Company incorporation in Cyprus

Cyprus, strategically located at the crossroads of Europe, Asia, and Africa, offers a highly attractive business environment for foreign investors. With its competitive tax system, favorable legal framework, and a strong reputation as a financial hub, Cyprus is a top destination for companies looking to establish a base in the European Union.

Most Common Business Forms for Foreign Companies

The most common business structures for foreign companies in Cyprus are the Private Limited Company (Ltd.) and the Public Limited Company (PLC).

• Private Limited Company (Ltd.): The Private Limited Company, or Ltd., is the most commonly used structure for foreign investors in Cyprus. It allows for limited liability, meaning shareholders are only responsible for the amount of their capital contribution. The minimum number of directors is one, and foreign shareholders can hold 100% of the shares. The minimum share capital requirement for an Ltd. is just EUR 1, but it is recommended to have a higher amount to show financial stability.
• Public Limited Company (PLC): The PLC is typically used by larger companies, especially those looking to raise capital from the public or through stock listings. A PLC requires a minimum share capital of EUR 25,000, and shares can be publicly traded. This structure is less common for small foreign businesses but is suitable for those seeking expansion or significant capital investment.
• Foreign ownership is allowed up to 100% in most sectors, and Cyprus offers various incentives for foreign investors, such as low corporate tax rates and an extensive network of double taxation treaties.

The Ltd. structure is typically preferred by foreign investors due to its flexibility, low capital requirement, and limited liability protection. It’s ideal for both small businesses and larger entities seeking to benefit from Cyprus’s strategic location and business-friendly regulations.

Setting Up a Company in Cyprus

Setting up a company in Cyprus involves several steps. Below is an overview of the incorporation process:

1. Choose a unique company name and verify its availability with the Cyprus Registrar of Companies.
2. Prepare and notarize the Articles of Association (AoA), which should outline the company’s objectives, shareholding structure, and governance.
3. Register the company with the Cyprus Registrar of Companies to obtain legal recognition. This process typically takes about 1-2 weeks.
4. Open a corporate bank account in Cyprus and deposit the required capital. The minimum capital requirement for an Ltd. is EUR 1, although a higher amount is recommended for financial stability.
5. Obtain a tax identification number (TIN) from the Cyprus Tax Department for all directors, shareholders, and the company itself.
6. Register for VAT if the company’s turnover exceeds EUR 15,600, as businesses above this threshold are required to charge VAT on goods and services.
7. Register with the Social Insurance Services if the company employs staff in Cyprus.
8. Obtain any necessary industry-specific licenses or permits, depending on the business activity.

The company formation process in Cyprus is relatively straightforward and can be completed in approximately 1-2 weeks, depending on the complexity of the business and the completeness of the application. Working with local experts can help streamline the process and ensure full compliance with Cyprus’s legal and regulatory requirements.

Taxation and Withholding Taxes

Cyprus offers a very favorable tax regime for businesses, making it an attractive destination for foreign investors. Key tax aspects include:

• The corporate income tax rate in Cyprus is 12.5%, one of the lowest in the European Union, providing a competitive advantage for foreign businesses.
• Cyprus also offers a 0% tax rate on dividends received from foreign subsidiaries, making it highly attractive for international holding companies.
• For businesses involved in intellectual property (IP), Cyprus offers preferential tax treatment with an 80% exemption on qualifying IP income under the “IP Box” regime.
• Value Added Tax (VAT) in Cyprus is 19%, but there are reduced rates of 9% for certain goods and services and 5% for others, such as books, medicines, and hotels.
• Cyprus imposes a 17% withholding tax on dividends paid to foreign shareholders. However, this rate can be reduced through double taxation treaties (DTA) with other countries.
• Cyprus has signed numerous DTAs with countries around the world, allowing for reduced withholding tax rates on dividends, royalties, and interest payments.

Service Providers for Company Incorporation

• Cypcon Ltd.
• PwC Cyprus
• Deloitte Cyprus
• BDO Cyprus
• Grant Thornton Cyprus

These service providers offer expertise in company registration, legal services, tax advice, and compliance. They can assist with the entire incorporation process, helping foreign businesses navigate the local regulations and set up operations in Cyprus efficiently.