Cyprus

Doing Business in Cyprus

Introduction

Cyprus is an island situated in the northeastern Mediterranean Sea at the crossroads of Europe, Asia and Africa. The capital city is Nicosia, which has a population of about 200,000 people.

Cyprus gained independence from Britain in 1960 and adopted a presidential system of Government with elections for the President taking place every five years. In 1974 Turkey invaded Cyprus and has since occupied the northern 40% of the island. There are ongoing and longstanding negotiations to reunify the island.

The official languages are Greek and Turkish but English is widely spoken and is the language mostly used in business, government and the courts. Laws are based on the English legal system and company law is modeled on the UK Companies Act 1948. Cyprus has been a full member of the European Union since 2004 and adopted the Euro as its currency in 2008.

Ready-made companies in Cyprus are now available!

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Company Information

A Cyprus company is defined as a Limited Liability Company (LLC) incorporated in the Republic of Cyprus. Cyprus Company has the following characteristics:

Compliance

Taxation

The main features of the Cyprus tax regime are as follows:

  • A uniform corporate tax rate of 12.5% is applied to all companies.
  • Dividend income is exempt from tax in Cyprus. It is also exempt from the special defence contribution of 20%, provided that the company paying the dividend either engages directly or indirectly in activities that give rise to more than 50% non-investment income, or the tax burden on the dividend paying company’s income is not lower than 6.25% irrespective of its source. Credit for foreign tax suffered is given, irrespective of the existence of a treaty.
  • Interest income is exempt from corporate tax unless it is received in the ordinary course of business in which case it is taxed like normal trade income. A special defence contribution of 30% (15% up to 28 April 2013) is payable by tax residents but credit is given for foreign tax suffered irrespective of the existence of a treaty.
  • Profit from the disposal of securities is exempt from tax in Cyprus.
  • Profits of a permanent establishment maintained abroad by a Cyprus company are exempt from tax in Cyprus (subject to certain conditions).
  • There is no withholding tax on dividends paid to non-resident shareholders.
  • There is no withholding tax on interest payments made abroad.
  • There is no withholding tax on the payment of royalties derived from outside Cyprus.
  • Various reliefs are introduced on company reorganisations.
  • Group relief is introduced.
  • Losses can be carried forward 5 years from 1 January 2013.

The above benefits, coupled with the fact that Cyprus has an extensive treaty network with more than 40 countries, provide an environment in which very advantageous tax structures can be put in place using a Cyprus company.

Shareholders

A minimum of one shareholder is required and details appear on the public registry but anonymity can be retained by the use of nominee shareholders. Bearer shares are not permitted.

The minimum number of shareholders is one.

Directors

A minimum of one director is required and details appear on the public registry but anonymity can be retained by the use of third party directors. There is no legal requirement that the directors be Cyprus resident but in order to obtain relief under the taxation treaties signed by Cyprus it is likely that the company would need to be seen to be Cyprus resident and therefore have a majority of the directors based in Cyprus.

Annual Reporting

Companies need to comply with the following filings annually:

  1. The company annual return must be submitted to the Registrar of Companies.
  2. Audited financial statements must be submitted to the Registrar of Companies.
  3. An annual company income declaration must be submitted to the Income Tax Authorities.
  4. Provision tax returns must be submitted on 31 July of the particular tax year and provisional taxation is payable in two equal installments. The first installment is payable by 31 July and the second installment by 31  December of the particular tax year. A revised provisional tax return can be filed at any time before the end of the tax year. The final tax return must be filed within 15 months following the end of the tax year and any remaining tax liability must be settled by 1 August following the end of the tax year.

Timescale

Normally it will take approximately seven working days from the receipt of due diligence documentation on the beneficial owners for incorporation to be achieved. In special circumstances, an accelerated process is available which would allow incorporation in five working days after receipt of those references.

Secrecy

Although details of the shareholders and directors appear on the public file, statutory secrecy provisions protect details of the beneficial owners supplied to the Central Bank.

Local Requirements

As a matter of local company law the company must maintain a registered office address within Cyprus and must also appoint a company secretary who, for practical reasons, must be resident in Cyprus. We would normally provide these services as part of our domiciliary service fee.

Name/Activity Restrictions

Names must end with the word “Limited” or “Ltd”. The following words and their associated activities cannot be used: Assurance, Bank, Building Society or any other words deem sensitive or offensive.

Disclaimer
Whilst every effort has been made to ensure that the details contained herein are correct and up-to-date, it does not constitute legal or other professional advice. IQTESADI does not accept any responsibility, legal or otherwise, for any errors or omission.