• Introduction
• Regulation
• Incorporation of the Cyprus limited company
• Compliance
• Administration
• Residence of the Company
• Taxation of the Company
• Privacy
• Operating from a Cyprus Company
• Summary main characteristics of the Cyprus Limited

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Introduction

Cyprus, as a former British colony, has based most of its legal system on the English system.
The Cyprus Companies Law, Cap.113,is based on the English 1948 Companies Act. Single member companies were introduced by the Companies (Amendment) Act 2000 and other amending legislation was passed in 2000 and 2001.
English Court judgments are followed by the Cypriot Courts as a matter of legal reciprocity, except where these are based on statutes which are very different to the corresponding Cypriot statutes

The Cyprus limited company serves both onshore as offshore businesses. Although Cyprus used to have an advantageous separate regime for International Business Companies, since the entry into the European union the special tax rates for non-resident companies are abolished. Cyprus implemented a new regime that is profitable for both resident and non-resident businesses, and has made Cyprus one of the most popular jurisdictions in Europe.

Regulation

Cyprus Companies are regulated by the Registrar of Companies regarding Company law matters and, partially the Central Bank of Cyprus regarding exchange control issues, taxation and money laundering.
It is noteworthy that the money laundering law and regulations currently in place have been vetted by the Council of Europe and the Financial Action Task Force, both of which have given their seal of approval.

The incorporation documents need to be filed by a licensed Cypriot lawyer, after which the Registrar of Companies will perform the incorporation.
The registration of the company is only possible in Greek, but a English translation of the documents can be provided by the lawyer.

Redomiciliation of the Cyprus company out of Cyprus is permitted, but needs to be announced to the Registrar of Companies.
Redomiciliation or branch registration of a foreign company into Cyprus is also possible.

Incorporation of the Cyprus limited company

Choosing a name
The company name must be officially approved by the Registrar of Companies. On applying to the Registrar for the approval of a name, it is recommended that two or three possible names ending with the word “limited” be submitted as this may avoid unnecessary delays. Applicants should however, bear in mind that a name is not likely to be approved if:

1. it is similar to the name of an existing company
2. it is considered misleading or confusing

Any name that implies illegal activity or implies royal or government patronage, the following words or their derivatives: asset management, asset manager, assurance, bank, banking, broker, brokerage, capital, credit, currency, custodian, custody, dealer, dealing, deposit, derivative, exchange, fiduciary, finance, financial, fund, future, insurance, lending, loan, lender, option, pension, portfolio, reserves, savings, security, stock, trust or trustees. If the word “Group” is to be used in the company name the minimum number of corporate shareholders are two.
Where a subsidiary company proposes to adopt the name of its parent company, the latter must furnish its written consent for the use of its name. Once the approval of the Central Bank has been obtained, the next step is the registration of the company.

The following names or their derivatives require consent or a license:
“Asset Management” “Asset Manager”, Assurance”, “Bank”, “Banking”, “Broker (s) / Brokerage”, “Capital”, “Credit”, “Currency (ies)”, “Custodian(s)”, “Custody”, “Dealer(s)” “Dealing”, “Deposit(s)”, “Derivative (s)”, “Exchange”, “Fiduciary (ies)”, “Finance”, “Financial”, “Fund (s)”, “Future (s)”, “Insurance”, “Lending”, “Loan(s)”, “Lender(s)”, “Option(s)”, “Pension(s)”, “Portfolio”, “Reserves”, ‘Savings”, “Security(ies)”, “Stock”, “Trust”, Trustees” their foreign language equivalents or any name that the Registrar considers may have a connection with the aforementioned

The legal name of the business must include one of the following suffixes: “Limited” or “Ltd”.

Required documents
For a company to be registered, the following documents and information must be filed with the Registrar of Companies:

(a) The Memorandum and Articles of Association. The Memorandum must state, among other things, the following:

• The name of the company with “Limited” as the last word;
• The situation of the registered office;
• The objects of the company, which it is advisable that they should be as wide as possible so as to enable the company to engage in any kind of business or activity, without this being “ultra vires” (beyond the powers of) the company and, therefore voided;
• A statement that the liability of the members is limited by shares or by guarantee, when applicable;
• The amount of the share capital and details of the shares authorized to be issued, and
  The subscribers to the memorandum together with the number of shares for which they have subscribed.

(b) The Articles of Association which generally govern the company’s internal procedures and functions. The articles contain rules governing the internal management of the company and regulating the rights of its members among themselves.

The articles may be altered or added to by means of a special resolution, which requires a majority vote of over 75 per cent of the members. The articles deal with matters such as:

• General meetings of the company;
• Voting rights of members;
• Transfer of shares;
• Appointment and powers of directors;
• Dividends;
• Accounts & Audit;
• Specimen memorandum and articles of association, which have been prepared after careful study by lawyers and Focus Business Services, can be made available, but care should be taken that the first few main objects’ clauses are tailored to the specific circumstances and the main business objects of the company.

(c) A list of the directors and the secretary’s name and details. A minimum of one director is required, but there is no maximum. Although there is no necessity to have local directors, this is advisable especially where the provisions of a double tax treaty are going to be utilized; and it is important to show that the company is effectively managed and controlled from Cyprus (tax resident in Cyprus) and that all company decisions are taken in Cyprus. Also, for practical reasons, it is recommended that the Secretary is a Cyprus resident. Directors can also act as Secretaries, but a sole Director cannot act as a Company Secretary, except only in the case of a “one shareholder – one director – one secretary company” when one person can indeed act in all three aforementioned capacities.

(d) The address of the company’s registered office, which will be the place where all official notices will be served.

(e) A declaration or affidavit from a lawyer confirming that all formalities provided by The Companies’ Law have been complied with in relation to the incorporation in question.

Incorporation time and procedure
The incorporation procedure takes 7 – 10 working days from the day of application to the Registrar of Companies. The procedure can be reduced by 2 – 3 working days if a name is chosen from our list of pre-approved names.
In relation to Cyprus companies which are owned beneficially by non-residents of Cyprus, the Central Bank of Cyprus requires submission of a Statistical Declaration form.

The following documents are necessary for due diligence purposes: a bank reference letter, a certified copy of the passport and a copy of the utility bill showing current residential address.

Compliance

General
Any company qualifies for the incorporation of a Cyprus company. restrictions on activities lik gambling?
If it concerns a foreign company, it´s necessary to use a registered office in Cyprus, which can be provided by the registered agent.
The registered office is used for communications with the local government. All government related mail, will be send to the registered office in Cyprus.
It is advised to appoint a secretary who is present at the registered office, so all requirements and responsibilities can be easily fulfilled.

Board members
The shareholders of the Cyprus company need to appoint at least one director, and one secretary at the time of incorporation. One person could
act as both director as secretary, but this is not advised.
To claim residence in Cyprus its necessary to appoint local board members. It is permitted to use a nominee director and secretary for this purpose.
Corporate bodies can be appointed as board member without restrictions, but if foreign corporate bodies will be appointed, the cyprus company will
loose it´s residence in Cyprus.

Share Capital
The usual authorized share capital of a Cyprus IBC company is € 5,000 and the minimum issued capital is € 1,000.
Shares can be issued in several classes, namely: Registered shares of par value, preference shares, redeemable preference shares and shares with no voting rights.
The minimum of shareholder is one, whether a company or an individual. The Cyprus company Law doesn’t have any restrictions on foreign shareholding, so 100% of the shares can be held by foreign companies or individuals.

There is no paid up requirement in Cyprus, however, the amount unpaid for their subscribed shares may have to be paid up in case of insolvency.

Administration

Every company must prepare a full set of financial statements in accordance with International Financial Reporting Standards. This financial statement has to be filed annually at the Registrar of Companies. Any company that fails to file the financial statement, or files it overdue will have to pay a fine.

Furthermore the company has to file an annual return, which set out all the details regarding the company’s current membership, directors and secretary and share capital as well as registered charges. Changes in these details must be notified to the Registrar within 15 days. Any company that fails to file an annual return in due time may be struck off.

Residence of the company

In the interpretation of the term management and control the English law will be looked to as the Cyprus legislation is similar to the English in this respect, as it were prior to recent changes shifting the criterion for tax purposes to registration insofar as English companies are concerned.

Well-established case law in England, dating back to the last century, has laid down that a company resides for tax purposes where its real business is carried on and the real business is carried on where the central management and control actually abides.

Without entering into more detail, the essential criteria of ‘central management and control” under English law and consequently under Cyprus law are:
1. Where the majority of the directors reside;
2. where the board meetings are held;
3. and where the general policy of the legal body is formulated.

Taxation of the company

General
A Cyprus limited company is taxable in Cyprus, only if its resident in Cyprus, or if it has business activities in Cyprus.
A resident Cyprus limited Company is taxable for its worldwide income, whereas a nonresident company is only taxable for its profits generated in Cyprus.
In order to take advantage of the attractive tax climate in Cyprus, its necessary to use management services in Cyprus.
However, if you don’t want to claim residency but simply use the corporate form(for any reason), it’s possible to use the Cyprus company for international (offshore) trading without paying any taxes in Cyprus.

Cyprus company as holding company
The Cyprus company has access to many tax treaties, therefore it can be used as holding company. Because Cyprus does not withhold
taxes on dividends, the company is often used as an conduit by European companies to transfer their profits outside the European Union, without being imposed to any taxes.
This means that corporate taxation is paid in the country of business, after which the profits after tax are paid as dividend(tax-free based on the European parent subsidiary directive) to the Cyprus holding company,
which can pay the dividends to its shareholder in a tax haven, without paying any withholding taxes.

Cyprus company as finance company/royalty company
For a similar reason, the Cyprus company is used as finance company, since no withholding taxes are paid on interests paid to foreign (related) companies.
Since most anti-avoidance legislation in Europe regarding interest deduction, excludes interest deductions only when interest paid to a tax haven (taxed les then 10%), Cyprus is the ideal conduit company between high tax country
and tax haven. A royalty conduit company in Cyprus can be advantageous, when the user and supplier of patents originate from countries which have agreed tax treaties with Cyprus(but not with each other).
Although a withholding tax on royalties in many cases is paid, the double tax agreement can reduce this rate, or abolish the withholding tax completely.
For example when a royalty transaction is going to take place between the supplier in tax-free Mauritius and the user in high tax Germany, its useful to redirect this transaction through Cyprus in order to reduce the withholding tax on the royalty payment.

Taxable Income(rates)
The taxable income under the income tax law is calculated based on the accounting profits as defined by the International Financial Reporting Standards (with some adjustments)

Profits which are generated in Cyprus are taxed at 10%. This also applies to any profit margins on interests and royalties that
were received by the Cyprus company. However the taxable income of the received interest is only 50%, so effectively the tax rate for interests is 5%.
The license costs of the Cyprus Company are 100 CYP per year and 14 CYP when filing the annual return.

For more information about the tax climate in Cyprus please read the country report, or contact us.

Privacy

Only the Memorandum and Articles of Association are required for public records and the registration of Registers of Directors, Members, and Mortgages and Charges are optional.
share register may be inspected only by a shareholder;
The Cyprus Registrar of Companies holds details of directors, secretary, registered mortgages and charges and Memorandum and Articles of Association, which are available for public inspection. The only information not available to the public are the details of non-resident beneficiaries who are not registered shareholders. These, where they are non EU citizens or registered companies, are only disclosed to the Central Bank and any bank with which the company may open an account in Cyprus.
As a member of the European Union, and a Double Treaty partner of many countries, Cyprus has agreed to exchange information if necessary.

Operating from a Cyprus Company

When reading about tax law and corporate governance, it seems very difficult to implement a foreign entity in you international business structure, and still be able to work with it.
This is however not true. Inco Trust is able to offer you full assistance concerning the legal requirements and obligations in Cyprus, so you can deal with your core business activities.

Inco Trust can provide professional nominee services for the board, as well as for the shareholders. A (notarized) Power of Attorney will be supplied when desired.
Fiscal-legal advice on substance requirements, transfer pricing, or tax avoidance can be provided
by our experienced tax team, or affiliated tax advisors.

Summary main characteristics of the Cyprus Limited

Factor

Description

Corporate tax in Cyprus

10%

Conduct business internationally

Yes, non residents company taxfree

Conduct business within Cyprus

Yes, 10% taxes

Official language / language of documents

Greek

Minimum paid-up capital

1000

Optimum amount of authorized capital

No limitation

Government license fee

CYP 100

Bearer shares

Not Allowed

Minimum number of directors

One

Minimum number of Members (shareholders)

One

Non-resident directors

Allowed

Corporate directors

Allowed

Registered Agent and Address in Cyprus

Required

Register of Directors

To be kept by the Registered Agent, and filed at registrar

Register of Members

To be kept by the Registered Agent

Register of Members filed for public record

No

Disclosure of beneficial owners to Registrar

Yes

Disclosure of beneficial owners to Registered Agent

Yes (confidential due diligence)

Holding of Annual General Meeting

Required

Convention of Meetings of Directors / Members

In Cyprus

Corporate Minutes and Resolutions

To be kept by the Registered Agent

Corporate Seal

Required

Keeping of accounts

Not required

Auditing of accounts

Required

Filing of accounts

Required

Access to double-tax avoidance treaties

Available

Subject to currency controls / restrictions

No

Redomicile a foreign company into Cyprus

Yes

Redomicile a Cyprus company abroad

Yes

Net time to incorporate

7-10 business days

Ready-made (shelf) companies

Available

Go to Cyprus Country Report