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Company formation in Cyprus

If you are looking for a jurisdiction that offers swift and convenient business registration, you might want to consider the Republic of Cyprus. This country holds a strategically important geographical position with gateways to Europe, Asia, and Africa, therefore standing out as a favored destination for setting up businesses. Company formation in Cyprus may become a profitable choice, due to its appealing tax policies, streamlined company registration processes, and favorable investment environment.

Company formation in Cyprus

Posted 11 September 2023

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Diane, partner of GFLO Consultancy

Advantages of Cyprus company registration

The Republic of Cyprus is a jurisdiction well-known among entrepreneurs worldwide. We’ve highlighted several key advantages of this country for business registration and operations.

  1. Being part of the Eurozone, Cyprus currently does not show the characteristics of typical offshore jurisdictions. The concept of “offshore” in its classical sense is not applied to Cyprus, which positively impacts its reputation.
  2. Cyprus has a favorable tax system. For example, the corporate tax rate is one of the lowest in Europe, standing at 12.5% of the organization’s profits, both within and outside Cyprus. Also, certain types of income, like dividends (which is convenient for holding companies) and profits from selling securities are not taxed on the island.
  3. The country provides a clear and straightforward company registration process. However, gathering the necessary registration documents may take additional time, and if you currently can’t handle collecting documents and completing the paperwork on your own, professional assistance can streamline the process.
  4. An easy procedure for obtaining a VAT number (Value Added Tax Number) for companies, whether acquired on a mandatory or voluntary basis.
  5. Significant influence of English law on corporate legislation.

Legal forms of business organization in Cyprus

  • Private company limited by shares – a private limited liability company. This is the most common form of business organization in Cyprus. There are no minimum statutory capital requirements. Participants are liable for the company’s obligations only to the extent of their share. The number of shareholders must not exceed 50.
  • Public company limited by shares – a public limited liability company. Participants in this type of company are also liable for the company’s obligations only to the extent of their share, but the number of shareholders is not limited, and the company’s shares are freely transferable.
  • Company limited by guarantee – a company with members’ liability limited by guarantee. These are usually established for charitable and other non-profit purposes.
  • Partnership – commercial enterprises created by partners. There are two types: general and limited partnerships. In a general partnership, all partners have joint and several liability for all partnership obligations. In a limited partnership, there is a distinction between general partners (who have unlimited personal liability) and limited partners (whose liability is limited to their contribution).

The process of company formation in Cyprus

Most companies in Cyprus are registered as private or public companies limited by shares. The registration procedure is not complicated and largely depends on the speed of gathering the registration documents and submitting them to the Registrar of Companies to initiate the process. The documents required for company formation in Cyprus include identification documents for the company’s participants, as well as the following information:

  • 2-3 proposed company names in order of preference;
  • the company’s structure (the director, shareholder, and beneficiary);
  • the intended line of business.

Once you have all the required information and documents, the registration process will begin. This process, from gathering the necessary registration documents to preparing the final corporate documents for the registered company, involves the following steps:

  1. Checking the company names and selecting an available one. The name-checking process takes 1-3 days, depending on the swiftness of the Registrar’s office.
  2. Preparation of forms, Articles of Association in both Greek and English, and other documents for submission to the Registrar of Companies.
  3. Company registration with the Registrar of Companies. The registration process typically takes around 7 working days from the submission of all the necessary forms and documents to the Registrar.
  4. Preparation of constitutional documents for the registered company and ordering a corporate seal. A distinctive feature of Cyprus is the issuance of Company Certificates, which reflect information about the registered company, its address, shareholders, and directors.
  5. Notarization and apostille of documents if necessary. The notarization process takes 1-2 days, while apostille may take 3-5 days.

Tips to keep in mind when conducting business in Cyprus

Companies registered in Cyprus should be aware of the obligation to register with the tax department in order to acquire a VAT Number. You can obtain this number either on a mandatory or voluntary basis.

The mandatory requirement applies to companies and entrepreneurs in Cyprus whose taxable supplies (sales of goods and services) for the year have exceeded EUR 15,600. Two instances are crucial in establishing the necessary threshold:

  1. If the profit of the company exceeds EUR 15,600 by the end of the reporting year. Paperwork submission in this case is carried out at the end of the month.
  2. If the planned or expected profit will exceed EUR 15,600. In this case, you can apply at any time.

On a voluntary basis, VAT registration can be obtained by companies and other economic entities in Cyprus who either believe that they will reach the required threshold in the future or if the company is registered or has a management center in Cyprus and conducts activities outside Cyprus. However, there are reasons to believe that if the supplies were made within Cyprus, they would be subject to taxation.

Cyprus also has a requirement for a physical presence in the Republic. To meet this requirement, a Cyprus company must have a resident director, and limited power of attorney should be granted to the company’s beneficiary.

Taxation in Cyprus

If a company is established in Cyprus, and its management and control are exercised from Cyprus, the company will be subject to tax on both income earned in Cyprus and income earned abroad. However, companies that are not residents of Cyprus will only be liable for taxes on income earned within Cyprus.

Tax rates in Cyprus:

  1. Corporate Tax (tax on the profits of legal entities) – 12.5%.
  2. Value Added Tax (VAT) – 19% (9% for certain goods and services). VAT is levied on taxable goods or services supplied or provided within Cyprus.
  3. Dividend Tax – not applicable to legal entities.

Furthermore, Cyprus has entered into double taxation avoidance agreements with more than 50 countries. These agreements are aimed at preventing individuals and companies from paying income tax in two different countries and provide opportunities for residents of other countries to benefit from Cyprus’s low tax rates.

Preparation and submission of reports in Cyprus

After company formation in Cyprus all businesses are required to submit annual financial statements (Annual Return) in the form of HE32 reports. The reporting period usually coincides with the calendar year and lasts from January 1st to December 31st, except for the first reporting, which has an extended period of 18 months from the company’s registration date.

For example: if a company was registered on June 14, 2018, the reporting period would end on December 31, 2019. The report must be submitted by December 31, 2020.

In cases where a company did not conduct any activities and has no transactions, a “zero” report is still required. However, if the company is active, has transactions and conducts banking transfers, all necessary documentation (invoices, bank statements, contracts, transaction confirmations) must be provided for the report preparation. An audit report is attached to the financial statement.

The tax payable is calculated based on the submitted report.

Conclusion

Cyprus is a popular business and commercial center offering unique conditions for company registration. A significant advantage of Cyprus is its membership in the European Union, which means that legal relationships are governed not only by local but also by European legislation, which Cyprus consistently adheres to.

GFLO Consultancy experts are pleased to assist and help you with any inquiries, just get in touch or leave a request through the form right below.

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