Comprehensive Guide to Company Formation in Cyprus - Your Trusted Partner for Business Success

Cyprus is one of the most attractive destinations in Europe for company formation, and for good reason. Here are some of the key benefits that make Cyprus an ideal location for establishing your business:

1. Strategic Location

Cyprus is strategically located at the crossroads of Europe, Asia, and Africa, making it an ideal gateway for businesses looking to expand into international markets. The island’s proximity to major trade routes and its well-developed infrastructure make it a prime location for companies engaged in international trade, logistics, and finance.

2. Favorable Tax Regime

One of the most compelling reasons to set up a company in Cyprus is its favorable tax regime. Cyprus offers one of the lowest corporate tax rates in the European Union, currently set at 12.5%. Additionally, Cyprus has a network of double taxation treaties with over 60 countries, which helps businesses minimize their tax liabilities. Other tax advantages include:

• No withholding tax on dividends: Cyprus does not impose withholding tax on dividends paid to non-residents.
• No capital gains tax: Except for gains on the sale of immovable property located in Cyprus, there is no capital gains tax.
• Exemption from tax on profits from the sale of securities: Profits from the sale of shares, bonds, and other securities are exempt from taxation.

3. Robust Legal Framework

Cyprus has a well-established legal system based on English Common Law, which is widely recognized and respected globally. The legal framework in Cyprus provides strong protection for businesses and investors, ensuring that your company operates in a secure and transparent environment. This robust legal structure is one of the key factors that attract foreign investors to Cyprus.

4. Access to the European Union

As a member of the European Union, Cyprus offers businesses access to the EU’s single market, providing the opportunity to trade freely with other EU member states. Companies registered in Cyprus can benefit from the free movement of goods, services, capital, and labor within the EU, making it an ideal location for businesses with European aspirations.

5. Highly Skilled Workforce

Cyprus boasts a highly educated and multilingual workforce, with a strong emphasis on education and professional qualifications. The country has a high standard of education, and many professionals are fluent in English, making it easier for international businesses to operate. The availability of skilled labor in sectors such as finance, law, technology, and tourism is a significant advantage for companies setting up in Cyprus.

6. Business-Friendly Environment

The Cypriot government is committed to maintaining a business-friendly environment, with streamlined procedures for company formation and an efficient regulatory framework. The ease of doing business in Cyprus is supported by a range of government incentives, including grants, subsidies, and tax reliefs for specific industries.

Types of Companies You Can Form in Cyprus

When setting up a company in Cyprus, you have several options depending on your business needs and goals. Here are the most common types of companies that can be formed in Cyprus:

1. Private Limited Company (Ltd)

The most popular form of business entity in Cyprus is the Private Limited Company (Ltd). It is suitable for small and medium-sized enterprises (SMEs) and is characterized by limited liability, where the shareholders’ liability is limited to the amount they have invested in the company.

Key Features:

• Minimum of one shareholder and one director (they can be the same person).
• No minimum share capital requirement.
• Shares cannot be offered to the public.
• Ideal for most types of business activities, including trading, consulting, and holding assets.

2. Public Limited Company (PLC)

A Public Limited Company (PLC) is suitable for larger businesses that may want to raise capital by offering shares to the public. A PLC must comply with stricter regulatory requirements compared to a Private Limited Company.

Key Features:

• Minimum of seven shareholders and two directors.
• Minimum share capital requirement of €25,629.
• Shares can be offered to the public.
• Suitable for businesses that plan to be listed on the stock exchange.

3. Branch of a Foreign Company

A foreign company can establish a branch in Cyprus to conduct business operations in the country. The branch is not a separate legal entity but an extension of the parent company.

Key Features:

• The branch must appoint a representative in Cyprus.
• The parent company is fully liable for the branch’s operations.
• Suitable for foreign companies looking to expand their presence in Cyprus without forming a separate entity.

4. Cyprus Holding Company

A Cyprus Holding Company is a type of Private Limited Company that is specifically structured to hold shares in other companies. It benefits from the favorable tax regime in Cyprus, making it an attractive option for international tax planning.

Key Features:

• Exemption from tax on dividends received from subsidiaries.
• No capital gains tax on the disposal of shares.
• Suitable for international investors and multinational corporations.

5. General and Limited Partnerships

Partnerships in Cyprus can be either general or limited. In a general partnership, all partners have unlimited liability, while in a limited partnership, at least one partner has limited liability.

Key Features:

• Partnerships must be registered with the Registrar of Companies.
• Suitable for small businesses and professional services firms.
• The partnership is not a separate legal entity; partners are personally liable for the business’s debts.

Steps to Form a Company in Cyprus

Forming a company in Cyprus involves several key steps. At Cyprus Company Set Up, we provide expert guidance and support throughout the entire process, ensuring a smooth and efficient company formation. Here’s a step-by-step guide to forming a company in Cyprus:

1. Choose a Company Name

The first step in forming a company in Cyprus is choosing a unique company name. The name must be approved by the Registrar of Companies to ensure it is not identical or similar to an existing company name. The name should also not contain any restricted words or phrases.

2. Prepare the Memorandum and Articles of Association

The Memorandum and Articles of Association are the constitutional documents of the company. The Memorandum outlines the company’s objectives, while the Articles of Association detail the internal regulations governing the company’s operations, including the rights and duties of shareholders and directors.

3. Submit the Incorporation Documents

Once the company name is approved and the Memorandum and Articles of Association are prepared, the next step is to submit the incorporation documents to the Registrar of Companies. The required documents include:

• Application for registration (HE1 form).
• Declaration of compliance (HE2 form).
• Details of the company’s directors, secretary, and registered office (HE3 form).

4. Obtain a Tax Identification Number (TIN)

After the company is registered, it must obtain a Tax Identification Number (TIN) from the Tax Department. This is required for all tax-related matters, including corporate tax, VAT, and social insurance contributions.

5. Register for VAT

If your company’s annual turnover exceeds the VAT threshold, it must be registered for Value Added Tax (VAT) with the Tax Department. The current VAT threshold in Cyprus is €15,600. VAT registration allows your company to charge VAT on goods and services and to reclaim VAT on business expenses.

6. Open a Corporate Bank Account

Once your company is registered, you’ll need to open a corporate bank account in Cyprus. This account will be used for the company’s financial transactions, including receiving payments and paying expenses. Cyprus has a well-developed banking sector with a range of local and international banks offering corporate banking services.

7. Register with the Social Insurance Department

If your company plans to hire employees, it must be registered with the Social Insurance Department. Employers in Cyprus are required to make social insurance contributions on behalf of their employees, covering areas such as pensions, unemployment benefits, and healthcare.

Ongoing Compliance and Reporting Requirements

Once your company is established in Cyprus, it’s important to be aware of the ongoing compliance and reporting requirements to ensure that your business remains in good standing. These requirements include:

1. Annual Financial Statements

All companies in Cyprus are required to prepare and file annual financial statements that comply with International Financial Reporting Standards (IFRS). The financial statements must be audited by a licensed auditor and submitted to the Registrar of Companies.

2. Annual General Meeting (AGM)

Companies in Cyprus must hold an Annual General Meeting (AGM) of shareholders within 18 months of incorporation and at least once every calendar year thereafter. The AGM is an opportunity for shareholders to review the company’s performance, approve the financial statements, and make decisions on key matters such as the appointment of directors.

3. Corporate Tax Returns

Companies in Cyprus are required to file an annual corporate tax return with the Tax Department, detailing the company’s income, expenses, and tax liabilities. The corporate tax return must be submitted by 31st December following the end of the tax year.

4. VAT Returns

If your company is registered for VAT, you’ll need to submit regular VAT returns to the Tax Department, detailing the VAT charged on sales and the VAT paid on business expenses. VAT returns are typically submitted on a quarterly basis.

5. Social Insurance Contributions

Employers in Cyprus must make monthly social insurance contributions on behalf of their employees. The contributions are calculated as a percentage of the employee’s salary and must be paid to the Social Insurance Department by the end of the month following the payment of wages.

How Cyprus Company Set Up Can Assist You

At Cyprus Company Set Up, we offer a comprehensive range of services to support your company formation in Cyprus. Our team of experienced professionals is dedicated to providing expert guidance and personalized solutions to ensure that your business is set up for success. Here’s how we can assist you:

1. Company Name Approval and Registration

We’ll help you choose a unique company name and handle the approval process with the Registrar of Companies. Our team will also take care of all the necessary paperwork and submissions to ensure a smooth and efficient company registration.

2. Preparation of Legal Documents

Our legal experts will draft the Memorandum and Articles of Association, ensuring that they comply with Cypriot law and reflect your business objectives. We’ll also prepare and submit all required incorporation documents on your behalf.

3. Tax and VAT Registration

We’ll assist you in obtaining a Tax Identification Number (TIN) and registering your company for VAT. Our team will guide you through the process and ensure that your company is fully compliant with Cypriot tax regulations.

4. Corporate Bank Account Opening

We’ll help you open a corporate bank account in Cyprus, guiding you through the application process and assisting with the necessary documentation. We work with a network of reputable banks to provide you with a range of banking options.

5. Ongoing Compliance Support

Our services don’t end with company formation. We offer ongoing compliance support to ensure that your business remains in good standing. From filing annual returns to managing social insurance contributions, we’ll handle the administrative tasks so you can focus on growing your business.