How to open a business in the Cyprus?

Бизнес на Кипре

Foreign entrepreneurs intending to open a business in Cyprus meet an absolute support of state institutions. Small size and poor mineral resources led to a change in domestic policy: foreign investments are appreciated, preferential taxation is provided, and government programs for support and business development are  introduced.

Business in Cyprus

Close proximity to majority of leading European powers, full membership in the European Community, participation in a number of international organizations, attracts businessmen who want to see for themselves the Cyprus model of business legal regulation.

Preliminary analysis shows that a business in Cyprus has the following advantages:

  1. Preferential taxation system,
  2. Favourable geographical position,
  3. Open European markets,
  4. Absence of bureaucracy and corruption,
  5. Excellent infrastructure,
  6. High-tech labour market
  7. Low lending rates,
  8. Attractiveness of the ready-made business in Cyprus in the form of tourist and consulting companies,
  9. Simple and clear procedure for registering companies,
  10. Absence of currency control.

Cyprus is a favourable tax haven due to a stable economy and flexible tax policy aimed at creating an image of business success on its territory and ensuring a high standard of living of its population.

Opening a business in Cyprus

The activities of Cypriot enterprises are governed by the law "on companies", worked out on the basis of British law. Depending on the goals, activities, choice of tax regime and other factors, it is possible to open a business in Cyprus in the following organizational and legal forms:

  1. Limited liability company.
    • Closed type.
      There is a restriction on the transfer of shares to a wide range of persons. The number of participants shall not exceed 50. The issue of bearer shares is prohibited.
    • Open type.
      At least 7 founders are allowed to participate. The total number of participants is not limited.
      The most common form of a company among businessmen who have decided to buy a ready-made business in Cyprus. In both types of companies, liability is extended to the contributions of participants to the authorized capital.
  2. Closed-type company, exempt from taxes.
    This type of business is created as charitable and non-profit funds. Preferential reporting and tax exemption are provided. Liability applies to the amount of the contribution of participants agreed upon establishment.
  3. Partnership.
    There shall beat least 2 participants, with limited and unlimited liability. It is managed by the general partner. Liability is distributed depending on the status of the participant.
  4. Trust.
    The most preferred form of the company for a foreign investor. It is not recognized as a legal entity and is not subject to taxation. Only a resident of Cyprus can carry out management.

Opening a business in Cyprus

To establish a company in Cyprus, an individual or legal entity is obliged to prepare in advance the appropriate package of documents, generally containing information about:

  1. Shareholders of the company,
  2. Director of the company,
  3. Beneficial Owners.

In addition to the above-mentioned data, there shall be a brief description of the type of future activity.

It is preferable to open a business in Cyprus with the help of qualified lawyers who provide specialized consultation on the registration of enterprises.

Business Registration in Cyprus

Understanding by the government of the need to attract fresh foreign investment has led to a liberal and transparent company incorporation procedure. Despite a certain number of laborious stages requiring the participation of specialists, business registration in Cyprus consists of the following stages:

  1. Checking the uniqueness of the name. Coincidence with the existing names is forbidden, as well as the use of the words contradicting moral and ethical principles. It is required to use prefix reflecting the organizational and legal form. In exceptional cases, the prefix does not apply in case of establishing a company for the purpose of charitable, scientific, religious, and other activities.
  2. Preparation and notarization of constituent documents.
  3. Payment of the registration fee.
  4. Given the numerous financial costs, it is easier to buy ready-made business in Cyprus.
  5. Applying for registration in the company register, with obtaining a registration number.
  6. Registration in the tax and social services.

The main documents confirming the registration of a company are the following:

  1. Charter with registration mark,
  2. Set of stamps
  3. Set of certificates for: registration, directors, shareholders, legal address.

Regardless of the form of ownership, as well as the direction of the company, an additional state fee must be paid annually.

Usually, business registration in Cyprus does not exceed 10 days.

A significant investment-attracting factor is the presence of the Larnaca Free Economic Zone, which provides preferential tax treatment without paying customs duties to its own residents when importing equipment and raw materials.

Company registration involves the preparation and filing of financial reporting:

  1. Annual reporting. It contains information on the status and changes in the  membership of shareholders, directors, secretaries.
  2. Tax declaration, interim and annual. Detailed information about income and profits.
  3. Financial reporting. Detailed information on the made commercial operations.
  4. Audit reporting . The results of the audit by an independent auditor.

Buying a ready-made business in Cyprus make it possible to avoid most of the likely pitfalls, speeding up the process of entering the Cypriot and European markets.

There are no requirements for the minimum authorized capital, but it is recommended to use an authorized capital in the amount at least 1 000 Euro.

Intending to buy a business in Cyprus, you must be familiar with the tax system:

  1. The income tax rate is 12.5%,
  2. Net tax profit is calculated by adding and subtracting income and expenses received from doing business in different countries of the world.
  3. Non-residents pay corporate income tax,
  4. The following are not taxed:
    • Income from the sale of shares and shares in a business,
    • Dividends,
    • Income from the sale of long-term investments,
    • Profit from the activities of foreign representation.

The military collection payment of 15% is obligatory imposed  on the Cyprus business.

A number of international agreements excludes the application of double taxation of residents. Individuals acquire the status of tax resident of Cyprus, on the basis of their residency for more than 183 days a year.

The fiscal residency rule also applies for a shorter period (60 days) in the following cases:

  1. You did not spend more than 183 days on the territory of another country,
  2. You were present in Cyprus for at least 60 days,
  3. You do not have the residency of another state,
  4. You carry out business activities / own real estate / hold a management position in a company registered in Cyprus.

Buying a business in Cyprus automatically transfers an entrepreneur into resident category.

The determination of the number of days falling under the rules of 183 and 60 days is calculated in the following way:

  1. The day of arrival and the day of departure are considered respectively days spent in and outside Cyprus,
  2. Arrival and departure on one day is recognized as a stay, and vice versa.

Registering a business in Cyprus in addition to a variety of preferential tax rates provides for numerous exemptions and deductions:

  1. Transfers in the form of charitable and other donations,
  2. Deductions to funds: pension, reserve and social insurance,
  3. Expenses related to proper maintaining the building under state safety,
  4. Representation expenses,
  5. Royalties and income from the use of intellectual and intangible property.

Cyprus business is distinguished by strong support at the state level, as well as by strict liability in cases of tax evasion.

Contact our company and we will provide detailed instructions for registering a business in Cyprus and effective methods of company management.