FAQs

Why choose Cyprus as a place for my international business?

The Cyprus generous tax incentives, the efficient legal, the accounting and banking system, the European standard of living, the hospitality, friendliness and the high level of competence of Cypriots as well as the strategic geographical location and the good social and industrial infrastructure are among the factors contributing to the success of Cyprus as an international business centre.

Cyprus Tax Advantages

  • Low corporate tax rate for business profits –  one of the lowest corporate tax rates in the European Union
  • No tax on income earned outside Cyprus for Non-Residents
  • No withholding taxes on dividends, interest and royalties paid to non-residents
  • Tax losses are carried forward for 5 years and group relief is available
  • Income from dividends is exempt from income and corporation tax
  • Profits from the sale of securities are exempt from all Cyprus taxes
  • No Capital gains or other taxes from the sale of immovable property situated outside Cyprus
  • The attractive platform and  tax regime that Cyprus provides for international trusts
  • The extensive network of Double Tax Treaties with more than 50 countries
  • Low personal tax rates for individuals with tax-free amount, significant reduction for first time employment of non-residents in Cyprus and for overseas employment
  • Full adoption of the EU Directives

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What is the procedure of registering a Cyprus IBC (International Business Company)?

Approval of name

An application has to be submitted to the Registrar of Companies for the approval of the company name.  The Registrar is unlikely to accept a name which is similar to an existing one, or is considered misleading, or too general.  Names which include any of the words National, International, Corporation, European, Co-operative can be allowed only in special circumstances for sound reasons and with conditions.

The following documents must be filed with the Registrar of Companies:

(a) The Memorandum and Articles of Association.

The Memorandum of Association mainly contains the objects of the Company and is the document that governs the relationship between the company and the outside world.  It also includes details of the share capital and the subscribers to the memorandum with the number subscribed.

The Article of Association includes provisions for the rights of the shareholders, procedure for the transfer of shares, voting rights, powers of the directors and appointment and removal of them, dividends, general meetings of the company, accounts and audits.

(b) Directors and Secretary of the Company.

A form with the names and details of the first appointed Directors and the Secretary of the company should be submitted.  For taxation purposes and for taking advantage of the existing double tax treaties it is advisable to show that the management and control of the company is exercised in Cyprus by appointing local (nominee) Directors.

(c) Registered address of the Company.

A form should be filed at the Registrar indicating the Registered Office address of the company in Cyprus.

(d) Affidavit.

An affidavit prepared and duly signed by the lawyer of the Cyprus company as to the legitimacy of the company.

Registration Certificates

Once the company registration process is complete the Registrar of Companies issues the incorporation certificates of the Cyprus Company, consisting of the following:

  • The Certificate of Incorporation
  • The Certificate of the Directors and the company Secretary
  • The Certificate of the company Shareholders
  • The Certificate of the Registered Office of the company
  • The Certified Memorandum & Articles of Association

The whole procedure of registering a Cyprus IBC and the issue of registration certificates can be done electronically and it is usually be completed within a short period of time.

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What is a Private Limited Company (Ltd)?

A Private Limited Company in Cyprus is a legal entity where the liability of the shareholders (owners) for company debts is limited/restricted to the amount of the shares taken in accordance with the Memorandum of Association.

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What is a Trust and what are the benefits of a Cyprus International Trust?

A Trust is a legally recognized arrangement with full contractual capacity, whereby a person being an individual or corporate body (The Trustee) agrees to hold the assets of the trust for the benefit of other person(s) (The Beneficiaries). The assets of a trust may consist of funds, shares, real estate and other property.

The Cyprus International Trusts which, are an essential tool for confidentiality and asset protection of foreign investors, are regulated by the International Trust (Consolidated) Law of 1992 and 2012 which has been updated in order to re-establish Cyprus as a preferred trust jurisdiction.

The definition of an International Trust as provided by article 2 of the said law is a trust in respect of which:

(a) The settlor, being either a natural or legal person, is not a resident of the Republic during the calendar year immediately preceding the creation of the trust

(b) at least one of the trustees for the time being is a resident in the Republic during the whole duration of the trust

and

(c) no beneficiary, whether a natural or legal person, other than a charitable institution is a resident of the Republic during the calendar year immediately preceding the year in which the trust was created, provided that the term “resident of the Republic” has the meaning allocated to the term by the Income tax Laws of 2002 to (No.2 of) 2011

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How can I maintain anonymity and confidentiality?

As per the legal requirements in Cyprus, the details of the company Directors, Shareholders, Secretary and Registered Office are kept at the Registrar of Companies and are open for public inspection.  To avoid this publicity and in order to maintain anonymity and confidentiality we can appoint for you nominee directors and shareholders to act on your behalf.

The identity of the beneficial owners will only be disclosed to the bank in case where a company bank account is opened but it remains confidential and for the bank purposes only.

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What is the benefit of appointing nominees?

Nominee services are a legal way of maintaining anonymity and confidentiality of your personal details and offer protection of your personal information and business operations.  Appointing nominee directors is also advisable in certain cases where, for tax residency purposes, you may need to show that the management and control of the company is exercised from Cyprus, thus taking advantage of the Cyprus favorable taxation regime and double tax treaties.

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How am I protected if nominees are appointed?

If we appoint for you nominee directors and shareholders then for your protection you will be provided with the following documents:

Trust Deed and Instrument of Share transfer

The beneficial owner(s) will be provided with an original and signed Trust Deed (Declaration of Trust) stating that the nominee shareholder holds the shares in trust and that he has no rights on those shares.  In addition, you will be given an undated and signed instrument of transfer for the shares held, which you can date and file at any time at the Registrar of Companies in Cyprus, thus changing the shareholder(s) at your choice.

Resignation letter for Director and Secretary

In the case of nominee Director(s) and Secretary you will be provided with a signed and undated original letter of resignation. You can this way date the letter at any time you decide and file the change at the Registrar of Companies, thus removing the Director and/or Secretary and appoint a person of your choice.

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Do I need to visit Cyprus to form an IBC and open bank accounts?

No, you don’t have to visit Cyprus in order to form/register an IBC or to open an account with a Cyprus bank; you must, however, arrange for either a physical meeting or a skype meeting with the Bank within 3 months from the opening of the bank account. We can proceed with the registration of your company, whether we appoint nominees or not and for the opening of a bank account we can send you all the necessary documentation and forms required by the bank.

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What is a shelf company?

A shelf company is a limited (ltd) company which has already been registered but has not yet carried on any activities.  The main advantage of a shelf company is the fact that, it can be used in cases of emergency, where a client needs a company.  In such a case, the shelf company can be transferred to the client within 24 hours instead of waiting for the incorporation / registration of a new company.  Any changes that a client may request later can be done as usual.

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Do I need to prepare audited financial statements?

Yes. The newly amended section 152A of the Companies Law (Ch.113) provides that every company must have its financial statements audited by a Cyprus registered auditor. Furthermore, section 30(1) of the Assessment and Collection of Taxes Law (N4/1978) provides that every company must keep accounts and records and prepare financial statements in accordance with the accepted accounting principles, which are audited in accordance with the accepted auditing principles by a person authorized to be the appointed auditor of the company under the Companies Act.

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What deadlines should I be aware of?

31 March Electronic submission of income tax returns (IR4) for companies preparing audited financial statements for the year before the last one.
30 April Submission of personal tax returns (IR1) for the previous year for individuals with salary exceeding the minimum taxable income.
30 June Payment of the special contribution for defence on rents, dividends and interest from source outside Cyprus for the first 6 months of the current year.

Annual levy payable to the Registrar of Companies for all companies in the register.

31 July Submission of the provisional tax return for the current year and payment of the first installment.

Electronic submission of the personal tax return (IR1) for the previous year by salaried individuals exceeding the minimum taxable amount.

Electronic submission of the employer’s return (IR7) with details of employees for the previous year.

1 August Payment of the previous year tax balance with self- assessment by companies and individuals preparing audited financial statements.
30 September Electronic submission of tax return (IR1) for previous year for individuals not preparing audited financial statements.

Payment of immovable property tax for the current year.

31 December Payment of the second and last installment of the provisional tax for the current year.

Payment of the special contribution for defence on rents, dividends and interest from source outside Cyprus for the last 6 months of the current year.

Monthly Payment of PAYE deducted from employees’ salaries for the previous month.

Payment of special defence contribution withheld on dividends, interest and rent paid to Cyprus tax residents in the previous month.

By the 15th of the month, VIES submission for previous month.

Annual Return 14th day from the Annual General Meeting of the Company: preparation of the Registrar of Companies Annual Return (HE32); the Annual return together with the financial statements of the previous year of the company must then be submitted within 28 days.

 

Note that deadlines may change at the discretion of the relevant authorities of Cyprus.

How can I obtain a Cypriot Citizenship?

A non – Cypriot citizen who meets one of the criteria decided by the Council of Ministers based on subsection (2) of Section 111A of the Civil Registry Laws 2002-2016, either personally or through a company in which he/ she participates as a shareholder – proportionally based on the percentage of participation, or even as a high-ranking senior manager of a company/ companies who meets one of investment criteria may apply for the acquisition of the Cypriot citizenship through Naturalization by exception.

Investment can be a direct financial investment of €2 mil either in real estate and/or land development and/or infrastructure projects, the purchase or incorporation of Cypriot companies or Cypriot organizations, in Investment Funds or financial assets of Cypriot companies or organisations which are licensed by CySEC or a combination of the said criteria. The purchase government bonds of €500,000 is also permitted as long as they are issued by the government of Cyprus and the applicant keeps the binds for a period of 3 years.

The applicant must also purchase a residential property valued at €500,000 plus VAT or more.

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What is a Category F Immigration permit and how can I obtain one?

The Category F Immigration permit is given to thirds country nationals on the basis of one of the Categories referred to in Regulation 5 of the Aliens and Immigration Regulations which allows third country nationals to easily travel to Cyprus without the need of a VISA.  The requirement of obtaining such a permit is that the applicants must be financially capable of sustaining themselves without having to work in Cyprus and to have a residence in Cyprus, however, applicants are entitled to own a company in Cyprus and receive dividends from its profits. Permanent residency permits will also be granted to the spouse of the applicant and any dependable children.

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Why is economic substance important?

Economic substance is an important tool for multinational companies wishing to expand on an international level for avoiding burdening the business with tax-disputes and double taxation structures which are only set up to enjoy the beneficial terms of the applicable double taxation treaties.

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How can I achieve economic substance for my IBC in Cyprus?

Economic substance is achieved on a case-by-case method, keeping the client’s needs and strategy in mind. However, there are some basic steps, which would help achieve “substance” in Cyprus, such as:

Define the reasons for operating in Cyprus – Apart from constructing a purpose and an organizational mission, the company needs to demonstrate the reasons for operating in Cyprus e.g. close proximity to target market: Middle Eastern countries.

Establish a physical presence with headquarters in Cyprus – Purchase or rent corporate offices, set-up the Information Technology, corporate telephone lines and website.

Beneficial Ownership – BO should belong to the Cypriot company and income should be recorded into the company’s bank accounts before flowing in any other direction. The Cypriot company should decide at its own discretion on how to deal with the income received and not merely acting as an intermediary on behalf of others.

Employ qualified staff – A number of qualified employees residing in Cyprus, should man the corporate offices and handle day-to-day operations, such as answering the telephone calls and e-mails, providing customer support, produce invoices, etc.

Discover and appoint a qualified team of Directors – The directors appointed should be residents of Cyprus and must have the required knowledge and skills to properly manage and control the company.

Enhanced activity – There should be substantial sale and purchase transactions at the Headquarter offices, as well as acquisition of assets, opening and administering corporate bank accounts and maintain accounting books and records in Cyprus.

Major decisions to be taken in Cyprus – It is important to demonstrate that the major decisions of the Cypriot company are taken in Cyprus.

Keep original records – Original Minutes of the Directors’ and other meetings and conferences, contracts and other original records should be kept at the company’s offices.

Justify operations in Cyprus – Not only at the formation but also after a reasonable time-period the company must continue validating the reasons for establishment in Cyprus e.g. by showing actual economic activity / transactions between the Cyprus company and the Middle East.

Set up a Cyprus International Trust – The setting up of a Cyprus International Trust to hold the shares of the Cypriot company will further enhance the beneficial ownership of the Cypriot company as the beneficiaries have no control over the Cypriot company.

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