Registration of a company in Cyprus

The Republic of Cyprus is a small Mediterranean country. It is known for its developed tourism sector and loyal foreign investment policy, which allows us to judge the country as a tax haven. Offshore Cyprus has a favorable tax environment and stable legislation. Nevertheless, the Republic does not have the disadvantages typical for tax havens. The legal norms of creation and functioning of companies fully comply with the European ones, and reputational risks are excluded due to the inclusion in the allowlist of the OECD. Registering a company in Nicosia or any other city in Cyprus is also beneficial due to access to the EU market, which promotes international trade.

Advantages of registering a company in Cyprus

• well-developed infrastructure;
• absence of restrictions on the choice of the sphere of activity of foreign companies;
• the possibility of creating a company in Cyprus with one founder;
• freedom of currency operations and capital repatriation;
• availability of double taxation avoidance agreements with more than 60 countries;
• the opportunity to obtain a long-term visa for two years and in the future to apply for citizenship.

Main forms of legal presence and doing business in Cyprus

• Private limited company (LLC);
• Public limited company (PLC);
• European company (Societas Europaea);
• Partnership;
• Subsidiary;
• Affiliate.

The most popular business structure used in Cyprus is the Limited Liability Company (LLC). Such organizations can have up to 50 members of any nationality and residency. Registration of companies in Cyprus in the legal form of LLC requires a legal address in the country, a secretary, and at least one director, who can be both a secretary and a shareholder. In addition, the law restricts the right not to transfer LLC shares to third parties. This allows you to benefit from favorable taxation in the country and receive a tax deduction for the tax paid abroad.

Registration procedure in Cyprus

• choose a name and get approval for its use from the Registrar;
• register the company in Cyprus with the State Registry of Companies and obtain a certificate;
• to submit the details of the new company to the tax authorities and to receive the TIN;
• to open a bank account;
• register with the Social Security Service of Cyprus;
• obtain business licenses and permits (if required);

Cyprus Legislation and Regulatory Environment

The legal system of Cyprus is based on the principles of English common law. After the country acceded to the European Union, the legislation adapted to the European norms. The Companies Law outlines the basic requirements for company registration in Cyprus, management, and corporate reporting.

The Industrial Property Office regulates intellectual property. It is responsible for the maintenance of registers and takes administrative decisions leading to the registration of intellectual property rights. The Office, the district courts, and the Supreme Court resolve disputes in the first instance.

Regulated business activities in Cyprus include auditing, law practice, gambling, finance, and investment business. Therefore, you must obtain the appropriate permissions to engage in these companies.

Once a company is established in Cyprus, its founders must hold an annual general meeting and file financial statements.

Cyprus tax system

Cyprus is an offshore zone, which does not exempt entrepreneurs from paying taxes, but provides an exhaustive list of preferences. The level of taxation here is one of the lowest among the EU countries. The central tax rates:

• corporate tax - 12.5%;
• capital gains tax - 20%;
• VAT - 5% to 19% (0% on export transactions and financial services);
• PIT - 35%.

Dividends or interest paid to a non-resident is not subject to withholding tax in Cyprus. However, residents must also make a Special Contribution to the Defense of the Republic (SDC) of 3% or 17% (for dividends received from non-resident companies). SDC is imposed only on non-taxable income through dividends, "passive" interest, and rental income.

Cyprus law applies the criterion of management and control to determine tax residency. An organization will be considered a tax resident if the company's business decisions are made in the state's territory, and the majority of the board of directors are residents. A company in Cyprus is taxed on its worldwide income.

Opening a company in Cyprus also allows you to take advantage of the tax deduction (NID). Its value can be up to 80% of taxable income from raising capital.

Opening a business in Cyprus: how Prifinance lawyers can assist

Cyprus offshore is one of the best ways of tax optimization. Investors who decide to open a business on the island are protected by European legislation, get access to the developed EU market, and optimize tax liabilities. Opening a company in Cyprus seems simple. However, ignorance of the local law or failure to comply with its requirements may lead to adverse consequences.

Prifinance lawyers will support to set up a business following the client's priorities. Our specialists will consult on organizational-legal forms of companies and prepare documents under current legislative requirements. Prifinance lawyers can perform the procedure with maximum comfort for the client. In addition, we provide services of annual maintenance and accounting.