Company formation in Cyprus

Company formation in Cyprus involves a number of actions to create a legal entity on the territory of the Republic of Cyprus. Cyprus is one of the most attractive countries for company incorporation due to its tax regime, stable economy, strategic location and business-oriented legislation.

Before joining the European Union, Cyprus was considered a classic offshore jurisdiction. After becoming part of the EU and the integration of local corporate legislation, Cyprus cannot be considered as an offshore, contrary to popular opinion.

Cyprus is one of the most attractive countries for IT companies and holding companies.

Company formation in Cyprus - advantages

1. Tax incentives: Cyprus is known for its tax regime, which provides companies with reduced rates and various tax incentives. One of the main advantages is the income tax rate, which is 12.5% , which is one of the lowest in Europe;
2. Stable economy and favorable business climate : the country offers a developed financial and legal infrastructure, access to international markets and attractive conditions for forming a company in Cyprus;
3. Convenient geographical location: Cyprus is located at the crossroads of Europe, the Middle East and Africa, making it a strategically important location for business and trade. This provides access to different markets and the possibility of establishing business connections in different regions;
4. Ease of doing business: The process of incorporating a company in Cyprus is relatively simple and fast, the country's legislation is adapted for business, which makes it much easier for entrepreneurs to manage a company;
5. Cyprus provides a high level of business data confidentiality and asset protection;
6. More than 60 signed agreements on the avoidance of double taxation;
7. Financial reporting is prepared in accordance with international standards (IFRS);
8. Special IP-Box tax regime for IT companies that generate intellectual property on the territory of Cyprus;
9. Cyprus is quite often used in connection with the Curaçao gambling company as a payment agent.

Read about company formation in Hong Kong

Cyprus is considered to be a good choice for specific types if businesses

Forming a company in Cyprus is a good solution for various businesses. Here is a list of popular types of activities for which Cyprus is often chosen for company registration:

• IT services: Cyprus attracts IT entrepreneurs thanks to its favorable tax environment and the availability of highly qualified specialists. Software development, web design, cyber security and other IT services can be successfull in Cyprus. You can also open an account in the payment system when registering a company in Cyprus;
• Marketing and advertising;
• International trade;
• Companies providing sea transportation services;
• Import-export of goods;
• Holding company - receiving payments in the form of dividends, interests, royalties;
• Digital commerce;
• Ownership of intellectual property (special IP Box intellectual property taxation regime).

Organizational and legal forms of business in Cyprus

Private entrepreneur (PE)

Conducting business activities through the status of a private entrepreneur (PE) means independent entrepreneurial activity without formation of a legal entity. A private entrepreneur does not have a separate legal status from - the entrepreneur bears personal responsibility for all obligations and losses related to the business by its personal assets. PEs in Cyprus usually work without employees and their activities are subject to personal income tax at a rate from 0 to 35%. This form of business is suitable exclusively for residents of Cyprus.

Limited Liability Company (LTD — Private Limited Company)

LTD is one of the most common organizational and legal forms of companies in Cyprus.

Private Limited Company - a legal entity with a separate legal status from its members. This means that the owners (shareholders) have limited liability for the company's obligations - they are liable only to the extent of the value of their shares. There are no requirements with regards to minimum authorized capital. The number of shareholders are limited by 50 persons. Usually, the authorized capital is in the amount of EUR 1,000.

Rights and obligations of shareholders are detfined by the company's statutory documents.

It is allowed to issue different classes of shares, which provide for different levels of rights and obligations for shareholders who own such shares. This is useful, for example, if an IT company wants to issue options to its own employees with the right to purchase the company's shares.

Branch of a foreign company

A branch of a foreign company in Cyprus is a legal structure representing a foreign company on the territory of Cyprus. The branch does not have a separate legal status from the parent company, it is part of a foreign company and acts on its behalf.

This legal form of the company can enter into agreements and sign contracts on behalf of the parent company, is subject to taxation according to the laws of Cyprus and must keep its financial records.

Cyprus Trust

A trust is a legal structure that is used to preserve and manage assets and according to which the founder of the Trust transfers its assets to the Trustee, who is obliged to manage the assets for the benefit of the Beneficiary or to achieve a certain goal under the conditions stipulated by the Trust Deed.

Read about company registration in the Czech Republic

Structure and main characteristics of a company in Cyprus

The standard  amount of the authorized capital  is 1000 EUR (the minimum is 1 EUR). It is not necessary to pay the authorized capital.

A legal address in Cyprus is required  (depending on the registration address, the company must pay an annual tax to the municipality in the amount of approximately 100-150 EUR).

A secretary  is a mandatory position (must be resident of Cyprus). The position of secretary and director cannot be held by the same person. The secretary can be both a corporate (legal entity) and an individual.

The minimum number of directors  is 1. There are no residency requirements, but in order for the company to become a tax resident of Cyprus, the director must be local. A director can be either an individual or a legal entity. If a non-Cypriot resident wants to actively participate in the management of the company, it is advisable to manage the company through the Board of Directors, the majority of which are residents of Cyprus. For example, two directors are Cyprus residents, one director is a non-resident.

Registration of a company in Cyprus requeires a minimum  number of shareholders  - 1 (maximum - 50). There are no requirements regarding the residency of a shareholder: it can be both an individual and a legal entity.

Necessary documents and information to register a company in Cyprus

To register a company in Cyprus, we need the following documents and information:

1. Certified copy of the passport. The certification must be in English or with an English translation;
2. Proof of residence  (not older than 3 months). A Utility Bill or a bank statement with the specified address will suffice. The document must be in English or translated into English and certified;
3. Resume (CV)  ;
4. A letter of recommendation  from a bank, а lawyer or an auditor in English.

Read about company formation in Estonia

Procedure of company formation in Cyprus

Corporate taxes in Cyprus

Cyprus offers one of the most favorable tax regimes among all EU countries:

• The corporate tax rate is 12.5%. This is one of the lowest rates in the European Union. Resident companies are taxed on their worldwide profits from any commercial activity.
• Tax on dividends – 0%. Both dividends received by a Cyprus company from a non-resident company and dividends paid by a Cypriot company to a non-resident are exempt from tax.
• The annual fee (Annual Levy)  is a mandatory payment for all companies, which is  350 euros.
• VAT (Value Added Tax)  -  19%.
• Capital Gains Tax  -  20% . It is important to note that there is no tax on capital gains: (1) when selling shareholding in a foreign company; and (2) if income is derived from foreign securities.

Changes implemented in the Cyprus tax legislation, which became effective in 2023

Starting December 31, 2022, Cyprus has introduced a Withholding Tax in cases where dividends, interest or royalties are paid to recipient companies that are tax residents in countries listed in Annex I (Annex I) of the EU black list.

The list of countries included in  the "black list"  of the EU is listed below:

• Dividends  – Dividends paid to recipient companies that are tax residents of blacklisted countries are taxed at a rate of 17%.

• Interest - Interest paid by a Cyprus tax resident company to a blacklisted tax resident company is taxed at a rate of 30%.

• Royalties – royalties paid by a Cyprus tax resident company to a blacklisted tax resident company are taxed at a rate of 10%.

Accounting in Cyprus

The fiscal year  in Cyprus is the same as the calendar year - that is,  it starts from 01.01 and ends on 31.12 of the corresponding year.

The director of the Cyprus company is obliged to maintain proper accounting records (documents that can properly explain the transactions and confirm the financial status of the company), which are necessary for proper preparation and maintenance of financial accounts.

Registration of a company in Cyprus implies that all companies must prepare audited financial statements  in accordance with International Financial Reporting Standards  (IFRS). Such financial statements are attached to the annual report when submitted to government authorities.

Based on financial statements, the HE32 form is submitted to the Registry, and the IR4 form is submitted to the tax office (submission of these forms is mandatory).

The Annual General Meeting  must be held annually, and the interval between meetings must not exceed 15 months.

The annual report  is submitted within 42 days from the date of the annual general meeting. The company must submit a copy of the annual report to the Registrar of Companies.

A quarterly VAT report  (if the company is registered as a VAT payer) is submitted no later than the 10th day of the month following the reporting period (quarter).

Read about company formation in Poland

Audit in Cyprus

Companies registered in Cyprus must annually:

• prepare an audited financial report;
• on the basis of the annual audited report, submit a tax return to the relevant regulatory authorities of Cyprus; and
• submit a Company Return to the Registrar of Companies.

Tax residency certificate in Cyprus

The tax residency certificate of a Cyprus company  confirms the relevant status of a legal entity in this country and that the company is subject to taxation in Cyprus.

Usually a certificate is required for the purposes of applying double taxation treaties. However, the relevant document can often be requested by the company's counterparties for Due Diligence.

The main criterion for determining tax residency is the place of effective management and control of the company. Thus, the majority of directors should be resident in Cyprus.

Below is an example of a tax residency certificate for a company in Cyprus:

Opening a corporate bank account in Cyprus

It should be noted that banks in Cyprus have gone through several financial crises which negatively affected the reputation of the local banking system.

However, as of 2023, Cypriot banks work smoothly.

The entire banking system of Cyprus is controlled and supported by the government.

Cypriot banks strictly comply with all EU Regulations, Recommendations and Directives and, accordingly, carefully check each potential client in terms of compliance and Due Diligence. In order to open an account in a Cypriot bank, you need to carefully prepare the application, collect the set of necessary documents and information.

Banks in Cyprus require economic presence, i.e. substance (rental agreement for premises, employed employees, etc.). Taxters helps clients with the organization of substance in Cyprus. 

How to open a corporate bank account in Cyprus

In order to open a bank account in Cyprus the following is required:

1. Corporate documents:  The standard set of corporate documents: certificates from the registry, memorandum of association and articles of association;
2. KYC Documents regarding each individual in the structure of the company - directors, shareholders and beneficial owners: passport; proof of address; source of funds and source of wealth. In addition to these documents, the director and beneficial owner need to provide a detailed CV in order prove experience in a particular type of business; diplomas from the university, certificates of completion of professional courses;
3. Information for opening a corporate bank account:

• Contact details of the company and the account manager (telephone, mail, skype, address for correspondence);
• Reason for opening a bank account;
• If the company previously had an account with another financial institution, account statements with another bank or payment system should be provided;
• If the company is not newly incorporated, scanned copies of signed contracts along with invoices will be required;
• If the company is engaged in trading activities, then waybills may be required;
• How the account will be used, what kind of transactions are planned;
• Where will the money come from to the account and in what currency;
• Where will the money go from the account and in what currency;
• Number of incoming and outgoing transactions per month;
• Account turnover (annual and monthly);
• Details for all counterparties, in particular: name, country of registration, name of the payment institution where the counterparty has an account.

We recommend considering the following banks for opening a corporate account for a company in Cyprus:

Bank of Cyprus

Bank of Cyprus - received the Best Domestic Private Banking award at the Euromoney Awards in 2023. For the seventh time Bank of Cyprus has received the title the bank best for private banking in Cyprus.

Along with traditional banking products, Bank of Cyprus also provides a wide range of investment services and specialized services, including Private and Affluent Banking, Wealth planning, custody services, brokerage services, asset management and investment banking services.

Hellenic Bank

Hellenic Bank Group began operations in 1976 and quickly became one of the largest financial institutions in Cyprus.

In addition to traditional banking products, Hellenic Bank Group also provides a wide range of financial services, including factoring, brokerage, insurance, equity portfolio management, investment banking, private banking and custody services.

Hellenic Bank Group has created a customer-centric structure to meet the various needs of its broad customer base. To this end, a number of business units have been created to serve different customer segments.

Fibank 

First Investment Bank (Fibank) is one of  the leading banks in Bulgaria, constantly developing and having branches in Cyprus  and Albania.

Fibank is an innovative and client-oriented financial institution offering a wide range of products and services for both individuals and legal entities. Fibank is one of the leading institutions in Cyprus in the field of international payments. Fibank is one of the best savings banks that offers high quality customer service in line with the best banking practices. The Bank constantly improves the level of its service and offers its corporate clients new payment solutions and modern banking.

Why you should contact Taxters for company formation services in Cyprus

Company formation in Cyprus  is a complex process that includes a number of legal, tax and administrative issues. Registration of a company requires accuracy and care when filling out documents and performing all procedures. You should apply to Taxters to open a company in Cyprus, because:

1. We know all the requirements, procedures and documents required to register a company;
2. At the very beginning,  we advise  on the selection of the legal form of the company, ownership structure and other financial and corporate aspects before starting the registration of a company in Cyprus;
3. With over a decade of experience, we register Cyprus companies  without errors, delays or problems;
4. We help optimizing the tax burden  and ensuring compliance with the tax rules of the country;
5. We are well skilled in the registration procedure and are familiar with the requirements for opening a company in Cyprus, so we quickly prepare the necessary documentation, ensure communication with the relevant authorities and  speed up the process as much as possible.

Press the  "Quick Consultation" button  and our team will gladly help and answer all your questions.

You are reading the English version of the webpage.

Ukrainian version and Russian version are also available.

Written by: Valeria Nevinchana, Pavlo Dubynskyi, June 2023