There are many advantages in registering a company in Cyprus. First and foremost is the advantage of Cyprus as a jurisdiction, geographical location and tax system.
About Cyprus
Cyprus is located in the south eastern Mediterranean and its capital is Nicosia. Cyprus was a British colony which attained independence from Britain in 1960. On 1/5/2004 Cyprus joined the EU as a full member and on 1/1/2008 it joined the Euro-zone. Cyprus is also a member of the British Commonwealth, the UN, the WTO and several other International Organisations.
Services are the main industry of Cyprus. The services industry which includes financial, professional and business services, shipping and ship-management and tourism is the most significant economic industry in Cyprus. It is noted that hydrocarbons have recently been discovered in the Cyprus economic zone and permissions have already been granted to international companies for drilling. The discovery of gas reserves is expected to be a big driver for investments and growth and will open jobs for several hundreds of Cypriots.
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Advantages of Cyprus as a Jurisdiction
Apart from the relatively low corporate tax rate of 12.5% applicable to Cyprus resident companies and other attractive features of the Cyprus tax system, a number of other reasons have contributed to the successful development of Cyprus as a jurisdiction for registering companies:
Status: Cyprus is a low tax jurisdiction for business in the EU with access to the EU Directives and the EU Arbitration Convention
Location: It is located in the south eastern Mediterranean, on the east of Greece, south of Turkey and on the north of Egypt and Israel. It is commonly advertised as being strategically located at the cross roads of the Middle East and Europe, Africa and Asia. It also has a favorable time zone. (2 hours ahead from London and 1 hour ahead from mainland Europe.)
Infrastructure: There are excellent air and sea communications and telecommunications. There is also a very good commercial infrastructure with well qualified lawyers, accountants, banking and fiduciary services etc.
Services: It has mature systems of legal, accounting and banking services at reasonable prices. The legal system is strongly rooted to the English legal system as amended by EU legislation. International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) are followed by the accounting profession.
Language and skills: English is widely spoken. There is a well-educated, highly qualified and trained multilingual workforce.
Costs: Set up costs, operational and professional costs are reasonable. Also important is the ease of adding substance to a Cyprus presence and residence by operating through fully fledged offices.
Capital Duty: Upon incorporation of a company a capital duty is payable at €102.52 together with a rate of 0.6% payable on authorized share capital.
Network of Double Tax treaties: There are DTT with approximately 50 countries which makes Cyprus a very beneficial jurisdiction to set up a company.
Other: Business friendly environment and a member of the euro-zone.
Key People
Advantages of Registering a Cyprus Company
There are many reasons for registering a Company in Cyprus. Among these, are, the advantages of Cyprus as a jurisdiction, the ease of setting up a company in Cyprus, the Tax Benefits of Cyprus and the Anonymity enjoyed by the incorporators of the company.
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Ease of Setting Up a Company in Cyprus
The procedure of setting up a Company in Cyprus is easy. You can either incorporate your own company or alternatively you can buy a shelf-company.
Incorporating a Cyprus Company
Incorporating a new Cyprus Company involves the following Steps:
- Purposes: We will require you to provide us with a description of the purposes and activities of the company. These for example may relate to the provision of services to the sale of goods/products. They can also be a combination of activities of general application. These will allow us to provide you with the Memorandum and Articles of Association.
- Know Your Client (KYC):Under the Regulations governing the legal profession in Cyprus we have to follow standard KYC procedures.
This means that prior to registration, you will have to provide us with a completed form of information such as the copy of shareholders’ passports (if the shareholder is accompany we require the certificate of incorporation), residential address (if a company we require the certificate of the registered office).
A similar procedure applies in order for us to proceed with the appointment of Directors as well as the Secretary of the Company. All documents which are not in the English (or Greek) language must be translated, certified and apostilled in accordance with the Hague Convention.
To learn about all the documents that we will require from you please click here.
- Name Approval: A name is sent for approval to the registrar of Cyprus Companies. The name may take up to 10 days to be approved. If not approved the process must be repeated. For this reason, we usually advise our clients on the likelihood of the name being accepted.
- Registration of Company:We then proceed with the registration of the Company under the name approved by the Registrar of Cyprus Companies. This process takes approximately another 5 working days.
Ability to purchase shelf companies
There is no need to wait for incorporating a new company as you can buy a shelf company. By purchasing a shelf company waiting time is eliminated.
A Cyprus shelf company is a company which has already been incorporated and is available for sale to a client who wishes to immediately start doing business in Cyprus.
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Anonymity
If anonymity of shareholders is required, the company’s shares may be held on trust by individuals or companies or they may be held by nominee shareholders (for an explanation of nominee shareholders please click here).
In case the shares are held on Trust, such trusts may need to be registered (without disclosing the identity of the ultimate beneficial owners) with the Cyprus Bar Association. It should be noted that as Administrative/Corporate Service Providers, we are legally required to keep all the information of the ultimate beneficial owners of the shares.
After we register a company in Cyprus, we can offer a range of other services which include secretarial services, fiduciary services, opening of bank accounts with banks in Cyprus or abroad. You can find more about the services we offer at the services section of our website.
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Tax Benefits of registering a company in Cyprus
Unlike other tax-favourable jurisdictions which may impose low corporate income tax, Cyprus is a trusted tax-efficient jurisdiction with a wide range of double tax treaties in place, offering one of the most advantageous tax systems in the EU.
Cyprus’ corporate income tax rate is at the rate of 12.5% and it is the lowest in the EU. At the same time Cyprus is not considered a tax haven as it is included in the OECD white list. This makes Cyprus a very competitive jurisdiction to set up a company.
The EU Parent-Subsidiary Directive has also played a significant role in eliminating withholding tax.
Below we list some of the other tax benefits of registering a company in Cyprus:
Dividends Payable by Cyprus Companies
There is no withholding tax on dividends paid by Cyprus Companies to non-residents whether companies or individuals.
Dividends received by a resident or non-resident company, are generally exempt from corporation tax and Special Contribution for Defence (SCD).
Dividends received by a Cyprus resident company from a Cyprus resident company are exempt from Special Contribution for Defence. (This is unless dividends are paid out of profits which are more than 4 years old.)
Interest
Interest paid to non-resident companies is not subject to any tax.
Interest paid to a resident Cyprus Company is subject to a Special Contribution for Defence tax at a rate of 30% (withheld at source) unless the interest is earned in connection with ordinary business activities.
Royalties
Royalties paid to non-residents are exempt from withholding tax unless the rights giving rise to the royalty are used in Cyprus in which case, they are subject to withholding tax of 5% on film royalties and 10% on other royalties.
Capital Gains
Gains arising from the sale of shares are tax-exempt, unless the gain results from the sale of shares in an unlisted company which owns immovable property situated in Cyprus.
Capital gains tax is levied at a rate of 20% on the gains from the disposal of immovable property or shares in private Cyprus Companies owning property in Cyprus.
Losses
Tax losses may be carried forward for five years for set off against future taxable profits.
Double Tax Treaties and Tax Credit
Further to the above advantages, by registering a company in Cyprus, the specific company will benefit from the wide network of double tax treaties in which the Republic of Cyprus is a party. This means that investors from foreign jurisdictions may benefit from paying additional taxes in their country of residence.
Unilateral credit relief applies for tax paid abroad; but where a tax treaty exists,
the treaty provisions apply if more beneficial. This means that, in the absence of a Double Tax Treaty by registering a Cyprus Company, a unilateral tax credit is available.
Rent
Rent paid to a Cyprus tax resident, is subject to Special Contribution for defence at a rate of 3% on 75% of the rental income. Note that Rental income is subject to personal income tax and corporation tax.
Transfer Fees on Immovable Property
Transfer fee ranging from 3% to 8% calculated on the market value of the property as estimated by the Land Registry.
Annual Company Levy of €350
An annual levy of €350 is payable by a Cyprus Company by the 30th of June every year. In case of payment between the 1st of July and the 31st of August, there is a penalty of €35 and in case of payment between the 1st of September and the 30th of November, the penalty jumps to €140.
Other taxes
Capital duty at 0.6% on the authorised share capital.
Payroll tax.
Social Security.
Stamp duty on contract relating to property or actions performed in Cyprus. (Maximum payable is €20,000)
Sale of Securities are exempt from taxation in Cyprus.