Benefits of Company Formation in Cyprus

Company Formation in Cyprus

Tax benefits are very significant for companies choosing to incorporate a company in Cyprus and the process is surprisingly quick and uncomplicated, too.

Cyprus is rapidly becoming a well-known major, strategic, financial centre within the European Union (EU) and, as such, it offers a number of tangible benefits, not least of which is, literally, being located offshore. As such, incorporating a company in Cyprus is popular in Europe because of the favourable tax regime and direct access to the European Union. Conversely, those international companies who wish to direct EU-based investments outward, often incorporate a company in Cyprus, so it can be advantageous both for International Business Companies (IBCs) looking to do business inbound to the EU and vice versa.

By way of background, the Republic of Cyprus is an island nation located offshore from mainland Europe in the Eastern Mediterranean Sea. As such, it has become known for being a bona fide offshore tax haven for offshore companies. Cyprus functions as a fully-fledged member of the EU, benefiting from all EU Treaties and Regulations, including (notably) the freedom of movement of capital, and complies with all EU laws, it offers superior tax advantages to those who choose to incorporate their IBCs within its territory. Cyprus offers advantages to any international investor who wishes to incorporate their IBCs within the country, not just EU based businesses or those high net worth individuals, investors or companies who seek to trade with the EU or invest on an outbound basis from within the EU. Cyprus also allows individuals to set up very discreet international Trusts as these can be established without the disclosure of client names, enabling individuals to secure assets anonymously.

Why should I open a company in Cyprus?

It also offers the advantage of English being used as the main business language, it offers a solid, physical infrastructure and telecommunication facilities; world-class professional and banking services; a stable political climate and the formation of a company is very straightforward and uncomplicated, too.

Let's take a look at the specific tax advantages of registering a company in Cyprus. Double Treaties are in place with EU countries, Russia, the USA, Canada, China, and India, together with a long list of other countries, but these are the main ones most companies like to know about. Cyprus offers one of the lowest corporation tax rates in the European Union (12.5%) the same as Ireland, above the 10% in Bulgaria, but below the 15% in Latvia. For revenues from Royalties, it's only 2% in Cyprus. Dividends paid by a company in Cyprus to its owner are exempt from tax, as long as the owner is not resident in Cyprus. There is no withholding of tax on dividends to shareholders living outside of Cyprus and no defence tax payable. Dividends received from abroad are exempt from corporation tax. The only capital gains tax (CGT) under Cyprus tax rules is on the sale of a property located in Cyprus. In the event of liquidation of a Cyprus holding company, no exit taxes apply to owners who are not residents in Cyprus (provided that the company does not own property in Cyprus).

If you are interested in buying property in Cyprus and would like to know how to avoid paying 20% CGT), then you can form a company to buy property and incorporate it as a Development Company in Cyprus to avoid paying the 20% CGT.

Furthermore, in order to save on transfer fees, a company can transfer its property owning shares to a new owner instead of transferring the property owned by the company. Therefore, the transfer fees are paid on the initial purchase only. This represents a big saving and an excellent selling point.

The process of registering a company in Cyprus is relatively straightforward.

Here's a simple step-by-step guide:

  • The first thing to do is decide on a name which must then be approved by the Registrar of Companies; names similar to existing companies are not allowed.
  • The proposed company must draw up a Memorandum and Articles of Association (stating the company's purpose and objectives).
  • The beneficiaries (shareholders) must provide a bank reference; this needs to be provided by the bank in the country where the main shareholder/s reside or conduct their business.
  • A copy of passport; proof of address is required for an individual; if a legal corporate body, then a certificate of incorporation and a bank reference for the company needs to be provided.
  • Shares may be held by Trustee companies with Trust Deeds signed by the Trustee in order to safeguard privacy of the main shareholders is allowed.
  • The name or names of main shareholders can be kept confidential if a nominee Trustee is appointed.
  • One Director needs to be appointed. This can either be a local individual or a foreigner. It's beneficial to use a local resident in order to maintain effective control for tax reasons; a corporate body may act as a director.
  • Name, address, nationality, passport number and occupation of each director is required.
  • A company secretary needs to be appointed - a Law firm can act in this capacity and also stand as a nominee director.
  • A law firm can also provide a registered address, but there must be a company Registered office in Cyprus.
    • It will take approximately 30 days to process the application to form a company in Cyprus. As long as the proposed company name has been approved by the Registrar, it is possible to speed up this process at the Registrar of Companies office.

      Do you need some free advice on opening a company in Cyprus? Please click here or choose one of the contact links at the top of this page. We'll get straight back to you.

With over 30 years' professional experience, working at Board level for some of the world’s most respected communications agencies, Sarah loves to work with busy professionals, freeing up their time and helping them achieve their objectives.

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