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Cyprus

Corporate Structures

Starting a business in Cyprus is the best way to conduct business in the EU if you want to optimize your taxes. If you are seeking compliance with international and EU rules, tax efficiency, and stable tax planning, Cyprus is your best choice. The country offers plenty of opportunities to reduce your tax exposure and optimize your taxes.

Cyprus has become a top destination for companies seeking a legal way to optimize their taxes. The fact that the laws and regulations for foreign investors are the same as for local investors makes it even better.

In a nutshell, why Cyprus should be your next corporate destination?

What corporate advantages does Cyprus offer? In a nutshell:

12.5% corporate tax rate, one of the lowest in the EU.
Access to over 60 double taxation treaties
Excellent banking options, and bank accounts can be opened remotely
Fully compliant with OECD substance requirements and entirely whitelisted
Full access to the European market with passporting rights for financial licenses
Wonderful tourism, real estate, shipping, gas, and agroindustrial investment possibilities
Friendly and transparent financial environment
Robust LLC legislation
One of the best European destinations for holding companies
We can help you with all main corporate services; from incorporation, headhunting, and tax planning, to branching, accounting, and auditing.

Corporate structures in Cyprus

Cyprus has five main types of corporate structures:

Cypriot company

Branch of a foreign company

Partnership

Sole Proprietor

Cyprus International Trust Cooperatives

A regular Cypriot company can be formed following the procedure established by the Companies Act, which allows three types of company:

Company limited by shares, further divided into:

Private companies: the limited liability company is the most used in Cyprus. It can be used as a holding company and take advantage of the tax benefits provided in Cyprus; it can be used as a trading company for commercial activities, and it can be used as a financial entity, so investors set up banking institutions under one mother company. There is no minimum share capital and may have from one to 50 shareholders with non-transferable shares. Shareholders are liable to the extent of their investment

Public company: It’s quite similar to a private company. However, shares can be freely transferred and may have as many shareholders as desired, with a minimum of seven. The initial capital must be of around €26,000.

Companies limited by guarantee: They are generally established for charitable or non-profit ends. Each member can set the limits of their liability, which is subject to an agreement between the members.

Exempt private companies: They are companies where no other corporate body other than the company holds any of its shares, the number of the debenture holders is less than 50, and the director of the company is not a body corporate. Its main advantages are that it doesn’t need to file accounts with its annual return and it’s not subject to statutory restrictions on directors’ loans.

Unlimited companies: The liability of members in the case of winding up is unlimited.

Foreign companies that wish to operate in Cyprus can set up:

Subsidiaries: they can be registered as LLCs, which gives them the status of a Cyprus resident company. They are independent companies that can undertake different activities than those of their parent company

Branch offices: They depend entirely on the parent company, and their activities cannot differ from the parent company. It’s considered a Cyprus resident company but is cheaper and easier to set up than the subsidiary. Cyprus’ double taxation deals fully protect them.

Representative offices: They can undertake any commercial activity as long as they act as a marketer and contact point between the parent company and potential clients and business partners in Cyprus.

Partnerships are divided into general and limited partnerships:

General partnerships can be formed by two to twenty partners that have to register with the Registrar of Partnerships. There’s no required capital, or auditors, and partners are liable to the extent of their private assets.

Limited partnerships are pretty much the same as general partnerships. However, they must have a partner that is fully liable for the partnership’s obligations (general partner) and at least one that is only liable to the extent of his investment (limited parent).

Sole proprietors are individuals that run their businesses with or without additional employees. It’s the simplest corporate structure in Cyprus. They can trade under a business name, but there are the sole responsible for the debts of the business. There are no statutory requirements for their accounting records or audit of their annual accounts. Their profits are considered for income tax, no matter if the proprietor gets them or leaves them in the business.

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Trust cooperatives are increasingly used for tax planning. All income and gains from an international trust cooperative that comes from foreign sources are tax exempt. Likewise, dividends, interest, and royalties are not taxable nor subject to withholding tax, estate, or inheritance tax.

Holding companies in Cyprus

Along with Malta, Cyprus is the top European holding company destination. This is one of the best ways you can use a corporate structure in Cyprus and take advantage from its tax system and robust double taxation treaty network.

Holdings don’t trade. They exist for the sole purpose of owning and controlling companies through share majorities and distributing dividends. They generally are the parent company of a corporate conglomerate.

Holding companies are necessary because they distribute and diversify the risk liability between different corporate structures. Further, they reduce tax liability because you can choose where to establish the holding and the subsidiary and receive beneficial tax rates.

Thus, a first-level holding jurisdiction is a must for any high net worth individuals.

You basically have four criteria from which to derive the decision over a jurisdiction:

Incoming and outgoing dividends

Dividend income received

Capital gains tax

Re-organization and controlled foreign company rules

Cyprus checks all the boxes. Companies can be incorporated at a low cost and you have one of the best corporate tax rates in Europe (12.5%).

It will provide you with the following advantages:

Tax exemption on:

Disposal and trading of securities

Dividends received from Cypriot companies and, under certain conditions, the foreign permanent company of your holding

Dividends, royalties (excepting intellectual property), and interest paid by the holding to non-resident companies or individuals, are not subject to withholding tax.

Reorganization is tax exempt

You can carry forwards losses for five years

There are no controlled foreign company laws

Cyprus must be your next holding destination if you’re interested in the European market. Contact us and we’ll help you establish one.

Opening a company in Cyprus

After understanding the incredible benefits that registering a company, it’s necessary to know how to register a Cyprus company. The process is quite simple and can be completed in a mere two weeks tops. To do it, you’ll need:

To register the name of the company and receive approval from the Registrar of Companies.

To deliver the notarized memorandum and articles of association that specify which activities will the company conduct and how will it rule its businesses

To provide the owner’s ID papers or the incorporation documents

To fill the application forms issued by the Trade Register

To specify the capital structure. There’s no minimum amount of paid-up capital, but the general practice is to have a minimum €1,000 share capital

To submit the registration file that includes the above-mentioned, statements appointing the secretary, the director, and the registered office address and a statement from a lawyer saying that the documents are in accordance to the Companies Law

After registration, the owner will receive the following certificates: of incorporation, of shareholders, of director(s), of secretary, and of registered office, with a copy of the Articles of Association.

Also, consider the following: