Invest in Cyprus

What types of business entities can be registered in Cyprus?

The following five types of businesses may be registered under Cyprus law:
  1. Limited liability private or public company;
  2. General or limited Partnerships;
  3. Business/Trade Name;
  4. European Company (SocietasEuropeas);
  5. Branch of a foreign company.
  6. Private or public limited liability companies are the type of businesses for which the overwhelming majority of registration applications are submitted

Are there any eligibility criteria for a party who wishes to form a private or public limited liability company?

Any physical or legal person, whether of EU origin or not, is entitled to form a company in Cyprus.
An applicant needs simply to be able to submit all the information and documentation that his legal representative in Cyprus will request, in order to file a complete application to the Registrar of Companies
What are the statutory obligations of a Cyprus company with respect to the audit of its financial statements?
A Cyprus company has the following two statutory obligations with respect to the audit of its financial statements:
  1. A company must submit its audited financial statements to the Registrar of Companies in Greek, which is the official language in Cyprus. These financial statements must be prepared on an annual basis, except for the first financial statements of a company which can cover a period of up to eighteen months from the date of the company’s incorporation. In the case a company has subsidiaries and it has no exception from consolidation either from the International Financial Reporting Standards or from the Cyprus Companies Law, Cap. 113, Section 142, then it is required to file with Registrar of Companies its consolidated financial statements.
  2. A company must submit its Annual Tax Return to the Inland Revenue authorities on a calendar year. Annual Tax Returns must be supported by the audited separate (non-consolidated) financial statements of the company.
In the case of a company without subsidiaries or of a company with subsidiaries that falls within the non-consolidation criteria, a single audited set of financial statements will suffice for both statutory obligations. However, where consolidation is required, then a company should prepare a set of consolidated financial statements for the purposes of the Registrar of Companies and a set of separate (non-consolidated) financial statements for the purposes of Inland Revenue. The financial statements for both the above statutory purposes should be prepared in accordance with International Financial Reporting Standards as adopted by the European Union and in accordance with the requirements of the “Cyprus Companies Law, Cap. 113.
Double Taxation Agreements
Cyprus has developed a wide network of Double Tax agreements with 44 countries; ensuring that the same income is not taxed in more than one country.
Moreover, Cyprus is in the stage of negotiating the conclusion or awaiting ratification of Double Taxation Agreements with several other countries.
Special Tax Treatment
Shipping Companies
Cyprus is considered as one of the most competitive shipping centres in the world in terms of registration fees and taxes.
No tax is imposed on profits from the operation of Cypriot registered vessels, or on dividends received from a ship-owning company.
Income arising from ship management activities is subject to tax at 4,25%. Alternatively, a ship-management company may choose to pay at a rate equal to 25% of tonnage tax rates of vessels under management if deemed more beneficial.
International Trusts
Cyprus International Trusts are widely utilised as a vehicle for international tax planning, offering the following tax advantages:
  • Income and gains of a Cyprus International Trust, derived from sources outside Cyprus are exempt from any tax imposed in Cyprus under certain conditions.
  • Dividends, interest or other income received by a Trust from a Cyprus international business company are not subject to tax nor are they subject to withholding tax.
  • No capital gains tax is charged on the disposal of assets of an International Trust.
  • Exemption from taxation in the case of an alien who creates an International Trust in Cyprus and retires in Cyprus under certain conditions.
Corporate tax
All companies are subject to a uniform tax rate of 12.5%, the lowest corporate tax rate in the European Union.
Moreover, various tax exemptions apply for corporate tax such as:
  • exemptions in respect of dividends received from other companies
  • exemption in respect of interest income under special conditions
  • favorable tax treatment of losses
  • no tax on profits earned from permanent establishments abroad under certain conditions
  • no tax on capital gains derived from the disposal of securities
  • no tax on profits from company reorganizations
  • tax relief of foreign tax paid
Personal Income Tax
Based on Eurostat’s latest statistics (May 2006), Cyprus does not only exhibit the lowest corporate tax rate, but also one of the lowest top statutory personal income tax rate at 30%. Moreover, various tax exemptions apply for personal income tax as well, such as:
  • exemptions in respect of dividends subject to certain conditions
  • no tax on interest income subject to certain conditions
  • favorable tax treatment of losses
  • no tax on profits earned from permanent establishments abroad under certain conditions
  • no tax on capital gains derived from the disposal of securities
  • no tax on remuneration by services rendered abroad
  • no tax on specific type of income such as compensation for injuries, provident fund, pension fund or other approved funds
Value Added Tax
Value Added Tax (VAT) rate is imposed on the supplies of goods and services, as well as on imports to Cyprus.
The standard VAT rate of 19% applies to Cyprus;
Exemption from Tax:
  1. Dividend income
  2. Profits from overseas permanent establishments
  3. Dividend
No withholding Tax on:
  1. Dividend income
  2. Interest and royalties paid from Cyprus
  3. Double Taxation Agreements
Cyprus has developed a wide network of Double Tax agreements with 44 countries, ensuring thatthe same income is not taxed in more than one country. Cyprus is in the stage of negotiating the conclusion or awaiting ratification of Double Taxation Agreements with several more countries.
For more information, please visit the Government of Cyprus site.
International Trusts
Cyprus International Trusts are widely used as a vehicle for international tax planning, offering the following tax advantages:
  1. Income and gains of a Cyprus International Trust, derived from sources outside Cyprus are exemptfrom any tax imposed in Cyprus under certain conditions.
  2. Dividends, interest or other income received by a Trust from a Cyprus international business company are not subject to tax nor are they subject to to withholding tax.
  3. No capital gains tax is charged on the disposal of assets of an international Trust.
  4. Exemption from taxation in the case of an alien who creates an International Trust in Cyprus and retires in Cyprus under certain conditions.
Shipping Companies
Cyprus is considered as one of the most competitive shipping centres in the world in terms of registration fees and taxes.
No tax is imposed on profits from the operation of Cypriot registered vessels, or on dividends received from a ship-owning company.
Income arising from ship management activities is subject to tax at 4,25%. Alternatively, a ship-management company may choose to pay at a rate equal to 25% of tonnage tax rates of vessels under management if deemed more beneficial
Efficient legal, accounting and banking services
Acknowledging that information and knowledge would be the drivers of sustainable growth in the global economy of the future, Cyprus has undertaken a major role in facilitating the exchange of ideas, services and support among professionals worldwide. In fact, in 2011, more than 80% of the country’s economy is based on the provision of services.
Legal services
Cyprus inherited a legal system based on Common Law. The legal profession is long established and consists of many independent law practices. Highly qualified and well trained professionals can provide expert and reliable advice on all aspects of business and commercial law, both local and international.
Accounting services
The accounting profession is very well represented, with many international companies operating on the island, as well as a number of private individuals providing accounting, auditing and consulting services. Most accountants are British trained and members of either the Institute of Chartered Accountants or the Chartered Association of Certified Accountants.
Banking and financial services
The banking sector is well developed and caters for a wide variety of financial needs of both businesses and individuals. The commercial banks and specialised financial institutions offer full and varied local, national and international services on personal and corporate level. They offer a wide range of services including insurance, leasing, hire purchase finance, factoring, mutual fund management, investment and consulting as well as custody and asset management services. Cypriots and foreigners residing on the island enjoy the benefits of a well developed insurance industry with all types of risk accepted mainly through agents and intermediaries.
Local business and financial consultants have typically trained at European or US universities and many have worked overseas before setting up in Cyprus. They offer advice on the whole spectrum of modern business and investment. Overall, the professional services sector plays a significant and rapidly expanding role in the Cyprus business landscape.
Reputable International Shipping Center
Cyprus is a highly reputable international shipping centre, ranking among the 10 leading maritime nations in the world;
More than 1,000 registered vessels with 21 million gross tonnage under the Cyprus flag;
More than 130 ship owning and ship management related companies maintain offices in and conduct international activities from Cyprus collectively controlling a fleet of 2,300 ships with 46 million gross tonnage
Ship Managagement
Cyprus constitutes one of the largest shipmanagement centres in the world; around 50 shipmanagement companies and marine-related foreign enterprises are conducting their international activities in the country while the majority of the largest shipmanagement companies in the world have established fully fledged offices on the island.
The accession of Cyprus to the European Union has undoubtedly had a considerable impact, both in terms of quality and quantity on the structure of the community fleet. In terms of tonnage, Cyprus accounts for 16% of the EU fleet, thus enhancing considerably the market share of the European fleet in international sea transport.
Transhipment
Cyprus has long developed into a transhipment centre for Asia Pacific trade with Europe as well as with shipping markets situated along the coasts of the Levant and Black Sea, or the North Adriatic. These markets can be easily accessed from Cyprus with minimum diversion from main arterial routes. This development is attributed to the key position of the island, the efficient customs formalities and the reliable handling and delivery system.
Likewise, Cyprus is a natural hub for other main-line deep sea trades traversing the Mediterranean, to North Africa and the Middle East. The main products re-exported from Cyprus are tobacco, processed foodstuffs, beverages, textiles and textile articles, minerals and chemicals. Cyprus could be used as a base for exporting to the Middle East, North Africa and Asia.
Led by its geostrategic position, the island has been a pioneer in the development of purpose-built container terminals in the Eastern Mediterranean, and was one of the first countries in the region to use specialised container gantry cranes.
Notably, Cyprus is classified as a low tax jurisdiction; meanwhile, its fiscal and regulatory regimes as well as its legislation are fully aligned with the EU’s acquis communautaire.
Cyprus is an attractive location for the establishment of shipmanagement companies and companies with shipping related activities. The geographical position of the island, its accession to the main international maritime conventions, as well as the generous tax incentives and the extensive network of bilateral agreements in merchant shipping, have enabled Cyprus to become an ideal shipping centre.
New Shipping Tonnage Tax System
The European Union´s approval of a fully revised and upgraded Cyprus Shipping Taxation System in March of 2010 is a turning point for Cyprus and European Shipping. The new Shipping Taxation System covers the three basic Shipping activities in International Shipping, namely Shipowning, Shipmanagement (including Crew Management) and the Chartering of vessels. The benefits of the new system may soon render Cyprus, the “Shipping Metropolis” of Europe. Shipowners are exempted from Income Tax and are automatically taxed under the Tonnage Tax System. Shipmanagers and Charterers can exercise their option to be taxed under the Tonnage Tax System.