Why Cyprus
Cyprus stands out as an attractive destination for international businesses due to its strategic location at the crossroads of Europe, Asia, and Africa. The island offers a favorable business environment, supported by a stable political system, EU membership, and a well-developed legal framework based on English common law. Additionally, Cyprus provides an extensive network of double tax treaties, ensuring reduced withholding taxes on international transactions.
Corporate Taxes
Cyprus boasts one of the lowest corporate tax rates in the EU, set at 12.5%. The Cyprus IP Box regime further enhances tax efficiency, offering significant tax benefits for income derived from intellectual property, potentially reducing the effective tax rate to as low as 2.5%. Moreover, there are exemptions on foreign dividend income, capital gains, and profits from permanent establishments abroad, provided specific conditions are met.
VAT Registration Requirements
Businesses operating in Cyprus must register for VAT if their taxable supplies exceed the registration threshold of €15,600 over a 12-month period, if intra-EU transactions are conducted, or if services from abroad received in Cyprus exceed the registration threshold. Voluntary registration is also possible. Once registered, businesses are required to charge VAT on their taxable supplies, submit quarterly VAT returns, and comply with other regulatory requirements.
Employee and Other Substance Requirements
While Cyprus tax law does not explicitly mandate substance requirements, demonstrating substantial presence can help prevent challenges from tax authorities both locally and internationally. This includes having local directors, physical office space, and employees.
Types of International Clients Coming to Cyprus
An increasing number of businesses from Europe, Middle East, Asia are choosing Cyprus due to its favorable business environment. Many of these clients are active in sectors such as financial services, technology, biotechnology, research & development, shipping, and intellectual property.
These international clients are drawn by the attractive tax regime, strategic location, access to EU markets, and a robust legal framework.
Types of Companies Being Set Up and Beneficial Structures
Common types of companies established in Cyprus include IP holding and development companies, holding and financing companies, and trading companies. Beneficial structures often involve holding companies for tax-efficient profit repatriation, financing companies leveraging notional interest deduction, and IP companies utilizing the Cyprus IP Box regime.
Types of International Clients Physically Relocating to Cyprus and Their Benefits
High-net-worth individuals, entrepreneurs, and professionals seeking a favorable tax regime and a high quality of life are among those relocating to Cyprus. Benefits include a non-domicile status that offers exemption from taxes on worldwide dividends and interest income, as well as favorable personal tax rates.
Annual Financial Requirements & Reporting
Cyprus companies are required to maintain proper accounting records and prepare annual financial statements in accordance with International Financial Reporting Standards (IFRS). These financial statements must be audited by a licensed auditor. Additionally, companies must file annual tax returns and may need to submit VAT returns, employer returns, and other statutory filings.
Additional Attractive Features for International Clients
Cyprus offers attractive residency and citizenship programs. The country boasts a high standard of living, with excellent healthcare and education systems.
Cyprus has advanced infrastructure, including telecommunications, transportation, and professional services.
Company registration timing considerations
It takes approximately 7-9 business days with the expedited procedure to incorporate a Cyprus private company.
Private company registration requirements
- Company Name: choice of 3 names must be provided, for approval by the Registrar;
- Directors: at least 1 director, corporate or physical (local nominee services can be provided). The director need not be a Cypriot national, but it is an important factor in determining if the company is tax resident in Cyprus (the company must be managed and controlled in Cyprus in order to be tax resident);
- Shareholders: at least 1 shareholder corporate of physical person (local nominee services are part of our services offering). The full name, nationality, address, profession, passport copy and number of shares to be acquired required. The nationality of shareholders is not taken into consideration in respect of the tax residency of the company;
- Company Secretary: Cyprus company secretary (part of our services offering);
- Registered Office: Cyprus registered office (part of our services offering);
- Share capital: No minimum issued share capital, but at least 1 share in issue. Share capital can be expressed in any currency;
- Registrar submissions: M&AA of the Company and standard forms HE1, HE2, HE3 containing the proposed officers and registered office of the Company.
- Once the Registrar is satisfied the above have been complied with, they will incorporate the company and issue its corporate certificates.
- In the meantime, our team prepares all resolutions for the appointment of officers, the company’s first minutes, adoption of seal (and order of same), and the corporate register which we maintain up-to-date for the companies under our administration.
UBO Registrations, Annual Return & Financial Statements
- UBO Registrations: the details of the UBOs of the Company are filed in the UBO Registry System within 90 days from incorporation, they must be yearly confirmed and also updated whenever there are any changes (within 45 days). Access to the UBO Registry is restricted only to a) competent supervisory authorities and b) to obliged entities for the purpose of due diligence and identification measures (banks, law firms, audit firms etc) after payment of a fixed fee.
- Annual Returns & Financial Statements filings: companies must file once every calendar year annual returns, which contain essential information on the company (reg. address, directors, secretary, share capital and register of members) accompanied by the company’s audited financial statements relating to the previous financial year.