How to Set Up a Company in Cyprus: The Ultimate Guide for Entrepreneurs

Before diving into the steps of setting up a company in Cyprus, it’s essential to understand why Cyprus is a preferred location for businesses. Here are some key reasons why entrepreneurs choose Cyprus for company formation:

1. Strategic Location

Cyprus is strategically positioned at the crossroads of Europe, Asia, and Africa, making it a perfect gateway for businesses looking to access multiple markets. Its geographical location facilitates trade and offers easy access to key global markets, including the European Union, the Middle East, and North Africa.

2. Favorable Tax Environment

Cyprus offers one of the lowest corporate tax rates in the European Union, currently set at 12.5%. Additionally, Cyprus has an extensive network of double taxation treaties with over 60 countries, allowing businesses to minimize their tax liabilities. Other tax benefits include:

• No withholding tax on dividends paid to non-residents.
• No capital gains tax (except for gains on the sale of real estate in Cyprus).
• Tax exemptions on profits from the sale of securities.

3. Member of the European Union

As a member of the European Union, Cyprus offers businesses access to the EU’s single market, which allows the free movement of goods, services, capital, and people. This membership provides companies with significant trade advantages and opportunities for expansion within the EU.

4. Strong Legal Framework

The legal system in Cyprus is based on English Common Law, which is widely recognized and respected internationally. This provides a solid legal foundation for businesses and ensures that investors’ rights are well protected.

5. Skilled Workforce

Cyprus boasts a highly educated and multilingual workforce. With a high standard of education and a large proportion of the population fluent in English, Cyprus provides an excellent environment for businesses to thrive.

Types of Companies You Can Set Up in Cyprus

When considering setting up a company in Cyprus, it’s important to choose the right type of business structure that aligns with your business goals. The most common types of companies in Cyprus include:

1. Private Limited Company (Ltd)

The Private Limited Company (Ltd) is the most popular business structure in Cyprus. It is suitable for small to medium-sized businesses and offers limited liability to its shareholders. This means that shareholders are only liable for the company’s debts up to the amount they have invested.

Key Features:

• Minimum of one shareholder and one director.
• No minimum capital requirement.
• Cannot offer shares to the public.
• Ideal for various business activities, including trading, consulting, and holding assets.

2. Public Limited Company (PLC)

A Public Limited Company (PLC) is suitable for larger businesses that intend 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.
• Can offer shares to the public.
• Suitable for businesses planning to be listed on a stock exchange.

3. Branch of a Foreign Company

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

Key Features:

• Must appoint a representative in Cyprus.
• The parent company is fully liable for the branch’s operations.
• Suitable for foreign businesses expanding into 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 Cyprus’s favorable tax regime, 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.

Step-by-Step Guide to Setting Up a Company in Cyprus

Now that you have an overview of the types of companies you can set up in Cyprus, let’s dive into the step-by-step process of company formation:

1. Choosing a Company Name

The first step in setting up a company in Cyprus is choosing a unique company name. The name must be approved by the Registrar of Companies, ensuring it is not identical or too similar to an existing company name. Avoid using restricted words or phrases that may require special permission.

2. Drafting the Memorandum and Articles of Association

The Memorandum and Articles of Association are the company’s constitutional documents. The Memorandum outlines the company’s objectives and the scope of its activities, while the Articles of Association govern the internal management, including the roles and responsibilities of directors and shareholders.

3. Submitting Incorporation Documents

Once the company name is approved and the constitutional documents are prepared, the next step is to submit the incorporation documents to the Registrar of Companies. These documents include:

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

4. Obtaining a Tax Identification Number (TIN)

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

5. Registering for VAT

If your company’s annual turnover exceeds the VAT threshold (currently €15,600), you must register for Value Added Tax (VAT) with the Tax Department. VAT registration allows your company to charge VAT on goods and services and to reclaim VAT on business expenses.

6. Opening 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, such as 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. Registering 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 comply with ongoing regulatory and reporting requirements. These include:

1. Annual Financial Statements

All companies in Cyprus are required to prepare and file annual financial statements in accordance with International Financial Reporting Standards (IFRS). These 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. During the AGM, shareholders 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. The tax return should detail the company’s income, expenses, and tax liabilities. The corporate tax return must be filed 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 Help

Setting up a company in Cyprus involves several steps and ongoing compliance requirements. At Cyprus Company Set Up, we offer a comprehensive range of services to support your company formation and ensure your business remains compliant with local regulations. Here’s how we can assist you:

1. Company Name Approval and Registration

We assist you in choosing a unique company name and handle the approval process with the Registrar of Companies. We also take care of all the necessary paperwork and submissions to ensure a smooth company registration.

2. Preparation of Legal Documents

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

3. Tax and VAT Registration

We guide you through the process of obtaining a Tax Identification Number (TIN) and registering your company for VAT. Our team ensures that your company is fully compliant with Cypriot tax regulations.

4. Corporate Bank Account Opening

We assist you in opening a corporate bank account in Cyprus, guiding you through the application process and helping you prepare the necessary documentation. We work with a network of reputable banks to provide you with a range of banking options.

5. Ongoing Compliance Support

We offer ongoing compliance support to ensure your business remains in good standing. From filing annual returns to managing social insurance contributions, we handle the administrative tasks so you can focus on growing your business.