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All you need to know about establishing a Cyprus company
That has given the island a unique cultural mix, with all kinds of archeological and historical wonders. Add some of the best beaches on the planet, and you'll see why Cyprus is on the bucket list of thousands of people.
Mundo brings you Cyprus, the land where Aphrodite was born and the saint of zero tax, Saint Mamus, is revered. Now, you can fall in love with this amazing island for the corporate freedom and low taxation it offers.
What corporate advantages does Cyprus offer? In a nutshell:
- One of the lowest taxation rates in the EU
- Access to numerous double taxation treaties
- Great banking options
- Fully compliant with OECD substance requirements
- Full access to the European market
- Fantastic tourism, real estate, shipping, gas, and agroindustrial investment possibilities
- Friendly financial environment
- Solid LLC legislation
- A top destination for holding companies
- We can offer all main corporate services from incorporation, headhunting, and tax planning, to branching, accounting, and auditing
It is believed that the first to arrive in Cyprus were the Greeks, who introduced their language, religion, and customs to the islands. Later, the Phoenicians, Assyrians, Egyptians, and Persians controlled the island. Passing through the hands of Alexander the Great, it remained part of the Greek-Egyptian kingdom until the Romans arrived, and Cyprus became a senatorial province. Cyprus was conquered by the English king, Richard Lionheart, in 1191, during the Third Crusade.
He later sold the island to the Templars, who, in turn, sold it to the Franks until they ceded the island to Venice. The Venetians were unable to resist the invading Ottoman troops who conquered the island in 1571. Cyprus remained under Ottoman rule until the arrival of the British in 1878.
Then, the island became independent from Britain in 1960, but tensions between the Greek and Turk inhabitants of the island led to a Greek-backed coup that was followed by a Turkish invasion in the north. As of today, the island remains divided.
Today, the attraction that led so many to try to conquer the island continues. Investors from all over the world and from all kinds of industries make Cyprus the home of their business. Retirees choose the island as their place of retirement, and every year more and more expatriates decide to leave their home countries for Cyprus.
It's clear why the Greeks believed Cyprus was the home of Aphrodite.
And, on top of that, Cyprus has one of the most attractive tax regimes in the EU, has become a top financial industry center, and offers an ideal environment for FDI, which has turned it into one of the fastest-growing economies in the EU.
There is no doubt that Cyprus has a financial, historical, and tourist attraction that can blow your mind.
Effective management and control of companies is the determining factor for tax residence in Cyprus. The corporate tax rate is one of the lowest in the EU, at 12.5%, with exemptions for participation in dividends, capital gains (under certain conditions), and on profits from the disposal of securities. Another great advantage is that the country has no withholding taxes.
The country has no restrictions on foreign investment. Both EU and non-EU investors can invest in, or set up, Cypriot companies, even if they own 100% of them.
All this makes Cyprus a fantastic investment opportunity. This brought a lot of FDI to the island, which continues to fuel the country's growth. In fact, according to Global Finance, Cyprus has the 8th best return on FDI in the world.
Cyprus the ideal country where to set up your business.
And what investment opportunities you have in Cyprus? The first is clear: tourism. The country enjoys 340 days of sunshine a year, has some of the best beaches in the Mediterranean Sea, and some famous archaeological sites, such as the Paphos Mosaics. Tourism represents more than 15% of the country's GDP and has the potential to grow to contribute around 25% of the Cypriot economy.
Another exciting investment opportunity is the shipping industry.
The country has the third-largest merchant fleet in Europe and the eleventh largest in the world. Cyprus is the largest ship management center in Europe and is among the top five in the world. As such, the industry employs 3% of the country's workforce. Similarly, the geopolitical pattern that has moved Brexit has had a good impact on the industry as many shipping companies want a new safe port in the EU.
But the shipping industry isn't the only one that has had a positive impact from Brexit. Brexit has benefited the financial business, especially e-payment institutions. Cyprus offers a fantastic environment, legal framework, and tax system to establish an investment firm or an EMI, especially after the UK, which had in its hands almost three-quarters of the European EMI market, left the EU.
Also, Cyprus is an ideal place for establishing a holding company to distribute dividends for a set of companies.
All this makes Cyprus the best destination in Europe for your business. If you're not still convinced, let's see if this helps.
Why Cyprus? Seven reasons to start your company in Cyprus
First-level tax system
A 12.5 % corporate tax rate, which is one of the lowest in the EU, sounds pretty good. Add to that, full tax exemptions on dividends, capital gains (under certain conditions), withholding taxes, and profits from the disposal of securities.
Moreover, Cyprus has a territorial tax system, which means it only taxes locally-sourced income and a robust double tax treaty network of more than 60 countries.
All this makes Cyprus not only ideal for any kind of company but especially for holding companies.
An entryway to Europe
Cyprus is a popular destination for businesses that are starting to operate in Europe. In a continent where there's so much fiscal and bureaucratic pressure, Cyprus is a breeze of fresh air. Moreover, starting and running a business is simple, and if you wish to start a financial business, financial licenses in Cyprus are reputable, offering peace of mind for investors, and have passporting rights.
That means you can choose Cyprus as your European headquarters, and you can operate your business from there without any additional licensing requirements on other EU members or needing to establish branches or offices.
The government took many business initiatives. For example, it introduced many tax incentives on the table and opened up the country to investors and established an attractive non-dom status for foreigners, provided tax credits for fund managers. As if that wasn't enough, it also created citizenship and residency by investment programs, and reformed banking laws so that banks could securitize loans, reducing their NPL exponentially.
Fantastic investment opportunities
Cyprus has all kinds of investment opportunities. It is one of the most touristic countries in the Mediterranean and Europe as a whole; it is one of the global shipping powers; it has a thriving real estate business, and its financial business still has a ton of room to grow. And we haven't yet talked about the gas, agricultural, and fishing potential Cyprus has. There's room for all in the home of Aphrodite.
More than 70 % of the Cypriot population speaks English, and the island has a well-established ex-pat community. More than half of the Cypriot residents hold tertiary qualifications. That means the island has an apt public sector and top-notch service providers of all kinds (accounting, legal services, tax planning, and more) that can help you start operating in Cyprus.
Low cost of living with excellent quality
When compared to the services and easy life offered by the country, its cost of living is among the lowest in the European Union. The country has a modern infrastructure with great telecommunications. All this led to Cyprus being named the 5th best relocation destination in the world by a report by Knight Frank, one of the world's leading real estate consultants. This is why the country has the second-highest percentage of foreigners in the EU, with almost 20%.
Corporate structures in Cyprus
Starting a business in Cyprus is the best way to do business in the EU. If you are looking for compliance with EU and international standards, tax efficiency, and stable tax planning, Cyprus is your best choice. The country offers many opportunities to reduce your tax exposure and optimize your taxes. Cyprus has become an essential destination for companies looking for a legal way to optimize their taxes and the fact that the laws and regulations for foreign investors are the same as for local investors makes it even better. Cyprus has four main types of corporate structures:
- Cypriot company
- Branch of a foreign company
- Sole Proprietor
An ordinary Cyprus company can be incorporated under the procedure established by the Companies Law, which allows for three types of companies:
- Company limited by shares, which is further divided into:
- Private company: The limited liability company is the most widely used in Cyprus. It can be used as a holding company and take advantage of the tax benefits provided in Cyprus; it can be used as a trading company for commercial activities and can be used as a financial institution. There is no minimum share capital, and it can have from one to 50 shareholders with non-transferable shares. As usual, with LLCs or PCs, shareholders are responsible for the extent of their investment, but the company is a different legal person from the shareholders. This is the corporate structure that most foreign businesses choose in Cyprus.
- Public company: It's quite like an LLC. Nevertheless, shares can be transferred at will, and the company can have as many shareholders as wanted, starting with at least seven. The minimum capital must be of €26,000.
- Companies limited by guarantee: They are usually created for charitable or non-profit purposes. Each member can establish the limit of their liability freely, which is subject to a previous agreement between the members.
- Exempt private companies: These are companies where no corporate body holds any of the company's shares, the number of shareholders is less than 50, and the director isn't a corporate body.
- Unlimited companies: The liability of the members is unlimited
Foreign companies that wish to set up a business in Cyprus can be established as:
-Subsidiaries: they can be registered as LLCs, which gives them the status of a resident company in Cyprus. They are independent companies which can carry out activities other than those of their parent company
-Branches: They depend entirely on the parent company and their activities cannot differ from those of the parent company. It is considered a Cyprus resident company but is cheaper and easier to establish than the subsidiary. They are fully protected by Cyprus' double taxation agreements.
-Representative offices: They can only carry out marketing and point of contact activities between the parent company and potential customers and business partners in Cyprus.
Partnerships are divided into:
-General partnerships: They can be formed by two to twenty partners who have to register with the Registrar of Companies. There is no capital requirement, no auditors, and the partners are liable to the extent of their private assets.
-Limited partnerships: They are virtually the same as general partnerships. However, they must have one partner who is fully liable for the partnership's obligations (general partner) and at least one partner who is liable only to the extent of his investment (limited partner).
Lastly, sole proprietors are persons who conduct their business with or without additional employees. It is the simplest corporate structure in Cyprus. They can trade under the name of a business but are solely responsible for the debts of the business. There are no statutory requirements for their accounting records or the audit of their annual accounts.
Do you have questions?
Do you have questions?
Holding companies in Cyprus
Cyprus is one of Europe's top destinations for holding companies. As you may know, holding companies don't offer products or services, but exist only to own and control other companies through share majority. Thus, they are generally the parent company of a group of companies. Their primary income source is the dividends from the disposal of capital to its subsidiary companies.
Holding companies are vital for investors with different companies as the risk and liability of the parent company is distributed and diversified between its subsidiaries. Also, it limits your tax liability as you can both base your holding and your subsidiary in different jurisdictions with beneficial tax rates for them.
This means selecting a solid jurisdiction for your holding company is probably one of the most significant considerations you must make as an investor. Thus, you probably have five main criteria from which to choose your jurisdiction:
- Incoming dividends (withholding taxes on foreign jurisdiction)
- Outgoing dividends
- Dividend income received
- Capital gain tax
- Other tax considerations such as re-organization rules, group relief, controlled foreign company rules, etc.
This means that jurisdictions that offer friendly rules to the above criteria are prime locations for your holding company. And Cyprus is one of them.
It's one of the top choices for businesses in Europe, Africa, Asia, and the Middle East. Companies can be incorporated at a surprisingly low cost and overhead expenses and have a marvelous corporate tax rate (12.5 %). Holding companies are usually incorporated as a private company limited by shares.
A Cyprus Holding company provides you:
- A tax exemption on the disposal and trading of securities.
- A tax exemption on dividends received from Cypriot companies or the foreign permanent company of your holding company (with certain exemptions, such as income arising from jurisdictions with lower tax rates or foreign companies with mostly passive income).
- Dividends, royalties (except for intellectual property), or interests paid by the holding to non-residents are not subject to withholding tax.
- Re-organization is tax-exempt.
- Losses can be carried forward for five years.
- No Controlled Foreign Company laws.
All this have made Cyprus one of the top jurisdiction for holding companies in Europe and one of our favorites in Mundo.
Who are we, and what can we do for you?
In Mundo, we have more than two decades committed to your freedom. Along with NTL, we've offered top financial, immigration, wealth management, banking, and investment services for family offices, high net worth individuals, and investors around the world.
In this time, we've built a paramount network of experts.
That's why we can provide you with top financial and corporate advice in Cyprus. Our experts on the island form an unparalleled multidisciplinary team that offers the best services in Cyprus.
One of them is helping you open and operate your business in Cyprus.
Cyprus is in the 54th position of the Doing Business ranking. That means it's not difficult to do business in Cyprus, but counting with a helping hand is the best way to go.
How to register a company
Registering a Cyprus company takes somewhere between a week and ten days, we can help you with this process, so you don't encounter any unpleasant issues. Let's walk you through it:
- Register the company name and receive approval from the Registrar of Companies (this process costs €30).
- Our legal team prepares the Memorandum and Articles of Association.
- Register the company at the Registrar of Companies. You must submit:
- Declaration form
- Office address
- List of directors
- Original or scanned copy of the memorandum and articles of associations
- Company name registration document
- Payment of registration fees (€205+€100 if you want the fast-track process)
1) Register at the tax authorities for tax and VAT and get a taxpayer number.
2) Register for social security at the Ministry of Labor.
You should also know that:
- The legislation requires a company to at least have one director, one shareholder and a secretary
- The registered office address must be in Cyprus.
- The standard authorized share capital is €1,000, but there are no requirements for minimum paid-up capital.
- Companies must file accounts and prepare yearly audits
Our corporate services sin Cyrpus
Our experts in Cyprus can help you with all primary corporate services in Cyprus, such as:
- Opening a company in Cyprus for you
- Company maintenance services, accounting, shareholding, and directorship services
- Due diligence services
- Tax planning
- Legal support
- Headhunting for your company personnel and finding an adequate office space
- Virtual/physical office support
- Mediation and arbitration services
- GDPR audit and auditing advisory
- Opening a corporate bank account
- Establishment of branches and offices
Want to know more about our corporate services in Cyprus? Don't waste any more time and hire a professional, enquire now!
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