The process of company migration – generally referred to as ‘redomiciliation’ – involves de-registering a company in one jurisdiction and re-registering in another jurisdiction. Redomiciliation may be required where the original reasons why a company was incorporated in a particular jurisdiction are no longer be valid or where another jurisdiction presents advantages that the original jurisdiction does not.
Redomiciliation provides the benefit of continuity. The registered address of the company will change and the governing law and regulations under which it operates, but the company itself does not cease to exist and there is no interruption or disruption to business. Importantly, the company retains its legal identity, its original date of incorporation and its history.
The alternative to redomiciliation is the liquidation of the existing company and the transfer of each individual asset, corporate contract or item of property to a new company that has to be incorporated for the purpose in a new jurisdiction.
It is clearly easier for a company to apply to continue in another jurisdiction than to wind it up and transfer all the assets, and some countries allow foreign companies to change their jurisdiction of incorporation. Cypriot law provides for the redomiciliation of companies, through a transfer of their registered office, both into and out of Cyprus.

Economic substance

Action 5 of the OECD’s Base Erosion and Profit Shifting (BEPS) project, titled ‘Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance’, focuses on addressing arrangements that could erode the tax base of other jurisdictions and is one of the four minimum BEPS standards.

The standard aims to prevent business activities from being relocated to jurisdictions with ‘no or only nominal tax’ to avoid the substantial activities requirement. The standard requires that the ‘core income generating activities’ (CIGA) for certain highly geographically mobile sectors of business activity must be conducted with qualified employees and operating expenditure in the ‘no or only nominal tax’ jurisdiction.

These economic substance rules are now in operation and an assessment is required of their impact on any existing entities in affected jurisdictions. If substance requirements are not able to be met, options such as the changing of tax residency or redomiciliation to another jurisdiction, such as Cyprus, should be considered.

Cyprus Corporate Taxation

Cyprus is one of the most favourable jurisdictions in the EU and offers great opportunities for international companies, investors and traders. These are some of the tax benefits that make foreign businesses choose Cyprus:

  • A uniform corporate tax rate of 12.5% is applied to all companies
  • Access to EU directives
  • Extensive double tax treaty network with over 60 countries
  • Dividend participation exemption (subject to conditions)
  • Exemption from tax on gains from the disposal of securities
  • Notional Interest Deduction (NID) on equity applies to all taxpayers and all business activities
  • No withholding taxes on interest and dividends
  • No taxation of capital gains (except for disposal of real estate in Cyprus)
  • No succession taxes
  • No Controlled Foreign Company (CFC) rules
  • Tax neutrality on foreign exchange differences unless they arise from trading in currencies
  • Foreign tax relief on income subject to both Cypriot and overseas tax
  • Exemption on profits of foreign permanent establishments (subject to conditions)
  • Company re-organization rules based on the EU Mergers Directive allow for tax-neutral group
  • Attractive Intellectual Property regime in line with ‘modified nexus approach’ – effective 2.5%
    No exit tax rules
  • 50% exemption on employment income exceeding €100,000 per annum for non-residents taking up employment in Cyprus
  • No tax on dividends, interest and rental income of non-domiciled individuals.

Sovereign Trust (Cyprus) has the broad knowledge and hands-on experience to assist fully with the redomiciliation of a company to Cyprus. Our service will ensure the proper completion of the relevant forms, collection of required documentation and official submission to the Cyprus Registrar of Companies, through to completion and the obtaining of the Certificate of continuity of the foreign company to Cyprus.

Get in Touch

Please contact us if you have any questions or queries and your local representative will be in touch with you as soon as possible.