Lending money to a Cypriot company

[Onassis]

Hi all,

I've recently set up a company in Cyprus and need a bit more money to cover the startup expenses - more than the share capital I've paid.

May I simply transfer the funds to the company's bank account or should a loan agreement be put in place as well?

Thanks.

 

[Sols]

You should have a loan agreement, or draft a resolution for capital injection. Loans are usually better/easier than capital injections.

 

[CyprusLawyer101]

A loan although would provide for an interest expense to the company , would also normally give rise to an interest income to the shareholder which is considered taxable income and depending on the jurisdiction of tax residency of shareholder. A capitalization on the other hand can give rise to a "deemed interest deduction" which essentially provides for a "fictitious" interest expense, therefore granting the expense while not creating any taxable income to the shareholder.

 

[Onassis]

Thank you for your replies. It's a low amount, and I don't really care about charging interest to the company. I suppose a loan will be simpler paperwork-wise so I'll go with that.