Time of establishment of the company
Member State of the European Union since 2004, Cyprus is a destination of choice for the registration of offshore companies in Europe with an intra-community VAT number. The economy of Cyprus is based primarily on financial and banking services as in Luxembourg, but shipping also brings in a proportion of the island’s revenue, which has been an important transit point between Europe and Asia since ancient times. Like all offshore companies, anonymity is possible in Cyprus through the use of nominee directors and shareholders.
What to remember
Any lawful business may be established in Cyprus with the benefit of a European image, you can operate several business activities within the same entity with an offshore company in Cyprus. Thanks to its favorable tax system, Cyprus is one of the most attractive countries to incorporate an offshore company with a Intra-Community VAT number for imports / exports in Europe.
Company registration procedure
Name of the company
The first step towards the establishment of companies in Cyprus is to obtain consent to the proposed name of the company from the Register of Companies.
Initial share capital
The company’s share capital shall be expressed in euro and divided into shares of any value. However, the company’s share capital may be expressed in another currency.
The company must have at least one shareholder. Each shareholder submits the following information to the register when registering the company: full name, nationality, address, profession, passport copy, curriculum vitae and number of shares taken up. A foreign company may be a shareholder of a Cypriot company – in order to do so, it must submit certified corporate documents to the Cypriot register of companies.
Anonymity: all shares are registered and, in the case of a limited liability company, bearer shares can not be issued to their owners, however, owners of shares who do not wish to appear as registered shareholders may appoint nominees in the register as shareholders, while direct control remains in the hands of the actual owners.
The Company must have at least one director, but it is recommended that at least two directors be appointed. For each director, the following information is required: full name, nationality, address, profession and passport copy.
Directors may be Cypriots or foreigners. It should be noted, however, that the place of residence of directors of a Cypriot company decides whether the company is or is not a tax resident in Cyprus.
The company must have a secretary. The secretaries shall act under the control and in accordance with the instructions of the directors, keep the company’s records and perform administrative functions of a non-executive nature. For practical purposes, the secretary of the company’s founding member or his or her appointed representative is usually appointed.
Each company must have a registration address in Cyprus. A registered office is the place where pleadings, notices and other official documents may be served on the company. Companies registered in Cyprus have the right to operate through law firms or their own offices if they wish to establish one in Cyprus.
Articles of Association and Memorandum of Association
It is a document prepared by our lawyers which defines the company’s structure, it consists of two parts.
Full sets of registration documents are delivered as soon as the company is registered. The registration procedure takes approximately 10 days from the date of the order, completion of the form and submission of the original KYC documents (see below).
Each beneficial owner, director and shareholder of the company is obliged to provide the following documents:
- Confirmation of identity and address
- Current, valid passport (notarized copy must include nationality, place and date of birth, passport number, expiry date, photograph and signature).
- VAT invoice for utilities (not older than three months – indicating the name and address of the person) – e.g. for gas, electricity, water or landline phone (but not for mobile phone).
- Bank opinion – the document must indicate the period for which the person is known to the institution (not less than three years) and the nature of the relationship between the individual and the institution. It must be original, dated no later than 3 months back. Ideally, it should be in English.
Taxes and finances
All companies which are tax resident in Cyprus are subject to a tax on income from all taxable sources, both in Cyprus and abroad. Companies not being tax resident in Cyprus are subject to a tax on income resulting from business activities conducted through a permanent establishment in Cyprus and certain types of income obtained from sources in Cyprus. The Company is resident in Cyprus if it is managed and controlled in Cyprus. Taxes paid abroad may be recorded as corporate income tax liability.
The corporate income tax rate for all companies is 12,5 %.
Type of income / exemption limit:
- profits on the sale of securities (1)/total;
- dividends /total (2);
- interest not resulting from ordinary activities or not closely related to the ordinary activities of the company (3) / total (4);
- profits from permanent foreign establishments, under certain conditions / total.
Generally, costs incurred exclusively with taxable income and properly documented are entitled to a tax relief under the corporate income tax.
Tax losses incurred during the tax year and those that cannot be covered by other income are conditionally transferred and covered by profits from the profits of following five years.
Losses of one company from the current year may be conditionally covered from profits of another company if the companies are tax residents of Cyprus belonging to the group. The group is defined as:
- a situation where a company holds 75 % of the shares of another company entitling it to vote;
- a situation where 75 % of the shares of both voting companies are held by a third company.
Depreciation is made using the line method, the rates are determined depending on the type of assets.
VAT is levied on the sale of goods and services available in Cyprus, as well as on the purchase of goods from the European Union and the import of goods into Cyprus.
For goods acquired within the EU (except for goods subject to customs duty), the trader does not pay VAT on the receipt of products in Cyprus, but records VAT using the aquisition method. This means the usual booking in business books that VAT has been imposed individually and at the same time it has been taken back if it is connected with goods in connection with which the right to recover VAT is granted, without creating any costs for business.
In the case of acquisitions related to a transaction for which the right to recover VAT is not granted, the trader must pay the VAT corresponding to the acquisition.
The legislation provides for the following four tax rates:
- reduced by 5 %
- reduced by 9 %
- normal rate 19 %.
Difference between zero rate and VAT-exempt goods
The difference between the zero rate and exempt goods is that businesses that produce exempt goods are not entitled to recover the VAT charged on their purchases, costs and imports.
Non-recoverable charged VAT
As an exception to the normal rules, VAT shall not be recoverable in the following cases:
- purchased products used in the manufacture of exempt goods;
- the purchase, import or rental of saloon cars;
- costs of entertainment and guest rooms (other than those of staff and directors);
- the cost of directors’ accommodation.
Registration is compulsory for businesses with a turnover exceeding 15,600 euros over the previous 12 months or an expected turnover exceeding 15,600 euros over the next 30 days. Businesses with a turnover of less than €15,600 or goods outside the scope of VAT but for which the right to recover VAT is granted, may register voluntarily. Exempt products and services and the disposal of goods of an investment nature shall not be taken into account for the determination of annual turnover for the purposes of registration. Registration shall be completed by filling in the relevant form.
VAT return must be submitted quarterly and VAT payment must be made by the 10th day of the second month following the month in which the tax period ends. Registered persons have the right to ask for a different period for filing the tax return. When the quarterly charged tax is higher than the tax due, the difference is refundable or transferred to the following quarter.
Real estate tax
Real estate tax is levied on the market value as at 1 January 1980 and applies to real estate located in Cyprus which is owned by the taxpayer on 1 January each year. This tax is payable by 30 September each year. Natural and legal persons are responsible for the real estate tax. Owners of real estates with a total value of 12,500 euros or less (taking into account the values of 1.1.1980) are exempt from real estate tax.
Authorised share capital – EUR 102,52 plus the rate of 0,6 % imposed on the authorised share capital. Issued share capital – no capital duty if shares are issued at nominal price. Linear tax of EUR 17.09 if the shares are issued at a higher price.
Increase in the company’s share capital
Authorised share capital – 0,6 % for additional share capital. Issued share capital – linear tax in the amount of EUR 17.09 per issue, regardless of whether the shares are issued at a nominal price or at a higher price.
Avoidance of double taxation
The following tables present a summary of withholding taxes under the double taxation treaties concluded by Cyprus.
The Company is required to keep its accounts in accordance with International Financial Reporting Standards (IFRS).
At the end of the tax year, an annual report is required in Greek. The financial statements must have been audited. If the company is subject to VAT, quarterly VAT returns are also required.
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