Cyprus is an island country in the Eastern Mediterranean and the third largest and third most populous island in the Mediterranean, located south of Turkey, west of Syria and Lebanon, northwest of Israel and Palestine, north of Egypt, and southeast of Greece.

The earliest known human activity on the island dates to around the 10th millennium BC. Archaeological remains from this period include the well-preserved Neolithic village of Khirokitia, and Cyprus is home to some of the oldest water wells in the world. Cyprus was settled by Mycenaean Greeks in two waves in the 2nd millennium BC. As a strategic location in the Middle East, it was subsequently occupied by several major powers, including the empires of the Assyrians, Egyptians and Persians, from whom the island was seized in 333 BC by Alexander the Great. Subsequent rule by Ptolemaic Egypt, the Classical and Eastern Roman Empire, Arab caliphates for a short period, the French Lusignan dynasty and the Venetians, was followed by over three centuries of Ottoman rule between 1571 and 1878 (de jure until 1914).

Starting a business in Cyprus is the best way to conduct business in the EU if you want to optimize your taxes. If you are seeking compliance with international and EU rules, tax efficiency, and stable tax planning, Cyprus is your best choice. The country offers plenty of opportunities to reduce your tax exposure and optimize your taxes. Cyprus has become a top destination for companies seeking 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 five main types of corporate structures:

After understanding the frame of the financial services industry in Cyprus and its wonderful opportunities, you’re probably wondering how to set up a financial services firm in Cyprus. Investment firms must be licensed by the Cyprus Securities and Exchange Commission (CySEC), and they can provide financial assistance through representatives and branch offices across the EU. The license includes brokerage services, portfolio management market making, and investment advice. The minimum number of directors is two executive, and two non-executive directors, of which the majority must be based in Cyprus. The firm must have at least three local employees: The head of back office, the head of dealing room, and the compliance officer.

Types of business entities in Сyprus 

Business entities in Cyprus can operate under the following forms:

• Limited company
• Sole proprietor or partnership
• Branch
• European Public Limited Companies, otherwise known as Societas Europaea (“SE”).

The redomiciliation of foreign companies to Cyprus, and vice versa, is possible. This means that companies may migrate from another jurisdiction to Cyprus (and vice versa) without the need for a takeover or a transfer of assets to another company already registered in the destination country.

Registration procedure of a limited liability company

Under the Companies Law, the procedure for the formation and registration of a company in Cyprus is quite simple and as follows:

Approval of name

The redomiciliation of foreign companies to Cyprus, and vice versa, is possible. This means that companies may migrate from another jurisdiction to Cyprus (and vice versa) without the need for a takeover or a transfer of assets to another company already registered in the destination country.

Filing of the memorandum and articles of association To effect registration of a company, the Memorandum and Articles of Association must be submitted for filing with the Registrar of Companies.
A Specimen Memorandum and Articles of Association can usually be made available but care should be taken to ensure that the first few main object clauses are tailored to the specific circumstances and main business objects (aims or activities) of the company. Share capital requirements

There are no legal requirements as to the minimum or maximum share capital of the company. In the case of foreign direct investment, there are some indicative minimum levels of investment depending on the sector.

Shareholders
Under the relevant legislation there must be at least one shareholder, for whom the following information is required to be disclosed to the Registrar of Companies:

• Full name & nationality
• Address & occupation
• Number of shares held.

Directors
How directors are appointed is usually laid down by Articles of Association, as well as how many constitute a quorum. However, it is usual for there to be at least two directors. The names of the directors are also required to be disclosed to the Registrar of Companies.

Doing business in Cyprus 11 company secretary
The appointment of the secretary is made by the directors in accordance with the Articles of Association. For practical purposes a body corporate may be appointed secretary.

Registered office

Every company must have a registered office in Cyprus, which is determined by the directors.

The country has two Free Trade Zones: the Larnaca Free Zone and the Free Ports of Larnaca and Limassol. The businesses that operate within their areas are subject to few custom formalities and can import machinery, equipment, and raw materials wholly duty-free. Their foreign employees are liable to only 50 % of the regular income tax rates. Companies operating in the Cyprus free zones can import non-Community and Community goods into the country. Community goods are usually for export to other EU countries. Non-Community goods cannot be sold freely but are meant exclusively for sales and use in Cyprus. However, non-EU products in these zones are not subject to VAT, excise tax, or import duties.

Amongst the numerous benefits, applicants have the fastest processing times among the EU CBI programs. In a worst-case scenario, the process takes a year, which is the minimum it takes in Malta, for example. You get direct citizenship for a €2,150,000 investment that can bring significant returns considering the state of Cypriot funds and the real estate market. Plus, you’re getting a passport that gives you the immediate right to live, work, invest, and enjoy your life in any of the 28 EU states, and visa-free access to more than 170 countries.

Real estate has seen significant growth in the last few years in Cyprus. This surge in the market has two main reasons:

1) Increased trust for investors thanks to the pro-business reforms and

2) The residency and citizenship programs

As we’ve explained, investing between 2 and 2.5 million euros in residential or commercial real estate is the first step to acquire Cypriot citizenship by investment. Likewise, there’s a smaller investment program to obtain the fast-track permanent residence in Cyprus, for which you must invest at least €300k to get it.

Considering the tax optimization opportunities Cyprus offers, and the fact that its passport opens the EU for those who get it, it’s an extremely attractive and competitive program for investors. Consider that the real estate sector is booming for the general influx of foreign investment, the gorgeous state of the tourism sector, and the need for affordable housing for the ever-growing expat community. It’s not that real estate is growing because investing in the market is a requirement for obtaining residency or citizenship; it’s growing because there are plenty of opportunities in the market.

Real estate is widely considered one of the wisest investments you can make in Cyprus.

Cyprus offers one of the most attractive tax regimes in Europe. A member of the European Union since 2004, Cyprus’ regulatory regime is in full compliance with the requirements of the EU and OECD. Cyprus has one of the lowest EU corporate tax rates at 12.5%. The island’s advantageous tax rate coupled with an extensive list of double tax treaties places it high on the list of preferred jurisdictions for international tax planners.

Key Features of the Cyprus Tax System

• OECD approved / EU compliant tax system
• One of the lowest tax rates in the European Union at 12.5%. The effective tax rate can be reduced further due to specific exemptions provided by the tax legislation
• Reasonable tax administration
• Tonnage Tax (TT) regime attractive to ship owners, managers and charters
• Possibility to obtain tax rulings in advance by the tax authorities provides flexibility and minimisation of tax risk
• IP Box regime: effective tax rate of 2.5% on profits from the use and sale of qualifying intangible assets (restrictions may apply)
• No taxes on entry, reorganisations and exits. Company reorganisation rules ensuring tax neutrality for group restructuring transactions u Low transaction taxes
• No thin-capitalisation rules or Debt/Equity ratios
• No withholding taxes on payments to non-residents (apart from royalties paid for IP economically utilised in Cyprus)
• No wealth taxes and only minimal stamp and local taxes
• No exchange controls u No detailed transfer pricing rules (arm’s length principle only)
  
• Most international transactions free of VAT
• Unilateral credit relief for foreign taxes u No CFC legislation
• ‘Non-dom’ rules for Cyprus tax resident not domiciled in Cyprus. Any interest, rents or dividends (whether actual or deemed) regardless of whether such income is derived from sources within Cyprus and regardless of whether such income is remitted to a bank account or economically used in Cyprus, is exempt from special defence contribution
• Capital Gains Tax only on gains from sale of real estate situated in Cyprus or sale of shares owning real estate situated in Cyprus
• Tax incentives for expatriate employees taking up employment in Cyprus

Basis of Taxation

All companies that are tax residents of Cyprus are taxed on their income accrued or derived from all sources in Cyprus and abroad. A non-Cyprus tax resident company is taxed on income accrued or derived from a business activity which is carried out through a permanent establishment in Cyprus and on certain income arising from sources in Cyprus. A company is resident of Cyprus if it is managed and controlled in Cyprus.

Cyprus is a beautiful country to invest in for anyone who is seeking excellent tax optimization and wanting to run away from bureaucracy and invasive statist policies. Investment funds in Cyprus are incredibly cost-efficient and easy to set-up; the regulatory framework is robust and business-friendly. Even better: there are incredible opportunities for tax optimizations as most income sources from tax residents are tax-exempt. The country has enticing tax incentives and double tax treaties with more than 60 countries, including most Western countries, and little to no restrictions regarding the type of investments.

Cyprus offers foreigners a wide array of income tax exemptions. There are specific requirements, such as the relocation of the tax residency to Cyprus and applying for the non-dom status (more on that further down).

Relocating personal and tax residency is not costly nor bureaucratic, especially for EU citizens. The benefits that can be obtained by relocating in Cyprus and acquiring a non-dom status are unique and unparalleled across Europe. For example, people with non-dom are not subject to taxes over their company’s dividends. It doesn’t matter if the company is registered in Cyprus, if it is an offshore company or if it operates in other countries. The interests and results of any investment are entirely tax-free, even if the capital is earned in Cyprus.

An individual with a non-dom status in Cyprus has the legal right to do business through an offshore company. This gives individuals who want tax-optimized companies and tax exemptions for all their earnings generated from their overseas activities them a ton of flexibility.

The tax system in Cyprus offers incredible opportunities for those seeking tax optimization for their personal and corporate income. It’s especially attractive because it comes with full compliance with international and EU standards and around sixty double taxation treaties. Sum all this and Cyprus is a must for investors who want to protect their legacy and their income.

The system comes with plenty of benefits for foreigners, with 50 % tax credits on personal income for those with incomes above €100k per year, and tax exemptions on passive income such as interest and dividends and tax exemptions on disposals of securities.

The first that we must discuss regarding the Cypriot tax system is its “non-dom” regime, introduced in 2015. In this program, tax residents’ that qualify as non-Cyprus domiciled are exempt from the SCD (Special Contribution for Defense) on their passive income (interests, dividends, and such) and unconditional tax exemptions on gains on disposals of securities for 17 years.

Foreigners who open Cyprus structures with Cyprus Banking will see an incredible variety of quality from the national and international banks that have established their offices in Cyprus. More and more multinationals and Family offices are using Cyprus as a base for their operations and Cyprus banks are welcoming to foreign business. Cyprus banks offer multi-currency accounts and many other features. Some banks even take applications without the need for visiting their offices (you can get more info from our experts). Therefore, having a company and bank account in Cyprus should definitely be part of your diversification strategy. 

Banking has seen a fantastic surge in the last few years following the 2013 financial crisis. The government has promoted a series of initiatives and reforms that helped private investment and gave confidence to the markets that Cyprus could have a booming banking sector. The overall economy has a sustained 4 % growth per year, credit rating improves per year, and banks are raising private capital and maintaining strong capital positions.

Likewise, non-performing loans have been cut in half, and fresh foreign investment has improved the banking sector, which has become one of the most dynamic industries in the country. The banking business is booming in Cyprus, that’s why we work with the top experts in the country so you can reap all the possible benefits.

Mundo´s country rating is essentially a freedom index whereby our team of specialists rate a combination of freedoms which include freedom from violence and personal attacks, financial freedom from high taxes, business freedom from government interference and especially from socialism and communism. 

Political stability: 9

Cyprus is a stable democratic country with a center-right, pro-business government. President Nicos Anastasiades has won two consecutive elections and conducted most of the business-friendly reforms that turned Cyprus into such an attractive investment location. The country is well-known for its fully transparent legal principles based on the common law system, an inheritance of its British rule. Even as the island allows offshore companies and has a friendly tax system, it’s completely harmonized with EU and international standards.  

Cyprus has its own word for hospitality: Flinoxia. This is culturally, almost an obligation based on ancient Greek traditions to make guests welcome, and indeed Aphrodite’s birthplace will make you truly fall in love and feel like you’re at home. Cyprus has magnificent beaches all over the place, a thriving foodie culture with some of the best restaurants in Europe, over 100 wine trails, amazing natural historical and cultural events, and a shop-till-you-drop culture intermingled by some of the best coffee houses on earth. Cypriots of all incomes and professions work to live rather than live to work. Life is relaxed, happy, and unstrained by the world's problems. Cyprus has been around since the birth of the Greek gods. The islands have seen gods, emperors, kings, wars, economic crises, and more. And Cyprus remains the same: an island where people spend their time relaxing, socializing, eating, and enjoying their time. Indeed, like the great philosopher Epicurus, Cypriots enjoy friendship, a good meal, and all the simpler pleasures of life over the rat race.

If you are a Family Office or have a select pool of qualified investors that wish to pool their money to invest in different asset classes with light regulation, fast set-up, low management costs and entry into the European Union economy, with good professional management and excellent reputation, then you’re in the right place. You’re looking for a Cyprus Alternative Investment Fund (AIF).

Our appointed experts can assist you establish a fund, appoint a manager and obtain registration with CySEC as well as establish relations with a reputable Cypriot bank in very little time. The AIF fund is an ideal structure for project-funding in and from Latin America due to its plethora of double taxation treaties and excellent pool of management talent.

About Cyprus Foreign Policy

When talking about investment, the options in Cyprus are countless. Starting with renewable energy, real state, gas, oil, shipping, and many more this paradise is calling investors from all around the world to expand their activities in Cyprus. This with a strategy of five pillars and twelve action points following the best practices in Europe.

The strategy is focused on the attraction of investors in high value-added businesses such as the shipping industry, high technology, innovation, pharmaceutical, and biotechnology sectors that according to the authorities are considered essential for the future sustainability of the Cyprus economy.

Cyprus is a unitary presidential representative republic. this means that the president is the head of state and the head of Government. The three main powers are exercised by the government (Executive Power), the parliament (Legislative Power), and the Supreme Court (Judiciary Power).

Ministry of Commerce, Energy, and Industry in Cyprus, this ministry manages the energy sector, drafts trades laws, and agreements. Works to promote the industry in Cyprus.

Ministry of Finance: The mission of the Ministry focuses on economic policy and coordinates its subordinate departments.