Setting up a company in Cyprus

Cyprus, birthplace of the Greek goddess Aphrodite, is a charming Eastern Mediterranean Island full of ancestral history, stunning beaches, succulent food and wine. A significant advantage - Cyprus has a double taxation treaty with more than 50 countries. Moreover, Cyprus is not included in the "black lists" of offshore zones. All this offers great opportunities for carrying out business abroad. Cyprus has been a member of the European Union since 2004 and as of 2022 is one of the highly attractive jurisdictions for incorporating a foreign company within the EU. Cyprus has no strict requirements for tax residency status or citizenship of the applicant wishing to incorporate a company. Tax incentives are available for certain sectors of the business, which makes it beneficial to start-up companies. Under Cypriot law, only experts licensed by the Cyprus Bar Association may prepare and sign the Memorandum, Articles of Association and Form HE1.

Corporate legislation, which regulates opening and doing business in Cyprus gives the right to a foreign citizen to start a business in Cyprus, and the registration process takes minimum time compared to many EU countries and does not require presence on the island. It is possible to register a company in Cyprus remotely.

In Cyprus there are several corporate forms of company registration:

TYPES OF COMPANIES

• Private Limited Company;
• General Partnership;
• Limited Partnership;
• Sole Proprietorship;
• Branch of a foreign company.

PRIVATE COMPANY LIMITED BY SHARES

It is the most preferable legal form of legal entity for non-residents. The liability of members is limited to the shares they own. Shares may be issued in different classes or series.

Shareholders may be legal entities, individuals, residents and foreign nationals. But their maximum number cannot exceed 50 people. There are no requirements to the authorized capital at the legislative level. The optimal variant for this form of commercial activity is the contribution of share capital in the amount of 1,000 euros. The director of the company does not have to be a resident of Cyprus, but it is necessary for the company to become a tax resident.

KEY REQUIREMENTS FOR LTD REGISTRATIONS:

• The status and residency of the shareholders and directors do not matter;
• The company may have shareholders whose liability is limited to shares in the capital of the company;
• There must be at least 1 director, who can be an individual or a legal entity;
• The secretary position in the company is required;
• The size of the standard authorized capital is 1000 - 5000 EUR;
• There is no requirement for a Cyprus company to maintain a bank account in Cyprus;
• The company must be registered only with a valid address.

LIMITED PARTNERSHIP

A Limited Liability Partnership is a partnership in which at least one partner is treated as a full partner and has unlimited liability for all obligations of the partnership, and the remaining partners have limited liability up to the amount contributed (or remaining unpaid) by them to the partnership. In Cyprus, partnerships are not considered as separate legal entities, so the profits derived by the partnership are taxable as income derived by the partners. Although a partnership exists from the commencement of its activities, it must notify the Registrar of Companies within 30 days of the commencement of its activities in order for its existence to be registered. Partnerships are not subject to taxation. Partners are subject to taxation.

KEY REQUIREMENTS FOR LP REGISTRATIONS:

• The partnership is established by at least two partners;
• There are two types of partners: general partners and limited partners;
• Partners may be either natural or corporate entities;
• General partner can be a managing director;
• Equality of general partners is declared. Their liability for debts and obligations is equal and unlimited;
• There is no requirement for a Cyprus company to maintain a bank account in Cyprus.

TAXES FOR LTD AND LP

Defense Tax (Special Contribution for the Defense) - from 3% to 30%. Payable only by tax residents of Cyprus. Interest income earned by a Cypriot company in the course of non-core/non-core activities, such as the rental of real estate, is subject to defense tax at the rate of - 30%.

It is compulsory for all companies to pay Annual Levy. (even those not operating) starting from the first year of incorporation and is 350 Euros. Payment must be made by June 30 of each year.

Under certain conditions, taxes in Cyprus can be optimized and the income tax rate can be reduced by 2.5% if the Cypriot company profits from the ownership of intellectual property (IP).

REPORTS AND AUDITS

The Cyprus Companies Law provides that the directors of companies must ensure that proper books of account are kept for the preparation of financial statements that give a faithful accounting of transactions, enable the financial position of the company to be determined with reasonable accuracy at any time and include supporting documents (including contracts and invoices).

In case of VAT registration of the company - quarterly VAT reports are required and monthly reports must be submitted.

COMPANY’S BANK ACCOUNT

To open an account in Cyprus the following will need to be submitted:

• Proof of the source of income and wealth of the ultimate beneficiary of the funds (UBO);
• Submission of a complete and convincing set of KYC documents regarding the beneficiary;
• For companies over a year old, providing statements for at least the last year and the company's balance sheet as of the account opening date;
• Tax number of company and participants (beneficiary, signatory), detailed summary (beneficiary, signatory);
• Legal address will be immediately available
• References to public sources regarding company activities and biographies of participants;
• Bank and professional reference letters;

• Proof of payment of personal income tax by the beneficiary in his/her country of tax residency.

Qualified specialists of Key2Law can help to open a bank account in the shortest time.

WHAT IS A COMPANY REGISTRATION FEE IN CYPRUS

Company registration in Cyprus takes from 1-2 weeks. You can find out the price of registration and other nuances of starting a business in this jurisdiction by signing a form on our website.

WHAT ISSUES MAY ARISE DURING THE REGISTRATION PROCESS?

Setting up a company in Cyprus is not an easy process, especially for those who are engaged in such a procedure for the first time. There are many legal subtleties that will have to be considered. Problems may arise at the very first stage - choosing a name. Checking its uniqueness is the responsibility of the business owner. Complications sometimes arise at the stage of paperwork as well. You need to consider many nuances known only to qualified professionals.

While setting up a company in Cyprus can be a relatively straightforward process, foreign investors may face some challenges. These challenges can include language barriers, bureaucracy, limited human resources, a complex tax system, and a limited market. However, with proper planning and guidance, these challenges can be overcome, and investors can take advantage of the opportunities that Cyprus has to offer. Key2Law is ready to offer you the following assistance in the setting up a company in Cyprus and other countries.

We have extensive experience in the procedure of setting up a company, opening bank accounts in any country and in the other ambitious compliance questions. Our qualified experts will provide professional assistance in setting up a company and explain the advantages and disadvantages of distinct types of activities in Cyprus. Similarly, we can help with the purchase and sale of existing companies in this jurisdiction.

In order to find out more information, you can use the opportunity to order a consultation on the regulation of activities in Cyprus from our specialists. You can contact us using the feedback form or the contacts listed on the website.