Information on Cyprus Company Formation

General
Type of entity: Private
Type of Law: Common
Shelf company availability: Yes
Time required to establish a new company: 15 days
Minimum government levy (excluding taxation): €350 annually
Corporate tax rate: 12.5%
Double taxation treaty access: Yes, if tax resident of Cyprus 
 
 
Share capital or equivalent
Standard currency: Euro
Permitted currencies: Any
Minimum issued: €1
Usual authorized: €1,000 
 
 
Directors 
Minimum number: One
Local Director: Not required, but necessary if Cyprus tax residency is targeted by the client
Publicly accessible records: Yes
Location of meetings: Anywhere, but necessary if Cyprus tax residency is targeted by the client 
 
 
Shareholders
Minimum number: One
Publicly accessible records: Yes
Location of meetings: Anywhere, but necessary if Cyprus tax residency is targeted by the client
 
 
Company Secretary
Required: Yes
Local or qualified: No, but Cyprus resident is advisable for this role for Law compliance purposes 
 
 
Accounts
Requirement to prepare: Yes
Audit requirements: Yes
Local Auditor: Yes
Requirement to file accounts: Yes
Publicly accessible accounts: Yes
 
 
Other
Requirement to file annual return: Yes
Change of Residency permitted: Yes
 
Cyprus (one of the lowest tax jurisdictions in Europe), is a suitable place for locating an intermediary company due to the island’s combination of tax treaties and low-tax regime. Dividends can flow through the Cyprus company totally tax free and the company can be used to take advantage of the extensive network of double tax treaties. 
 
 
Company formation requirements
The process of incorporating a Cyprus company is straight forward. First of all the client should decide what the name of the company will be. The Registrar of Companies will not accept a company name which is identical to the name of another company already registered in Cyprus or in any other country, a name which is similar to an already registered company, a name which is offensive or misleading, if the name includes words as national, international, democratic, European Union, Europe etc.  The approximate time required for incorporation to be completed is 15 days (depending on the workload of the Registrar).
 
 
Memorandum & Articles of Association 
Every limited liability company in Cyprus must have a Memorandum, which denotes the activities in which the company may engage and the Articles of Association which is a document that contains, inter alia, the duties and responsibilities of its members defined and recorded clearly.
 
 
Authorised and issued share capital
The share capital must be expressed in Euro (€). The usual authorized share capital of a Cyprus company is €5,000 and the usual issued share capital is €1,000. The authorised capital of a company is the maximum amount of share capital that the company is authorised by its constitutional documents to issue (allocate) to its shareholders. Part of the authorised capital can remain unissued. This number can be changed by shareholders' approval. The part of the authorised capital which has been issued to shareholders is referred to as the issued share capital of the company. There is no legal requirement as to the minimum or maximum share capital of the company. A paid up capital of minimum €1,000 is advisable. The Company must have at least one registered shareholder. For every shareholder the following is required for the formation of the company: full name, nationality, address, profession, passport copy, curriculum vitae and the number of shares to be taken up. A foreign corporation may be a shareholder of a Cyprus Company, and in such a case its incorporation documents should be submitted. 
 
 
Director & Secretary 
The Minimum number of Directors is one. A director/s may be any natural person, Cypriot or foreigner, or any legal person, incorporated in Cyprus or elsewhere. Under Cyprus Law, a company must have a secretary and in almost every instance Multilysis acts in this capacity. 
 
 
Registered Office
Under Cyprus Law, a company must have a registered office in Cyprus, which may also be used as the business address and correspondence address of the company. The registered office address is the place where official documents can be served to the company. Multilysis can provide registered office facilities. 
 
 
Legal System of Cyprus
The legal system is based on that of the United Kingdom and all the statutes regulating business matters and procedure are based on English Law. English translations of the Laws are available. The Companies’ law in Cyprus is the Cyprus Companies Law, Cap. 113, which is based on the English 1948 Companies Act. Single member companies were introduced by the Companies (Amendment) Act 2000 and other amending legislation was passed between 2000 and present date. 
 
Type of Law: Civil with many English Common Law influences.
 
 
Company Seal
Not a mandatory requirement but it is permitted and it is generally used.
 
 
Bank account 
Companies registered in Cyprus may open bank accounts in any part of the world.  We may assist clients to open bank accounts (personal or corporate) with the bank of their choice in Cyprus and/or in any other part of the word, provided that the necessary conditions are met. Such bank account/s may have all operations/facilities available including: online banking, Visa card, cheque book etc. Only nominated signatories may have access to the bank account.
 
 
International Business Companies (IBC)
When wholly foreign-owned, a private company is referred to as an international business company. On 1st January 2003 the favorable tax regime previously available to IBC’s was abolished and all companies are now taxed on the same basis.
 
'International Business Companies' is not a legal term but when mentioned it usually refers to a private limited company, limited by shares which are usually held by non-residents of Cyprus and its business activities are outside Cyprus. They can take the form of Holding Companies, Finance Companies, Royalty, Investment Funds and Trading Companies.
  • An IBC represents a separate legal entity.
  • The registered address of the company should be in Cyprus. 
  • The number of shareholders in a private limited company may be from 1-50. 
  • Shareholders may either be Cypriot or foreign natural or legal persons.
  • There is no minimum authorised share capital requirement. 
  • And finally, there should be at least one Director and one Secretary.
IBCs which are registered in Cyprus and are resident in Cyprus enjoy various tax advantages.
 
 
Restrictions on Trading
Companies cannot undertake the business of banking, insurance or the rendering of financial services to the public unless license is granted by the relevant authority. 
 
 
Taxation
A uniform 12.5% corporate tax rate, applicable to the worldwide income, is levied on all resident companies.  The taxation status of a Company is residence-based. A company is only ‘resident in the Republic’ if its business is managed and controlled in Cyprus. Therefore,  a resident corporation is taxable on its worldwide income accrued or arising from sources both within and outside Cyprus.
 
 
The Cyprus Tax System has:
  • A Uniform Tax Rate of 12.5% on Taxable Profit.
  • There is a 0% tax rate if it is a shipping company or ship-management company under certain circumstances.
  • Gains from sale of qualifying titles (including shares) are tax exempt.
  • Dividend Income is exempt from Cyprus IncomeTax. 
  • There is no Capital Gains tax on disposal of property abroad.
  • The tax loss incurred during a tax year and which cannot be set off against other income, is carried forward subject to conditions and set off against the profits of the next five years. 
  • There are no Controlled Foreign Company (CFC) rules.
  • There are no Thin Capitalization rules. 
  • Profits from Permanent Establishment abroad are tax exempt.
  • There are group relief provisions between Cyprus companies.
  • Companies can make use of Cyprus' Double Tax Treaty Network (reduced withholding taxes). 
  • Companies can have access to EU Directives (i.e. Parent/Subsidiary, Interest & Royalties Directives). 
  • Dividends, Interest or Royalties paid to non-residents are not subject to withholding taxes. 
  • There is a unilateral tax credit relief where no Double Tax Treaty exists. 
  • There are no Capital Gains or Income Corporation tax upon liquidation. And lastly, 
  • The Law provides for favourable company re-organizations.
 
Tax Exemptions:
 
  • Interest
The whole interest received by a corporation is exempt, excluding interest received from the recipient’s ordinary business.
 
  • Dividends 
Dividends received from abroad are totally exempt from corporation tax. Furthermore, they are also usually exempt from the Defense Contribution tax.
 
  • Royalties 
As from 2012, 80% of any income derived from Intellectual Property (IP), which is owned by a Cypriot resident company, will be exempt from tax. Additionally 80% of any profit arising from the sale of such IP will be exempt from tax.
 
Any capital expenditure incurred for the acquisition or development of IP will be written off over five years i.e. 20% capital allowance is granted.
 
  • Restructuring provisions
In view of the incorporation of the EC Merger Directive 90/434/EEC into the new tax law, there are tax exemptions on the transfer of assets (including shares) under a re-organization (merger / demerger / transfer of assets).
 
  • Gains in shares and Capital Gains Tax
Profits from buying and selling shares are exempt from income tax. Furthermore, there is no capital gains tax except for the 20% capital gains tax applying on gains accruing from disposal of immovable property held in Cyprus and shares in non-listed companies, which own immovable property in Cyprus.
 
  • Profits from activities of Permanent Establishment abroad
The profits from a permanent establishment abroad are exempt from income tax. The exemption does not apply if (i) the Permanent establishment directly or indirectly engages in more that fifty per cent (50%) in activities that produce investment income, and (ii) the foreign tax burden is substantially lower than that in Cyprus.
 
  • Carry forward of Losses
Tax losses of each year of Assessment starting from the fiscal year 2012 may be carried forward only against profits of the 5 years that follow. Losses incurred abroad by a permanent establishment of a Cyprus company can be offset against profits of the Cyprus Company.
 
  • Group relief
The Group relief rules provide for group relief of tax losses between a holding Company and its subsidiaries in the event where the Holding Company owns at least 75% of the Subsidiary directly on indirectly and/or otherwise among companies of the same group for the whole year.
 
By virtue of the said rules a company is considered as a member of a group if it is at least a 75% subsidiary of the other, or both companies are at lease the 75% subsidiaries of a third company.
 
 
Double Taxation Agreements
 
Cyprus combines a low-tax regime with a network of double tax treaties. Most of the Treaties follow the OECD model and all of them have the impact of reducing or eliminating the normal withholding taxes imposed by the Contracting states on dividends, interest and royalty payments. This is beneficial for trade with certain Eastern European Countries and Russia because foreign investors investing in Eastern Europe have the opportunity to channel their investments through a country, such as Cyprus, which has a treaty with the investment recipient country allowing for a reduction and in some cases elimination of the withholding taxes.
 
Cyprus has concluded many double tax treaties with many jurisdictions including, inter alia,  Austria, Belarus, Belgium, Bulgaria, Canada, China, the Czech Republic, Denmark, Egypt, Estonia, France, Germany, Greece, Hungary, India, Ireland, Italy, Kuwait, Lebanon, Lithuania, Malta, Mauritius, Norway, Poland, Qatar, Romania, Russia, San Marino, Serbia Montenegro, Seychelles, Singapore, Slovakia, Slovenia, South Africa, Sweden, Syria, Thailand, United Arab Emirates, United Kingdom, USA, USSR (covers Azerbaijan, Armenia, Kyrgyzstan, Moldova, Uzbekistan and Ukraine) and the former Yugoslavia. 
 
 
Financial Statements Required
Every company must prepare a full set of financial statements in accordance with International Financial Reporting Standards, and every parent company that has one or more subsidiary, should present consolidated financial statements. Under Companies Law, every company must complete an annual return within a period of 42 days from the date of its Annual General Meeting and must file immediately with the Registrar of Companies, a copy of the annual return, signed by a director and the company secretary. Further, under the same Law,  the annual return filed with the Registrar of Companies must be accompanied by the full set of financial statements. 
Office Address: 5 Amathountos street,
Pirilides Building, 4th-5th Floor,
3105 Limassol-Cyprus 51252, 3503