Interested to register a company in Cyprus?
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.
What types of legal entities is it possible to incorporate 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.
How long does it take to register a company in Cyprus?
The procedure for registering a company in Cyprus is rather quick and it usually takes 2-3 weeks to complete the registration.
What documents is it necessary to submit for incorporation?
Signed Nominee (Trust) agreement
Meeting or call is held with UBO -> completed UBO identification form
What are the requirements for company names in Cyprus?
Prior to the registration, company name must be approved by the Department of Registrar of Companies and Official Receiver. The company name cannot be identical or closely similar to other existing company name registered in Cyprus. Apart from it, the corporate name can be rejected by the Department of Registrar of Companies and Official Receiver if the name is general (without distinctive characteristics), offends country or religion; or if the name relates to a geographical name. 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.
What is a company legal structure in Cyprus?
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 the director and the 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.
Is accounting obligatory for Cyprus companies?
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.
Is it necessary to audit Cyprus 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.
What is the cost of company formation in Cyprus?
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).
What is a taxable period in Cyprus?
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.
What is corporation tax rate in Cyprus?
Corporate income tax rate in Cyprus is 12,5%.
How are dividends taxed in Cyprus?
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.
What is interest tax rate 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.
What is royalties tax rate in Cyprus?
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.
Do Cyprus company pay any special contributions?
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.
What is capital gains tax rate 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.
What is VAT rate 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.
What are the grounds for company liquidation in Cyprus?
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.
What is the procedure of company liquidation in Cyprus?
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.
Can a company be restored after liquidation in Cyprus?
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.