each company is required to prepare a financial statement on an annual basis according to the standards of IFRS. Company director(s) are responsible for maintaining of books and records that the company prepares for financial statements. Further, financial statements are presented to the shareholders at the Annual General Meeting. AGM takes place within 18 months from the company’s incorporation and subsequent AGM takes place within 15 months after the previous meeting. Consolidated financial statements are prepared by group companies.
Only a few companies are required to have their financial statements audited:
- Companies that are required to prepare consolidated financial statements;
- Public limited liability companies, and
- Private limited liability companies (excluding small sized companies, as defined).
Financial statements are made in Greek or must be certified into Greek language if they are made in another language.
The fee for company registration in Cyprus is made as a one-time payment. Later, the company should pay annual fees for company maintenance, including for services of nominee shareholders, nominee director(s), secretary and registered address in Cyprus.
Additional fees include the services of nominee shareholders, nominee director(s), secretary and registered address in Cyprus as well as annual statutory fees. Upon demand, it is possible to order accounting and audit services.
Opening a bank account is subject to a separate fee.
Our company assists clients with company formation in Cyprus. Our fee includes incorporation costs and company certificates issued by the Registrar of Companies. We act on behalf of our clients and prepare all necessary documents for filing. Above all, we advise our clients on legal and tax matters.
The fee for the company registration in Cyprus is 950 Euro.
In order to register a company in Cyprus, it is required to follow these steps:
- reserve a company name prior to incorporation;
- prepare memorandum and articles of association, provided that there is no standard template in Cyprus;
- appoint director(s) and secretary, alternatively use nominal services of director(s) and nominal shareholder(s);
- rent an office or use nominal services of registered office address in Cyprus;
- pay statutory fees;
- submit documents to the Registrar of Companies;
- receive company incorporation certificate and other certificates;
- receive tax number.
All documents can be submitted in English.
Once the company is approved for registration in Cyprus, the Registrar of Companies issues the company incorporation certificate in English. The certificate of incorporation confirms company registration and contains company registration number.
Additionally, the Registrar sends the following documents: Certificate of directors and secretary in English, Certificate of registered office in English as well as Memorandum and Articles of Association. The latter is provided in certified Greek version with English translation.
With the certificate of incorporation, the company should register with tax authorities for obtaining a tax identification number.
Among the standard set of incorporation documents in Cyprus, shareholders of Cypriot companies prefer to sign shareholders’ agreements. Shareholders’ agreement outlines an arrangement of shareholders on how they agree to operate the company. It includes matters related to company’s governance, appointment of key executives, shares and its distributions, shareholders’ rights and obligations, transfer of shares, resolution of any disputes between shareholders, etc.
The shareholders’ agreement need not be submitted to the Registrar of Companies, however, the company’s director(s) and secretary should be acknowledged with this document.
The information below is given as a checklist for company incorporation in Cyprus:
- International Passport Copy
- EU issued ID card
- Utility bill no older than 3 months. If this document is not in Latin letters, certified translation should be provided
- Copy of official ID document showing address. If this document is not in English, certified translation should be provided
- Signed Nominee (Trust) agreement
Personal meeting /Call
- Meeting or call is held with UBO -> completed UBO identification form
- Risk check list completed by manager;
- DD form for entities completed and signed by UBO;
- DD form for UBO completed and signed by UBO
- Reference letter from bank/auditor/lawyer (choose one)
- UBO printout from google
- Translator with signature, name and seal of translator
The procedure for registering a company in Cyprus is rather quick and it usually takes 2-3 weeks to complete the registration.
The Registrar of Companies in Cyprus is the official body in Cyprus responsible for registration of business entities, such as private or public companies, partnerships, overseas companies, etc. The Registrar performs other important duties related to companies, including forms for submission of applications, sending decisions, name approval, changes to company names and other formalities related to companies established in Cyprus. Each company is required to submit annual financial documents and annual reports of changes that took place in the company during the reporting year to the Registrar of Companies. The Registrar of Companies has an official website, though some of its parts are provided in Greek.
The cost of company incorporation in Cyprus is Euro.
Taxes in Cyprus
Cyprus offers a modern and transparent tax system. Resident companies enjoy numerous tax benefits based on the Cyprus double taxation treaties with over 55 countries. To be considered as a Cyprus tax resident, a company shall maintain management and control in Cyprus. These double taxation treaties allow to offset (deduct) taxes paid in one of the states from income that is taxable in another state; tax exemptions or reduced withholding tax rates in relation to various types of income; obligations on the mutual exchange of tax information, etc.
Cyprus is also a party to the Convention on Mutual Administrative Assistance on Tax Matters 1988 and Multilateral Competent Authority Agreement on Automatic Exchange of Financial Information (MCAA).
Taxable period is one calendar year from 1 January to 31 December. Cypriot companies submit annual tax return within 15 months from the year-end to which it relates.
Corporate income tax rate in Cyprus is 12,5%.
Dividends of Cypriot resident company (both from Cypriot or foreign companies) as well as income from sale of shares are exempt from the corporate income tax in Cyprus. It should be noted that expenses incurred by a company for the purpose of obtaining taxable income may be deducted from the income provided that their evidence is properly documented.
Dividends and interest payable by a Cypriot company to non-residents (either legal entities or individuals) are exempt from the withholding tax in Cyprus.
Active interest income (i.e. interest earned in the normal course of business of a company) is subject to income tax at the rate of 12.5%. No withholding tax on payments is imposed to foreign recipients.
Royalty income is subject to income tax at the rate of 12.5%. Royalties to be paid to non-residents for use of IP rights in Cyprus are subject to 10% withholding tax. If IP rights are not used in the territory of Cyprus, royalties paid to the owner of such rights are not subject to withholding tax in Cyprus. Tax rate may be reduced under applicable double taxation treaty or the EU Interest-Royalty Directive.
All Cypriot residents are subject to special contribution for defence on the source of income: for dividends in the amount of 15%, for interest income in the amount of 10%, etc. The defence contribution is not applied to non-residents.
The annual levy of 350 euros must be paid by 30 June of each year by all companies incorporated in Cyprus.
The disposal of shares of a Cyprus company by its foreign shareholder is exempt from taxation in Cyprus. The 20% rate applies to the disposal of immovable property in Cyprus.
The standard VAT rate is 19% and reduced VAT rate is 9%, 5% and 0%.
Tips: Recently, Cyprus introduced so called IP box regime that is effective from 1 July 2016. The new regime applies to Research and Development expenditure incurred by the taxpayer. As per the new IP box regime, qualifying taxpayers will be eligible to claim a tax deduction equalling 80% of qualifying profits resulting from the business use of the qualifying assets. A taxpayer may elect not to claim the deduction or only claim a part of it. In the meantime, if the taxpayer outsources R&D expenditure, then it cannot be treated as qualifying expenditure for the purpose of the IP box regime. You should consult with experts on tax optimization in Switzerland and we are ready to advise you on this matter.
As in other jurisdictions, a liquidation of a company in Cyprus can be done voluntary or involuntary. The term and cost of liquidation depends on certain aspects. Dormant companies can be simply dissolved. In case a company has debts, the formal liquidation procedure shall be followed which takes a few months.
A liquidation request in Cyprus can be filed with the court by the company itself, any shareholder, Official Receiver or creditor. The company is liquidated in Cyprus based on the following grounds:
- Shareholders of the company decide by a special resolution that the company should be dissolved;
- The company does not operate within a year after the date of its incorporation or suspends its business for one year;
- The company cannot pay its debts;
- The company failed to deliver statutory report to the Cyprus Register of Companies.
Upon such qualified decision is made, the liquidator is appointed who prepares the final financial statements, calls for filing of claims and distribute net assets. The liquidator prepares final balance sheet, settle debts to creditors, and pays all taxes and wages. Once all the debts have been paid to creditors and all the tax liability has been satisfied, the company is dissolved and cancelled in the Cyprus Register of Companies.
It should be noted that in case of voluntary or involuntary liquidation, a Cyprus court can restore a Company to the register within two years in certain cases, including if any assets are discovered that should be distributed to creditors. A Cyprus company may apply to the Registrar to be written off the register if: a company is not trading, has no assets and liabilities, no creditors. In this case an affidavit is submitted to the Cyprus courts by the directors. However, any shareholder, creditor or liquidator can apply to restore the company to the register for up to 20 years after its date of write-off.