Cyprus (Republic of Cyprus)
Without nominee services
With nominee services
|Company incorporation / Shelf (ready-made) company||
|Registered office address for 1 year||
|Set of documents with Apostille||
|Sending of documents||
|Opening a corporate bank account in a Cypriot bank||
|Nominee services (director, shareholder, secretary – residents of Cyprus), issue of power of attorney with Apostille||
|Total cost of registration||
All companies in Cyprus are also obliged to pay annual state duty in the amount of EUR 350 (before the 30th of June each year).
|Company name check (other than from the pre-approved names list)||
|Certificate from the Register of Companies||
|Tax residency certificate (for avoidance of double taxation)||
|Additional power of attorney||
|Setting up a real presence (substance) of a company||
|Cost of accounting and auditing services depends on number of transactions and turnover of a company and can be defined basing on the results of the first year of company’s activity.|
Main advantages of Cyprus
- One of the lowest corporate tax rates in Europe (12,5%);
- Cyprus is not considered an offshore zone;
- Membership in the European Union (from 2004) and Eurozone (from 2008);
- Sustainable corporate and tax legislation;
- Favorable regime for holding companies: dividends received by a Cypriot company are exempt from corporate tax;
- Good opportunities for real business;
- Treaties for avoidance of double taxation with more than 50 countries.
Company registration in Cyprus
The main forms of business in Cyprus:
- Limited company (public or private);
- Partnership (general or limited);
- Branch of a foreign company;
- Individual entrepreneurship.
Private companies limited by shares are the most popular in international business.
Company name is subject to prior approval by the Registrar of Companies. It must not be identical or closely similar to the name of an existing company incorporated in Cyprus (other restrictions also are in place). Due to a great number of the previously used names the choice of name may appear quite difficult, so it is recommended to develop several name options in advance. This will save time and increase chances of name approval. Use of certain words (e.g. those which indicate brokerage, depositary, trust and other financial activities) will require a special license.
Share capital. There are no legal requirements in respect of the minimal amount of share capital. At least one share must be issued and paid. Share capital must be nominated in euros.
Both individuals and legal entities of any residence and nationality may be the directors and shareholders of a company. A company must have at least one shareholder and one director. A company secretary is also required.
The information on company directors, shareholders, secretaries and registered office is publicly available. While the information on beneficial owners is confidential and is subject to disclosure only in cases provided for by law.
A company must have its registered office in Cyprus.
A Company may open bank accounts both in Cyprus and abroad.
A new Cypriot company registration process usually takes about 4 weeks.
Redomiciliation (change of jurisdiction)
The Companies Law allows foreign companies to be redomiciled in Cyprus (i.e. to register as a company continuing its business in Cyprus). Cypriot companies, in their turn, may change Cyprus to other jurisdiction (provided that the law of such jurisdiction allows it as well).
1. All companies incorporated in Cyprus must keep their accounting records, prepare and file audited annual financial statements.
A standard accounting period of a company is a calendar year. Financial statements for the past year must be filed with the Registrar of Companies before 31 December of the following year.
If a company was incorporated in the second half of a year (after 1 July), its first financial statements may be prepared for a period up to 18 months (i.e. for the remainder of the current year and all the following year).
While a company incorporated in the first half of a year (before 1 July) must prepare its first financial statements for the period from the date of incorporation to the end of the current year, and file it in the following year.
2. Cypriot companies must file annual return containing information on the registered office, current members, directors and secretary, share capital and some other data.
3. Companies also must file tax assessments and tax returns in time prescribed by the tax legislation of Cyprus.
A company is considered resident in Cyprus if its management and control are exercised in Cyprus. Despite the fact that ‘management and control’ are not determined by the law, the tax authorities of Cyprus usually take into account the following circumstances to ascertain tax residency:
- structure of the Board of Directors (the majority of directors should be Cyprus residents);
- the place where the Board meetings is held and major decisions are taken;
- the place where the discussion and approval of the financial statements takes place;
- whether the Board of Directors has control over the corporate bank account (which must be situated in Cyprus);
- the place where the corporate seal is authorized to be used.
Cypriot resident companies pay corporate income tax in respect of their worldwide income. Non-residents pay the tax only in respect of their income received from sources in Cyprus. Branches of foreign companies in Cyprus are taxed the same way as Cypriot resident companies.
It should be noted that the companies incorporated but not resident in Cyprus are not released from the obligation to prepare and file their annual financial statements as well as tax returns.
Moreover, a Cypriot company which is non-resident in Cyprus, cannot obtain a tax residency certificate and use tax reliefs under double taxation treaties. E.g., issue of a general power of attorney by a company to a non-resident person may reduce such company’s chances to obtain a tax residency certificate in Cyprus.
Regarding rules of tax residency of private individuals in Cyprus it is necessary to mention that the Cypriot Income tax law amendment that changes the term of presence in Cyprus necessary to obtain tax resident status was adopted at 14 July 2017. Previously this term was 183 calendar days per year. Now the term of 60 calendar days is established and applies if all the following requirements are fulfilled:
- Individual does not reside in any other single state for a period exceeding 183 days in aggregate.
- Individual is not tax resident in any other state.
- Individual resides in Cyprus for at least 60 days.
- Individual has got other defined Cyprus ties, such as ownership of business, employment or real estate ownership or rent.
The amendment has come into force since 2017 and applies starting with the tax period that corresponds 2017 calendar year (from 1 of January to 31 of December).
Corporate income tax
Corporate income tax rate is 12,5%.
Dividends received by a Cypriot resident company (either from Cypriot or from foreign companies) are exempt from the corporate income tax in Cyprus.
Income from sale of shares is also exempt from tax.
The expenses incurred by a company for the purpose of obtaining taxable income may be deducted from the income provided that their evidence is properly documented.
Companies which intend to receive profit in a calendar year, pay provisional tax.
A company must assess and pay the tax from the estimated amount of its taxable profit of the current year (the tax is to be paid in two installments). The estimated profit should be declared and the first installment should be paid before 31 July, and the second installment – before 31 December.
Where the final tax liability as per the audited financial statements, exceeds the temporary tax declared by more than 25%, there is a 10% penalty on the difference of the tax arising. To avoid this a company may file a revised assessment at any time prior to 31 December of the current year with a more accurate profit forecast.
If a temporary assessment is not filed, and the audited financial statements show that there is a tax liability, the company will pay a 10% penalty on the whole tax liability.
If a self-assessment installment is not paid within the prescribed date it is subject to an interest at 3.5% per annum. For 2015 and 2016, this interest is 4%, and for 2014 - 4.5%.
The delay in filing a tax return will result in a fine of 100 euros. Failure to file a tax return at the written request of the tax authority at the time specified in the request will result in a fine of 200 euros upon each notification.
Dividends and interest payable by a Cypriot company to non-residents (either legal entities or individuals) are exempt from the withholding tax.
Royalties payable to non-residents for use of intellectual property rights in Cyprus are subject to 10% withholding tax. If intellectual property rights are not used in the territory of Cyprus, royalties paid to the owner of such rights are not subject to withholding tax in Cyprus. Tax rate may be reduced under applicable double tax treaty or the EU Interest-Royalty Directive.
Special contribution for defense (SDC)
Special contribution for defense is imposed on some types of income received by Cypriot resident companies and individuals from sources in Cyprus (this tax is not applied to non-residents). Cypriot resident companies pay SDC on:
- interest income received by a company arising from activities other than ordinary activities of the company – at a 30% rate;
- rental income (from 75% of the income amount) – at a 3% rate;
- dividends received from a non-resident company (in cases where more than 50% profit of the company paying dividends is received from investment activities, and the tax rate of the company paying dividends is ‘significantly lower’ than the tax rate in Cyprus) – at a 17% rate. In other cases the SDC is not applicable;
- «deemed dividend distributions». If a company does not distribute its profit after taxation within 2 years after the end of a financial period in which that income was received, then 70% of such profit will be deemed to have been distributed, and (less the amount of dividends actually distributed, if any) will be taxed at a 17% rate. However, this rule is not applied if a company’s shareholders are not Cyprus residents.
The annual levy of 350 euros must be paid by 30 of June of each year by all companies incorporated in Cyprus.
In case of delay in payment not more than for 2 months, the levy is increased to 385 euros. In the event of delay in the payment of the fee for more than 2, but not more than 5 months, the levy will be 490 euros. In case of failure to pay the levy for more than 5 months, a company may be stricken off the Register.
Value added tax (VAT)
Cypriot VAT is applied to the following transactions:
- Supply of goods or services made in Cyprus by a taxable person;
- Intra-community (i.e. from other EU state) acquisition of goods by a taxable person;
- Importation of goods from outside the EU to Cyprus.
VAT taxpayers in Cyprus charge ‘output’ VAT for the goods and services they supply, while ‘input’ VAT is charged on the goods and services they purchase. If the ‘output’ VAT exceeds the ‘input’ VAT, the company has a tax liability and pays VAT. If the ‘input’ VAT exceeds the ‘output’ VAT, the excess amount can be offset in the future tax liability of the company.
Standard VAT rate in Cyprus is 19%.
Supplies of some goods and services are taxed at a lower rate of 5% (e.g. supply of pharmaceuticals and foodstuffs) or 9% (e.g. passenger transportation and hotel services). Zero VAT rate may be applied to export of goods and intra-community supplies, as well as for financial, educational, medical and other services.
An entrepreneur or a company must register in tax authority for VAT purposes (obtain VAT number) if at the end of any month the amount of VAT taxable transactions for previous 12 months exceeded 15600 euros (or if there are reasonable grounds to anticipate that such amount will exceed 15600 euros in the nearest 30 days).
Voluntary VAT registration is also possible (however, to do this a company has to prove that it carries out or plans to carry out taxable transactions which give the right to apply deduction of input VAT).
Any person registered for VAT must quarterly file a VAT return.
VAT must be paid not later than on 10th day of the month following the last month of the respective tax period.
Besides VAT returns, persons registered for VAT who supply goods or services to other VAT-registered persons from other EU member states also must file VIES (VAT Information Exchange System) return which contains information on intra-community supplies made by the company. VIES return must be filed not later than on 15th day of the month following the reporting month.
Late submission of VAT or VIES returns result in fines and penalties.
International tax treaties of Cyprus
As at the middle 2017 Cyprus has 55 treaties for avoidance of double taxation in force:
Bosnia and Herzegovina
These agreements provide mechanisms for offsetting (deducting) taxes paid in one of the states from income that is taxable in another state; tax exemptions or reduced withholding tax rates in relation to various types of income; obligations on the mutual exchange of tax information, etc.
Cyprus also participates in:
- Convention on Mutual Administrative Assistance in Tax Matters 1988, as amended by the Protocol 2010 (entered into force for Cyprus from 1 April 2015), and
- Multilateral Competent Authority Agreement on Automatic Exchange of Financial Information (MCAA) (the first automatic exchange for Cyprus is scheduled for September 2017).