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Cyprus Company Formation – Rules, Laws, Steps & Tax Optimization Explained
Despite being part of the EU – an advantage for some – and reporting foreign accounts on request, Cyprus is still an attractive jurisdiction for entrepreneurs from all over the world. Sure, it may no longer be the tax haven you knew a decade or two ago, but the environment is still business friendly.

It pays off researching everything before deciding on Cyprus company formation. There are more types of companies you can go for, and each of them comes with pros and cons. All in all, here is everything you need to know before investing your money.

Why incorporate in Cyprus​

Compared to other countries in the EU, Cyprus has the lowest tax rate – set at 12% only, so it is still an advantage that can help you keep more of your money. The tax can change based on the company. You will need one director and a separate shareholder to register a company in Cyprus.

Given the popularity of this country among foreigners and the fact that it hosts a huge expat community, company documents are available in both Greek and English. Local company legislation is based on the one in the UK, so it is quite simple to follow. Then, there is no withholding of tax on dividends.

Getting a European VAT number is straightforward and requires a quick application. You only need to prove that you have started your trading activities. Also, there is no capital gains tax for non-Cypriot assets, which is a plus. There is no stamp duty either for contracts regarding assets abroad.

Foreign companies and workers offering services in Cyprus will, however, pay an income tax. It is normally cheaper than what you can get in other countries in the EU and may vary – it can go up to 20% of your income.

Cyprus is also appreciated for how simple the residency procedures are. Work and residency permits for foreigners can be obtained with a simple procedure. There is one requirement, though – maintain a local office.

Bottom line, you will pay taxes. You will have to follow some rules. Your account might be reported to foreign authorities. There is no way you can hide money in Cyprus, but the jurisdiction is quite appreciated and beneficial for entrepreneurs sticking to legal activities.

Becoming familiar with the LTD in Cyprus​

The LTD is by far the most popular type of company, especially among foreigners. Many investors choose this option because there are not too many requirements. It can be established by citizens of the EU, as well as non-EU individuals.

The company is registered with the local Registrar of Companies. You will need to bring in all sorts of documents, but also decide on a name for the company. Details of directors and members must be included too, not to mention the capital.

Furthermore, every change you make to the company must be announced to the same institution. It is in charge of supervising local companies too and can take action should illegal activities occur. Companies will also need a VAT number in Cyprus.

Benefits of an LTD in Cyprus
Again, Cyprus is no longer the tax haven you used to read about a few decades ago, but it still maintains a prolific environment, despite all the harsh reporting rules of the EU. The LTD comes with a bunch of benefits too.

Most importantly, the structure is fairly simple to understand and will not cause any confusion. You can do it yourself or hire an agent – even if you do it yourself, there is nothing to be concerned about because the process is straightforward. All in all, the structure requires two or more members.

In terms of liability, your liability as a shareholder depends on your contribution to the share capital of the firm. This type of company is also used for different purposes, so there is plenty of flexibility in the country.

If your company is not considered a local one – a Cyprus resident entity, you will manage to avoid corporate tax. Then, you can use it for all sorts of activities locally – you might as well use it in trading, with no extra requirements.

The three types of LTDs in Cyprus​

There are three types of LTDs you can incorporate in Cyprus. Each of them has its own characteristics, as well as a few advantages. Choosing the right one depends on your business needs and long-term goals.

The private company limited by guarantee is one of the most popular ones – it can come with or without any shares at all. Then, you have the private company limited by shares, as well as the public limited liability company.

Main requirements for Cyprus company formation
You will be pleasantly surprised to find out that there are no minimum share capital requirements in Cyprus for private companies. Public companies do need a minimum share capital of €25,000, though. As for members, the private company needs one member, while the public one will require at least seven.

It is worth noting that in terms of maximum limits, a private LTD cannot have more than 50 members.

When seeking Cyprus company formation, you must provide details about all shareholders – contacts, shares, nationality, and so on. It is worth noting that there are no restrictions in terms of nationality whatsoever.

Five main steps in Cyprus company formation​

No matter what type of company you go for, there will be the exact same procedures. A few extras might be required for different companies though, but overall, you will see that a limited liability company is easy and quick to register – you do not really need an agent for it.
  • Come up with a trading name. You must ensure the name is unique. Discuss it with the shareholders and reserve it. Not only does it have to be unique, but it should not be close to other names either – such things can cause confusion.
  • Draft all the required documents. Come up with all the documents – they should be in Greek or English. They are fairly simple to complete – basically, just some forms to complete with specific details about the company.
  • Get a bank account. It must be a corporate or business bank account, of course. Your personal bank account cannot be used. You will also have to use this bank account for the initial deposit – the share capital.
  • Get all the documents required for the Cyprus company formation and file them to the local companies register.
  • Get in touch with the local tax department and register your company for VAT and taxation.
Based on what the company does or what industry you activate in, you may also require licensing.

Articles of the association explained for a company in Cyprus​

Whether you opt for a private or public company, the articles of association basically prove that your company exists as a legal entity. These documents must be carefully completed and should contain very detailed information for the local trade register to accept the Cyprus company formation procedure.

There are a bunch of documents and details you must include. Take shareholders, for example. You need their full names – like in official identification documents, nationalities, and addresses in Cyprus if they have any.

Company directors should also go in the same category – every single personal detail. Make sure the company secretary is also introduced to the trade register. You will find questions for such details in the forms you must complete.

The share capital of the company must be given too – you will also need evidence that your deposit has been successfully made. Each holder has a particular amount of shares – the division of these shares must be mentioned too.

Every company in Cyprus requires a legal address. It must go in the articles of association. The date of registration is also required, as well as the date of cessation – if you actually have such a date. Finally, include all the clauses targeting director appointment procedures and share capital alterations.

Name requirements for Cyprus company formation
Local laws make it crystal clear – every company registered in this jurisdiction must have a name, and the name must be reserved prior to the actual company formation. By the time your company is registered, someone else may take the name, hence the necessity to reserve it upfront.

You will have to show proof of reservation.
The name must be 100% unique – it should not be close to other names either, not to mention causing confusion in one way or another, such as a different letter from a famous company name. To make sure your name is alright, simply check upfront with the Companies House.

Another requirement is to make it obvious what type of company you have. You must add LLC or LTD at the end of the name. This is a legal requirement. You can choose a Greek name or perhaps an English name – even a mix or a unique combo, up to you.

Shareholder requirements for Cyprus company formation
No, the type of structure you choose for this company determines the shareholder requirements. Different types of businesses have different rules, whether it comes to minimum requirements or maximum limitations.

For instance, if you have a private company, you only need one shareholder. Sure, you can bring in a few more, assuming you start this company in a partnership with friends. But then, this is the main requirement – at least one shareholder.

There is also a maximum limitation for private companies – not more than 50 shareholders.

On the other hand, a public company requires seven shareholders. When considering public Cyprus company formation, make sure you have at least seven shareholders. At the same time, there are no maximum limitations.

Shareholders can be people or companies. They can be local or international – it makes no difference. When registered by a foreigner, the company can be a subsidiary. However, it will still be considered a domestic business.

Founding members are referred to as shareholders because of their capital requirements – shares. But then, if the company is limited by guarantee, there is no such requirement. Based on the amounts of shares, you can have both minority and general shareholders.

Shares can be ordinary – this is the most popular option in Cyprus, but they can also be redeemable or preferred. Various financial instruments can be issued as well, as long as they can be converted into shares – debentures or perhaps warrants.

There is one thing to remember, though – shares cannot be traded by the general public if the company is not public – pretty much like in every other country. You can do that by adding to the share capital.

Address requirements for Cyprus company formation
Registering a company in Cyprus comes with more requirements, and one of them is the necessity of having a legal address. It has to be a local address. This address can be anywhere – the city where the business operates or a different one.

Prior to completing the Cyprus company formation procedures, you can use a virtual office. However, when you mention the address on the documents, it must be filed with the local trade register. You can change the address later on.

Secretary and director requirements for Cyprus company formation
Every company in Cyprus – regardless of the type – needs one director and secretary. Less? Not allowed. More? Up to you. These positions can be filled by people or other companies. There is one major requirement for the secretary – the person or business taking this role must be a local resident.

The director can be of any nationality. The residency is not relevant either. But then, the residency will define the tax residency for the company. If the director is based in Cyprus, your company will become a local tax resident business.

Getting a bank account for your company​

You cannot register a company in Cyprus without having a corporate bank account for it – simple as that. Basically, having a bank account is one of the requirements and part of the Cyprus company formation procedure.

Why? Simple – you must make the deposit of the share capital, and you need a local bank account for it. You will then need to get a statement and use it as evidence in the company formation procedure. Even if you do not have any share capital requirements, you must determine the financial necessities for it.

This amount of money must be deposited as soon as you open the account.

No matter which bank you choose, there will be more formalities here. The institution will require articles of association, as well as different details about the company, such as what it does or what industry it activated in.

The bank account opening procedure may take up to a couple of weeks.

Licensing requirements for Cyprus company formation
The necessity of a license depends on what your company does or deals with, not to mention the industry you are part of. You may need particular permits or licenses – however, this is the last step in the process, and it is up to you to check the requirements.

Some of the most popular industries that require such licenses include finances, telecommunications, and tourism. While the legislation has not changed too much lately, it is still worth double-checking as soon as you decide to make this step.

Generally speaking, some licenses represent nothing but a procedure. For example, there are no major requirements in tourism. They can become stricter if they involve health and safety, though – such as the food industry.

Different uses for companies in Cyprus
A company in Cyprus does not necessarily have to operate like any other local business. There are more ways to use your LTD. It comes with a bunch of advantages – such as very few requirements. But then, pay special attention to its uses, as each of them comes with different rules.

For instance, LTD could be a subsidiary of a foreign company. You are interested in moving to Cyprus and establishing a presence in this jurisdiction. If you have a company in a different country, you can use the Cypriot one as a subsidiary.

An offshore company will also be able to take the LTD form and bring in all the beneficial tax conditions. Those who are after-shelf companies can also register LTDs and use them in that direction, not to mention the fact that limited liability companies can be used as a base for joint ventures.

Even a holding company can be registered as a limited liability company.

Taxation and exemptions in Cyprus​

Cyprus company formation comes with numerous benefits for your entity. The taxation depends on more factors, and the most important one is whether the company is a tax resident or not. There are a few rules in this direction, though.

If your company can be considered a resident one, you will deal with corporate tax, which targets worldwide income too. If your company is not considered a resident one, there will be no taxes applied to it in this direction.

Digging deeper into numbers, you should know that a resident company in Cyprus – including LTDs – will deal with a corporate tax of 12.5%. This is the standard value. Resident company will also need to deal with a so-called special defense contribution, which is set at 17%.

Talking about rules and regulations, you should also know that your business audited accounts need to be filed within 18 months for the first time. Then, you need your annual accounts audited. File every 12 months from that point on.

Local authorities are pushing hard to keep the jurisdiction attractive to investors without breaking international rules. With these thoughts in mind, there are still a bunch of tax exemptions that could help you retain more of the income.

There are plenty of tax exemptions, but some of them stand out.
First, you can avoid dividend tax. This exemption goes to both foreign and local shareholders when spreading profits from dividend payments. Tax on this type of income can be easily avoided by having a company in Cyprus.

Keep your shares in a local LTD, and you can also avoid the capital gains tax, which could save you a fortune.

Now, should you meet a few conditions, you will be able to turn your interest income into a tax exemption as well. Sure, this opportunity is not for everyone, but there are some exceptions. Rental income gained by your company may also benefit from tax exemptions.

However, there is a condition here – the income should be used in the preservation of the building.

Some conditions will also apply to income generated from foreign exchanges.
Tax exemptions are not the only benefits to pay attention to. There are plenty of tax deductions as well, and they can be just as attractive.

Then, it is worth noting that the Cypriot economy has been on an ascendant path for quite a while now. For example, in 2019, it went up by over 3%. The unemployment rate has also dropped to around 7% from the previous year.

In 2020 and 2021, just like many other economies around the world, the Cypriot one was affected by the coronavirus pandemic. Things are quickly going back to normal now. Everything is open, and tourism – among many other industries – are gaining back.

Conclusion​

As a short final conclusion, Cyprus company formation is still an attractive opportunity for people from all over the world. Offering access to the whole of the EU market and other jurisdictions, Cyprus does not have any restrictions when it comes to nationalities.

It is true that things have changed a lot over the past decade. Cyprus was often referred to as a tax haven, and it can still be one if you play your cards right. However, it is no longer an option to hide money or avoid taxes at all.

With all these, regulations are mild, and a tax optimization is still an option – Cyprus is still an attractive choice for low taxes and numerous benefits.
 
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lostguy

Mentor Group Gold
I'm owning 2 CY companies for some years already. Have been pleased with the service I got from my current agent. All is running good and silence.
 

scrawnycrewmate

New member
Foreign companies and workers offering services in Cyprus will, however, pay an income tax. It is normally cheaper than what you can get in other countries in the EU and may vary – it can go up to 20% of your income.
Below personal incomes of 19500 EUR / year, one only has to fill out a income questionnaire (the IR4), much less stress than doing a full declaration.

All in all, the structure requires two or more members.
My LTD only has me, myself and I. No other member.
 

Sols

Staff member
Mentor Group Gold
What about Hungary and Bulgaria?
It's true that you can find lower corporate income tax rates in EU. 12.50% is not the lowest corporate tax rate in the EU.

However, it is the lowest among options that — all things considered — are sensible to most people in most cases. I can only surmise that's the reason Cyprus is often touted as the EU member with lowest tax rate. Cyprus stands out more when you factor in additional taxes, such as payroll taxes, income tax, dividends tax, withholding tax, capital gains tax, and so on.

Romania, Hungary, and Bulgaria have lower tax rates. But setting up and maintaining a company there as a non-resident foreigner is tedious. There isn't the same availability of information and service providers. Processes aren't as tried and tested as in Cyprus. Additionally, there are other taxes that can come into play that may affect your total tax burden.

Taking that into account, I think Malta might be the only jurisdiction that really competes with Cyprus.
 

tacokai

Mentor Group Gold
Below personal incomes of 19500 EUR / year, one only has to fill out a income questionnaire (the IR4), much less stress than doing a full declaration.


My LTD only has me, myself and I. No other member.
don't you have a mandatory secretary for your company?
 

scrawnycrewmate

New member
don't you have a mandatory secretary for your company?
I'd have to check the company document which I don't have at hand right now. Let me add this to the discussion points for the accountancy at the next meeting. So far as I know, it's my name for each and every position.
 

Dandyline

Mentor Group Light (Private use!)
It's true that you can find lower corporate income tax rates in EU. 12.50% is not the lowest corporate tax rate in the EU.

However, it is the lowest among options that — all things considered — are sensible to most people in most cases. I can only surmise that's the reason Cyprus is often touted as the EU member with lowest tax rate. Cyprus stands out more when you factor in additional taxes, such as payroll taxes, income tax, dividends tax, withholding tax, capital gains tax, and so on.

Romania, Hungary, and Bulgaria have lower tax rates. But setting up and maintaining a company there as a non-resident foreigner is tedious. There isn't the same availability of information and service providers. Processes aren't as tried and tested as in Cyprus. Additionally, there are other taxes that can come into play that may affect your total tax burden.

Taking that into account, I think Malta might be the only jurisdiction that really competes with Cyprus.

Many rules and taxes for Cyprus companies is being introduced from 31 dec 2022.

 

lostguy

Mentor Group Gold
Most agents in Cyprus will provide the local secretary service. Actually it is mandatory for them to do in order to sell their services to foreigners!
 
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