Setting up a company in Cyprus
A Cyprus company may take the form of either a private company or a public company. Every 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 required to maintain proper books of account, prepare audited financial statements and submit an annual corporate income tax return. Specialist uses of Cyprus companies include:
Cyprus serves as an effective gateway to the EU, receiving dividends free of withholding tax and paying dividends to shareholders without deduction of withholding tax. Cyprus also has some particularly advantageous tax treaties.
Finance and treasury companies
A Cyprus company can receive interest on loans to EU group companies with no withholding tax and can pay interest without deduction of withholding tax. 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.
Ship owning and management companies
Cyprus operates an ‘Open Registry’ regime with a Tonnage Tax System (TTS), which covers ship owning, ship management (crew and technical management) and chartering. There is no tax on shipping profits, dividends paid from shipping profits, estate duty or capital gains tax and no stamp duties on documents or mortgage deeds. There is also no income tax for seafarers on Cyprus-flagged ships.
Oil and gas exploration and extraction companies
Combined with Cyprus’ permanent establishment exemption, exploration and extraction activity can be undertaken free of Cypriot tax.
The private company is the most common business vehicle in Cyprus. A private company must have at least one shareholder and cannot have more than 50 members. It also only requires a minimum of one director to be appointed, and does not limit the maximum number of directors. The transfer of shares must be restricted. A private company cannot invite the public to subscribe for its shares. There is no requirement for a minimum issued share capital, although there should be at least one share in issue.
A public company must have at least seven shareholders. The shares are freely transferable and available to public subscription. A public limited company requires at least two directors and must also register its memorandum and articles of association with the Cyprus Registrar of Companies. The minimum authorised share capital is €25,629, which must be fully paid up before the company initiates its business or exercises its borrowing powers.
The Cyprus Companies Law Cap. 113 offers a number of corporate vehicles:
- Company limited by shares
- Company limited by guarantee not authorised to issue shares
- Company limited by guarantee and authorised to issue shares
Establishing a presence in Cyprus can be effected through a subsidiary or a branch of an overseas company. Both procedures are cost and time-effective.
The differences between a branch and a subsidiary are that a branch office must have the same name as that of its parent company, and acts as an extension to the head office. A branch does not acquire a separate legal personality and therefore the liability for all activities undertaken fall on the parent company.
In general, a company wishing to establish a branch in Cyprus must submit to the Registrar of Companies, within one month of establishing a presence in Cyprus, its certificate of incorporation, memorandum and articles of association, particulars of directors and secretary, and the name and address of at least one person resident in Cyprus that is authorised to accept any notices that may be served on the company.
Joint ventures – partnerships or private limited liability companies – and franchises are also used by foreign entities.
Partnerships are regulated by the Partnerships and Business Names Law (Cap. 116). A general partnership is one in which all partners are general partners and have unrestricted liability for all the obligations of the partnership. A limited partnership is one in which at least one partner is treated as a general partner and has unrestricted liability for all the partnership obligations, with the other partners having limited liability up to the amount contributed (or remaining unpaid) by them to the partnership. Since the introduction of Amending Law 144(I)/2015, a limited liability partnership (LLP) can also be established.
In Cyprus, partnerships are not considered to be separate legal entities and, therefore, profits generated by a partnership are taxed as income received by the partners. Although a partnership exists as of the day on which it commences business, it must inform the Registrar of Companies within 30 days of commencement so its existence can be registered.
Investment funds are a rapidly growing sector within the Cyprus financial services industry. There are two types of funds that can be set up in Cyprus: UCITS and non-UCITS. The non-UCITS funds are known as International Collective Investment Schemes (ICIS). In addition there is the possibility to distribute foreign UCITS and foreign non-UCITS in Cyprus.
Cyprus has fully adopted all EU Directives and Regulations that effect investment services and financial markets. Under the conditions of the prevailing MiFID II related legislation, an investment firm licensed by the Cyprus Securities and Exchange Commission can effectively offer its services throughout the EU under the “passporting” conditions of its authorization.
Located at the crossroads of three continents and on key strategic shipping routes, Cyprus is a country with a strong maritime tradition that has developed into a dynamic international shipping hub.
Today, Cyprus is a modern, efficient and integrated shipping cluster ranked amongst the leading in the world. It is committed to providing quality services, a competitive business and taxation environment whilst ensuring efficient shipping and the highest possible standards in safety, security and environmental protection.