The Company | Services | Contact Information | International Companies

Introduction

Since 1975 Cyprus is promoting itself as a prominent and reputable international business center. In that year, the Government began offering the first incentives to foreign businessmen. Since then, a lot of additional incentives were given and the Government set up the legal framework for the sector. Today, Cyprus is recognized as one of the most reputable international business centers and about a thousand new companies are registered every year. Additionally, a lot of these companies have physical presence in Cyprus and employ a lot of people.

The Central Bank of Cyprus (CBC) is the supervisory authority, which was issuing the permits for the registration of international entities until 2004. After the Cyprus' accession to the European Union during that year, the procedure is not followed any longer, as there is no need for such a permit.

Nowadays, the legislation regarding the international business sector complies with the European directives and requirements. Additionally, Cyprus is cooperating with the rest of the international community with special emphasis given to the prevention of money laundering and the legislation regarding this is very strict.

As a full member of the European Union, Cyprus is successfully meeting the challenge of being part of the enlarged European family. The island’s economy is characterized by robustness and macroeconomic stability, which is evidenced by the favorable evaluations and comments of the European Commission, the International Monetary Fund and other international organisations.

During the period 2000-2005, real GDP grew by an average of 3,6% per annum, which compares favorably with the EU average. This was accomplished in an environment of full employment conditions, low inflation and a stable and strong currency. In 2005 Cyprus’s per capita GDP reached about 83% of the EU-25 average. In addition, it should be pointed out that important structural reforms within the context of the Lisbon Strategy are in progress in order to further modernize and liberalize its market-oriented economy, with a view to enhancing its international competitiveness and EU compatibility. These structural reforms, together with macroeconomic stability, provide a strong foundation for the successful participation of the island in the eurozone by 1 January 2008.

Benefits for Setting Up an International Company in Cyprus

The favorable tax incentives that have made the island attractive to both businessmen and investors wishing to expand internationally and to establish a legitimate business. It is important also to add that all rules and regulations governing tax incentives are in accordance with the European Union policies
A highly educated workforce coupled with the advanced western banking and financial system. Financial, legal and IT consultants have typically trained at European or US universities and many have worked overseas before setting up in Cyprus. They offer advice on the whole spectrum of modern business and investment.
The price of the offered services is lower than other EU countries.
The island's strategic location, excellent infrastructure, high quality of life and advanced legal system.
The island's role as a highly reputable international shipping centre, ranking among the 10 leading maritime nations in the world.
The friendliness, hospitality, low pollution and crime rates and the enviable climate.
The opportunities to combine business with pleasure.
The Free Zone Area located near Larnaca airport which was established to encourage external trade and offers various incentives, including abolishment of custom duties and taxes, in relation to imported goods and goods manufactured on-site for export.
The high standard of living, with excellent but low cost housing opportunities, the excellent telecommunications system and the advanced health services, are further reasons that make Cyprus an excellent choice for establishing an international company.
The World Bank has classified Cyprus among the high-income countries in terms of per capita income, while the United Nations place Cyprus amongst the world's high-rated countries in its Index of Human Development

Tax Benefits and Treaties

General

Because of its EU accession Cyprus reformed its Tax System in 2003 in order to comply with the EU requirements and within the OECD requirements against harmful tax practices. As from 1st January 2003 tax is imposed on all Cypriot resident persons (individuals and corporations) on their worldwide income. A corporation is tax resident when its management and control is exercised in Cyprus. An individual, on the other hand is tax resident when he/ she spends more than 183 days in a calendar year in Cyprus. Corporation Tax The tax rate is 10%, which is the lowest standard rate in the EU.

Dividend Income

Corporations do not pay tax on dividends received from other Cypriot tax resident companies. Dividends received from foreign corporations are exempt, when the following requirements are met. The dividend receiving company must own at least 1% of the share capital of the paying company. The exemption will not granted if:

Directly or indirectly more than 50% of the activities of the paying company result in investment income, and
The paying company is subject to tax at a rate substantially lower than the Cypriot rate

When dividend income is not exempt, there is a 15% defense tax contribution. Tax credits for taxes paid abroad are available. The exemption from tax also applies to profits of a permanent establishment the Cypriot Company has in another jurisdiction.

Interest Income

When interest income is the result of the ordinary activities of the company, it is subject to tax. If the interest income does not derive from the ordinary activities of the company, then it is subject to tax both for corporation tax and defense tax contribution. Group finance interest income is considered as trading income.

Other significant provisions

Companies that are part of a group can consolidate their results and set off losses of one company against profits of another company. Losses can be carried forward indefinitely. Mergers, acquisitions and spin offs, can be effected without tax cost.

Withholding Taxes

Cyprus does not impose any withholding tax on dividend, interest and royalty payments made to non-Cypriot resident recipients. In the case of the royalties, the exemption applies for royalty payments when the right/asset is used outside of Cyprus. If the royalty payment is for right/asset used in Cyprus, there is 10% withholding tax, subject to treaty provisions.

Expense Deductibility

According to the law all expenses incurred for the production of the income are deducted before arriving at the taxable income.

Stamp Duty

Under the legislation, stamp duty is imposed on documents referring to assets in Cyprus, or matters or things that will be done in Cyprus, irrespective of where the documents are signed.

Stamp duty rates:

If the agreement does not include values on which the stamp duty will be calculated then the rate is CYP 20. If the Stamp Duty Commissioner can determine the value the rate is between 0.15% - 0.20%. The duty is payable within 30 days after the signing of the agreement.

VAT

If the company is a holding company without any other activity, it will not be a taxable person under the VAT legislation. However, if the holding company is involved in other activities as well, such as the management services or granting of loans, then it may be entitled to deduct VAT that it suffers on expenses incurred in Cyprus or self-charged under the reverse charge provisions.

Tax Treaties

Cyprus has a higher number of double tax treaties than any other country specializing in the international sector. This wide network of double tax treaties offers valuable international tax planning opportunities and advantages.

The primary purpose of these treaties is to avoid double taxation of income earned in any of the treaty countries. This is usually achieved either through the allowance of the tax credit against the tax levied from the taxpayer by his country of residence, or through tax exemption in one contracting state of the income taxed in the other contracting state. Normally, the result is that the taxpayer pays no more than the higher of the two rates.

Forming a company

The following material is required for the approval and formation of a company:

The proposed name which has to be initially approved by the Registrar of Companies. Therefore, to avoid any delays it is wise to submit for approval at least two names, in order of preference, just in case the first selection is not accepted.
The amount of the authorized capital of the company that is the capital available for issue in any currency. Capital duty is payable on the authorized capital. Thus, it is usual to incorporate a company with the minimum authorized capital for the minimum duty.
The amount of the issued and paid up capital of the company, that is the capital actually taken up by way of subscription or allotment by the shareholders, is CYP 1.000. The company may open up offices in Cyprus, obtain temporary residence, work permits and be eligible for customer relief. To do so, the paid up capital of the company must be at least CYP 10.000.
The main objectives of the company as well as its business endeavors.
Full information regarding the shareholders, the directors and secretary of the company such as: Full name, Profession, Nationality, Full address, Respective shareholding (in case of the shareholders only).
If full anonymity and confidentiality is desired, nominee shareholders may be appointed to hold the share certificates in trust for the beneficial owner.
If the beneficial owner is a foreign legal entity and intends to open an office in Cyprus, a shareholders' and directors' certificate is submitted along with the application. If there are no plans to open an office in Cyprus, a copy of the certificate of registration is sufficient.
A bank reference is required for the intended shareholders.

Documents Required:

Corporate Clients

International Companies Registered in Cyprus

Certificate of registration
Memorandum and articles of association
Certificate of directors and secretary
Certificate of shareholders
Certificate of the address of the company's registered office

Companies Registered in Foreign Jurisdictions

All of the above documents.
In case that no certificates are issued from the authorities, then all minutes, since the FIRST MEETING OF THE SUBSCRIBERS appointing the directors, registered office and secretary of the company (where applicable) UNTIL TODAY, are required.

Notes & Additional documents

Photocopies of valid passports of the directors, bank signatories and ultimate shareholders are required.
Bank reference for the above.
Proof of residential address of the ultimate shareholders.

Individual Clients

Photocopy of a valid passport.
Bank reference.
Proof of residential address.

Snapshot on Cyprus tax incentives

A standard uniform corporate tax rate of 10%, the lowest in Europe. With proper tax structuring much lower effective tax rates can be achieved.
A fully EU and OECD compliant tax system. Cyprus is a respectable EU, non-offshore, non-tax haven jurisdiction.
Investor-friendly Tax Authorities.
Most advantageous provisions relating to holding companies, finance companies, royalty companies, permanent establishments outside Cyprus, companies trading in securities, Cypriot non-resident companies (companies registered in Cyprus with management & control exercised outside Cyprus).
Access to EU Directives enacted into Cyprus Law.
Access to a wide and in many cases particularly beneficial double tax treaty network.
Foreign dividend income exemption (participation exemption), in most cases.
No capital gains tax or net worth taxes except with respect to real estate situated in Cyprus.
No withholding taxes, in most cases.
No specific substance requirements and an absence of strict transfer pricing rules.
Foreign beneficiaries are not liable to pay additional tax on dividends or profits over and above the amount paid or payable by the respective legal entities.
Low personal tax rates and low social insurance contributions.
Mergers, Takeovers and other Re-Organizations can take place within groups without tax consequences.
Unilateral tax-relief for foreign tax suffered is granted to all Cypriot companies.
Tax losses can be carried forward indefinitely and can also be surrendered as group relief.
Interest deduction for borrowing costs provided.
Added commercial value and monetary benefits due to the ability to register for EU VAT in Cyprus.

Non-tax Incentives

Cyprus has an excellent infrastructure allowing clients to create substance to their tax planning in the form of setting up fully flexed offices and operations.
Very low expense level for financial and professional service provision and operational costs in general, compared to other EU Jurisdictions.
English is the most widely used business language. The Cyprus Legal System is based upon English Common Law.
Modern and efficient multilingual banking and financial services sector.
Professional, friendly and efficient Government services and Tax Authorities and a mature professional services sector.
Strategic location and time zone, excellent air and sea connections and telecommunications.

Services Offered

Company formation.
Corporate administration, including invoicing, opening and maintenance of bank accounts with local and international banks, handling of correspondence with third parties and local regulatory authorities.
Bookkeeping and maintenance of corporate records, including monthly bank reconciliations and preparation of annual statutory financial statements in accordance with International Accounting Standards.
Management reporting.
Corporate secretarial work, including maintenance of statutory registers, preparation of board and shareholders’ meetings, maintenance of all minutes and generally compliance with statutory requirements.
Payroll services.
Registration of ships and administration of shipping companies.
Provision of nominee shareholders.
Provision of directors and company secretary.
Registered office, mail forwarding, telephone, fax, e-mail facilities.
Provision of archive storage facilities.
Trust formation and trustee services.