Company Formation in Cyprus

About Setting up a Comapny in Cyprus

A full EU member state since 2004 and a eurozone member since 2008, Cyprus is a modern, cosmopolitan, transparent business centre offering investment opportunities across a wide range of sectors.

The Cypriot legal system is based on English Common Law principles and is widely recognised as providing reliability in business practices. The Cyprus Companies Law (Cap. 113) is predominantly based on the English Companies Act and is compliant with all EU Directives. Companies registered in Cyprus enjoy full access to European markets and EU trade agreements.

The key benefit of a Cyprus company is the uniform 15% corporate tax rate, which is one of lowest in the EU, with further access to multiple incentives. There is generally no capital gains tax on assets other than immovable property located within Cyprus.

Cyprus is also fully compliant with EU and international standards and provides access to an extensive network of more than 65 double tax treaties worldwide, including South Africa, Luxembourg, Mauritius, Singapore, the UK and the US.

This highly competitive tax system is combined with good ease of doing business and effective regulation, advanced infrastructure and a talented workforce, and low set up and operational costs.

Sovereign acts as a partner to businesses and individuals considering investment into or from Cyprus through all stages of the investment cycle. We provide Cyprus company formation and management services, together with the comprehensive advice to maximise opportunities and achieve long-term sustainability.

These services range from domiciliary services – providing company secretary and professional directors for your company – to helping you manage your payroll, banking, substance or intellectual property requirements.

Sovereign Trust (Cyprus) Limited is licensed by Cyprus Securities & Exchange Commission (CySEC) as an Administrative Service Provider (ASP), which provides for the management or directing of trusts, and the undertaking or provision of the service of managing companies.

Choosing the right company type

01

Private limited liability company (LLC) by shares – a private LLC cannot offer its shares for subscription to the public. It must have at least one shareholder but no more than 50, exclusive of any current or former employees. The liability of members is limited by the memorandum of association to any unpaid amount in respect of the shares held. A minimum of one director must be appointed. There is no maximum limit.

02

Public limited liability company by shares – a public LLC can invite the public to subscribe for its shares and may be listed on the stock exchange. The minimum number of members is seven and the minimum authorised and issued capital of a public company, which is offered for subscription, must be €25,629. This must be fully paid up before the company initiates its business or exercises its borrowing powers. The liability of members is limited by the memorandum of association to any unpaid amount in respect of the shares held. A public LLC requires at least two directors and must also register its memorandum and articles of association with the Cyprus Registrar of Companies.

03

Limited liability company by guarantee without share capital – there is no share capital and members act as guarantors rather than shareholders. The liability of its members is limited by its memorandum of association, up to the amount that the members have undertaken to contribute respectively to the assets of the company in case of dissolution.

04

Limited liability company by guarantee with a share capital – this type of company has a share capital, and the liability of its members is limited by its memorandum of association either up to any unpaid amount for the shares held or up to the amount a respective member has undertaken to contribute to the assets of the company in case of dissolution. It can be either a private or public company. If it is a public company, it can invite the public to subscribe for its shares.

05

Variable capital investment company (VCIC) – a limited liability company by shares that, according to its memorandum of association and the rules governing its operation, have a variable value rather a nominal value. A VCIC can take the form of either a private or a public company. The number of members of a private company can range from one to 50 and the number of members of a public company must be at least one. A VCIC can only be incorporated after it receives a relevant licence from the Cyprus Securities & Exchange Commission (CySEC) to operate as a Collective Investment Fund (CIF). The initial minimum share capital will depend on the type of licence.

The private LLC is the most popular type of a company in Cyprus. It provides a robust business structure with tax advantages and liability protection, laying the groundwork for growth and stability in the European market. 100% foreign ownership is permitted except in certain regulated sectors like banking, media, real estate and defence. It is mandatory to disclose foreign shareholders and their beneficial ownership details during the registration process, but this information is not publicly accessible.

A public company in Cyprus can provide access capital markets, broaden investor appeal and enhance business credibility, propelling growth and competitiveness in Europe. Sovereign can assist you to evaluate the various legal, financial and strategic considerations involved.

Every Cyprus company is required to have a company secretary and a registered office address in Cyprus, which may also be used as the business address of the company. Every Cypriot company is also required to maintain proper books of account, prepare audited financial statements and submit an annual corporate income tax return.

Every company is obliged, within 60 days from the date of its incorporation, to apply for taxpayer’s registration with the Tax Department and to obtain a tax number. Where relevant, it will also be required to submit a supplementary form for VAT Registration. Every employer is required to register with the Social Insurance Services.

The company and every officer have an obligation to inform the Registrar of Companies of any changes to the company’s particulars, such as change of name, change of directors and secretary details, changes in share capital, change of registered office address, registration of charges over the assets of the company, amendments of its memorandum or articles of association.

Uses of Cyprus companies include:

01

Operating Companies – international trading companies businesses involved in goods supply, export, import or logistics, tech companies and start-ups, e-commerce, and consulting, marketing or professional services. Cyprus provides an advantageous platform for operational companies with a highly beneficial tax framework, wide-ranging tax treaty network, no tax on dividends or reinvested profits, effective IP Box regime, EU VAT registration and the ability to invoice in euro.

02

Holding Companies – a holding company is a separate parent company created to own a controlling interest in subsidiary companies. Generally, a holding company does not trade because its sole purpose is to hold the assets of a corporate group. A group structure minimises the risk to the trade of the subsidiaries if one part of the group underperforms or becomes insolvent. A holding company can hold the valuable assets of a business, includes trading or investment property, plant and machinery, intellectual property and excess cash for investments. It can also provide the administrative and central services functions to subsidiaries, which reduces costs across the group, while dividends can generally pass between subsidiary and holding company without incurring tax charges.

03

Finance and Treasury Companies – the management of group finances is an important and potentially complex activity. Treasury management includes day-to-day control of cash and bank accounts including cash pooling, provision of intra-group loans, raising third-party finance, investing surplus funds and hedging against currency and interest-rate risks. In corporate groups, treasury function is invariably carried out on a regional or global basis and groups have a choice as to where they locate the function itself. This may be based on proximity to markets, availability of tax treaties, or favourable tax treatment of the activities or income of the business. Cyprus has an extensive tax treaty network and Cyprus companies trading in securities (e.g. shares, bonds, repos) have no tax liability because income and gains on disposal of such securities are exempt from tax.

04

Special Purpose Companies (SPCs) – a special purpose company (also known as a Special Purpose Vehicle (SPV) or a Special Purpose Entity (SPE)) is formed to develop, own and operate a special project or own a specific asset or pool of assets, while isolating financial risk and minimising bankruptcy risk. It is typically prohibited from incurring debt or other obligations, and limited in its purpose and the activities in which it may engage. SPC's are a popular tool for foreign investors, typically established as a subsidiary of a foreign company or structured via trusts. The choice of jurisdiction can have major tax consequences. SPVs are often established in tax-friendly locations, such as Cyprus, but require careful planning to manage withholding taxes and international reporting requirements.