Introduction to Cyprus Registration Guide

In the dynamic landscape of international business, Cyprus continues to stand out as a strategic location for entrepreneurs and large organizations looking to establish their companies. With its favorable tax environment, robust legal framework, and strategic geographical position, Cyprus offers a myriad of opportunities for both local and international businesses. In this comprehensive guide, we will delve into the intricacies of Cyprus company incorporation, providing a step-by-step analysis of the process, the key officers involved, timelines, an overview of the tax landscape, post-incorporation considerations, and essential details on bank account opening and audit requirements.

Understanding Cyprus as a Business Hub

Before delving into the specifics of company registration/incorporation, it’s crucial to understand why Cyprus is an attractive destination for entrepreneurs. Positioned at the crossroads of Europe, Asia, and Africa, Cyprus boasts a stable political and economic environment, making it an ideal location for international business operations. The country’s membership in the European Union further enhances its appeal, offering businesses access to a single market and a skilled workforce.

Overview of Cyprus Tax Landscape for Companies

Corporate Income tax is currently set at 12,5%.
Generally dividend income is exempt from tax.
Cyprus does not levy any withholding taxes on dividends, interest and royalties paid to non-residents of Cyprus except in the case of dividends paid to a company tax resident of an EU ‘blacklisted’ jurisdiction, and in the case of royalties earned on rights used within Cyprus.
Disposal of securities are tax exempted (e.g., shares, bonds, debentures).
No capital gains tax (except for disposal of immovable property in Cyprus).
Beneficial IP Box Regime which can lower the effective tax rate of your company as low as 2.5%.
There is a Notional interest deduction for investments into Cyprus companies.
A wide network of Double Tax Treaties covering approximately 60 countries.
50% income tax exemption for individuals earning more than €55.000 subject to certain conditions been met.
Tax losses can be carried forward and be utilized for the next five years.
Value Added Tax (VAT): Businesses in Cyprus may be subject to VAT, with the standard rate currently set at 19%. It is essential for companies to understand their VAT obligations and ensure compliance with local regulations.

Step-by-Step Guide to Cyprus Company Incorporation

There are certain steps during the Cyprus registration/incorporation process as follows:

a. Business Structure: Selecting the right business structure is the foundational step in the incorporation process. Entrepreneurs can choose from various structures, such as a private limited company, public limited company, partnership, or sole proprietorship. Each structure has its advantages and implications, and the choice should align with the business goals and requirements. Most of our clients proceed with the choice of private limited company, limited by shares.

b. Reserve company name: After you decide on the business structure the next step involves choosing and reserving a unique company name. The name must comply with the regulations set by the Registrar of Companies in Cyprus. This process ensures that the chosen name is not already in use and aligns with legal requirements.

c. Officers: For the incorporation to be able to take place, we will need to report through special forms who the Director(s), Corporate Secretary and Registered Office Address of the Company will be. Directors and shareholders can be local or foreign individuals or entities, offering flexibility to businesses. We do suggest the majority of Directors to be Cyprus Tax Residents, as this strengthens the case of tax residency of the Company in Cyprus. You can ready more about Cyprus Tax Residency in our article here.

d. Capital Requirements: Cyprus does not impose minimum capital requirements for private companies. However, it is essential to define the authorized and issued share capital in the Memorandum of Association.

e. Memorandum and Articles of Association: Drafting and submitting the Memorandum and Articles of Association is a crucial step. These documents outline the company’s constitution, structure, and rules governing its operation. They must comply with Cyprus law and be filed with the Registrar of Companies. These documents are also signed by the first subscribers (shareholders) of the Company’s Memorandum. Scanned copies would suffice (in wet ink) and there is no need to visit Cyprus to execute this, it can be done remotely.

f. Registration with the Registrar of Companies: Once all necessary documents are prepared and officers appointed, the next step is to register the company with the Cyprus Registrar of Companies. This involves submitting the required documents, paying the registration fees, and obtaining a certificate of incorporation, steps which we all take care of.

Timelines for Cyprus Company Incorporation

The timeline for registering a company in Cyprus is relatively efficient compared to many other jurisdictions. Typically, the process can be completed within a few weeks, depending on factors such as the complexity of the company structure, availability of required documents, and the responsiveness of relevant authorities. From the moment however that all the documents are submitted to the Registrar of Companies, it usually takes 4 to 6 business days for the Company to be incorporated.

Post-Incorporation Considerations

a. Registrations: After the Company is incorporated it will need certain registrations depending on its activities, but the most usual ones are as follows:

Obtain a Tax Identification Code: Complete necessary forms to the Tax Authorities to obtain a TIC number and also register with the Tax system for the online submission of tax forms. This registration is compulsory and needs to take place 60 days after incorporation.
UBO Register submission: The Cyprus Company will also need to submit its UBO information to the Registrar of Companies 30 days after incorporation. This is a compulsory registration.
Register for VAT: If the company will occur taxable supplies and meet the criteria for VAT registration then it needs to proceed with such registration.
Register with Social Insurance Authorities: If the Cyprus Company will employee staff members then it will need to register with the social insurance authorities as well. This can be done through the social insurance department and we can ofcourse assist.
Non-Dom Registration: If any individual shareholder, director, staff member etc of the Company will come to be based and work in Cyprus they will need to submit the non-dom application to confirm their non-dom status and be able to benefit from tax free dividend and interest income.
Obtain business licenses: Depending on the nature of the business, the company may need to obtain additional business licenses from the relevant authorities.

b. Bank Account Opening: After successful incorporation, opening a bank account for the newly registered Cyprus Company is a critical step for businesses to facilitate their day-to-day operations. Cyprus offers a robust banking system with a variety of financial institutions, both local and international. Companies must provide the necessary documentation, including the corporate certificates, source of wealth, detailed nature of activities and other compliance documents to open a corporate bank account.

c. Accounting and Audit Requirements: Companies in Cyprus are required to maintain accurate accounting records and prepare financial statements in accordance with International Financial Reporting Standards (IFRS). An annual audit is mandatory for most companies, providing transparency and ensuring compliance with regulatory standards.

d. Annual Compliance and Reporting: Companies must adhere to annual compliance requirements, including filing annual returns and financial statements with the Registrar of Companies. Staying compliant with these obligations is essential for maintaining good standing and avoiding penalties.

Conclusion

In conclusion, embarking on the journey of Cyprus company incorporation offers entrepreneurs a strategic gateway to the European market and beyond. By following the comprehensive guide outlined above, businesses can navigate the intricacies of the incorporation process, leverage the favorable tax environment, and establish a strong foundation for success. With the right planning, adherence to regulatory requirements, and a commitment to ongoing compliance, entrepreneurs can unlock the full potential of their ventures in Cyprus. Start your business in Cyprus in 2024 with confidence, knowing that you have a roadmap to guide you through every step of the process.

How Asterisk Corporate Services Cyprus can assist

Asterisk Corporate Services consists of a team of specialized qualified professionals and lawyers who are well aware of the Cyprus incorporation process and legislation requirements and have been involved in a number of transactions both for small-medium sized businesses to large multinational organizations and are ready to assist during all steps of the process.

Other Articles on Cyprus Company incorporation:

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*Disclaimer

This article is provided for general information purposes only and is not intended to cover every aspect of the topic with which it deals. It is not intended to amount to advice on which you should rely and we recommend you to take advise from professionals before proceeding.

Easily register a Cyprus Company

Quick and easy incorporation of your Cyprus Company in just a few days. Our specialized teams will assist you through the whole process in a timely and cost-effective manner.

Incorporating a Company from the comfort of your home or office can be easy, but at the same time stressful as there is always the fear of the unknown.

Asterisk Corporate Services specialized teams will take you through the whole process, answering all of your questions in a timely manner while ensuring a fast incorporation. We can then assist you with anything you may need ensuring the Company is compliant in Cyprus at all times.

Here is where our role fits in:

Cyprus is a popular destination for small businesses, startups and big multinational organizations who want to register a company in Europe. The country offers a strategic location, an attractive tax regime, and an efficient business environment, making it an attractive hub for the aforementioned who are looking to expand their operations. In this article, we will provide a comprehensive guide to Cyprus company registration, focusing on the legal requirements and procedures involved in the process.

Why Choose Cyprus for Company Registration?

Cyprus offers a range of benefits for business owners who are looking to establish a company in the country. These benefits include but are not limited to:

Strategic location: Cyprus is located at the crossroads of Europe, Asia, and Africa, making it an ideal location for businesses looking to expand into these markets.

Favorable tax regime: Cyprus offers a competitive tax system, with one of the lowest corporate tax rates in the EU at 12.5%. Additionally, the country has signed double tax treaties with over 60 countries, making it an attractive location for businesses looking to minimize their tax liabilities.

EU membership: Cyprus is a member of the EU, providing businesses with access to the largest single market in the world.

Skilled workforce: Cyprus has a highly educated and skilled workforce, with a strong work ethic and proficiency in English.

Tech & IP Companies: Cyprus offers attractive tax regime and relocation schemes for Companies operating in the Tech sector, such as the IP Box Regime which can reduce the effective tax rate as low as 2.5%, as well as fast-track applications for work permits.

You can visit our dedicated ‘Why Cyprus’ page for more information.

Requirements for Company Registration in Cyprus

Before registering a company in Cyprus, it is important to understand the legal requirements. The following are the key requirements for company registration in Cyprus:

Company name: The first step in registering a company in Cyprus is to choose a name for the company. The name should not be identical or similar to any existing company in Cyprus, and it should not be misleading. After submission of the name application it usually takes 2-3 business days for the name to be approved.

Shareholders: A minimum of one shareholder is required to establish a company in Cyprus. Shareholders can be individuals or legal entities, and there are no restrictions on foreign ownership.

Directors: A minimum of one director is required to establish a company in Cyprus. The director can be a natural person or a legal entity, and there are no restrictions on foreign directors, but Cyprus Tax Resident Directors are recommended to strengthen the case of the Company for Cyprus Tax Residency

Company secretary: Every company registered in Cyprus must have a company secretary. The company secretary can be a natural person or a legal entity, and there are no restrictions on foreign secretaries.

Registered office address: Every company registered in Cyprus must have a registered office in the country.

Memorandum and Articles of Association: Every company registered in Cyprus must have a Memorandum and Articles of Association. These documents set out the company’s objectives, share capital, directors powers and responsibilities and needs to be signed by the first subscribers of the Company.

Share capital: There is no minimum share capital required to establish a company in Cyprus. However, it is common for companies to have an issued share capital of 1.000 shares of €1 each.

Procedures for Company Registration in Cyprus

Once the legal requirements have been met, the next step is to register the company in Cyprus. The following is the procedure our professionals follow for company registration in Cyprus:

Reserve company name: The first step in company registration is to reserve the company name with the Registrar of Companies. This can be done online or in person and usually takes 2-3 business days to be approved.

Prepare the Memorandum and Articles of Association: Once the company name has been reserved, the Memorandum and Articles of Association must be prepared and such document is signed by the first subscribers of the Company, i.e. the shareholders. You do not need to come to Cyprus to sign and scanned copies (in wet ink signature) will suffice.

Share capital: The next step is to decide on the amount of the authorized and issued share capital. We usually set the authorized share capital at 5.000 ordinary shares of €1 each and issue 1.000 ordinary shares of €1 each. This can ofcourse be altered depending on each individual circumstances.

Director(s), Corporate Secretary and Registered Office Address: The aforementioned will need to be decided so that the details of such are provided to the Registrar of Companies through the necessary completed forms.

Register the company: Once the above steps have been completed, we complete all the forms and submit to the Registrar of Companies. In terms of timelines after submission it usually takes four (4) to six (6) business days for the Company to be incorporated. Submission can be done online or in person but we usually submit online.

Registrations: After the Company is incorporated it will need certain registrations depending on its activities, but the most usual ones are as follows:

- Obtain a Tax Identification Code: Complete necessary forms to the Tax Authorities to obtain a TIC number and also register with the Tax system for the online submission of tax forms. This registration is compulsory and needs to take place 60 days after incorporation.
- UBO Register submission: The Cyprus Company will also need to submit its UBO information to the Registrar of Companies 30 days after incorporation. This is a compulsory registration.
- Register for VAT: If the company will occur taxable supplies and meet the criteria for VAT registration then it needs to proceed with such registration.
- Register with Social Insurance Authorities: If the Cyprus Company will employee staff members then it will need to register with the social insurance authorities as well. This can be done through the social insurance department and we can ofcourse assist.
- Non-Dom Registration: If any individual shareholder, director, staff member etc of the Company will come to be based and work in Cyprus they will need to submit the non-dom application to confirm their non-dom status and be able to benefit from tax free dividend and interest income.
- Obtain business licenses: Depending on the nature of the business, the company may need to obtain additional business licenses from the relevant authorities.

Opening of a bank account

Once the company has been registered and the necessary documentation has been obtained, a corporate bank account can be opened with a Cypriot bank. We can assist with such process by completing necessary forms and liaising with the client and the bank up until the bank account is opened. Bank account procedures have become a bit stringent in recent years, however, if you come to Cyprus and meet with the bank it can make the process more efficient. We can assist and advise you during all the steps of the process.

Benefits of Cyprus Company Registration

There are several benefits to register a company in Cyprus, which include but are not limited to:

Favorable Tax System: Cyprus has a highly favorable tax system, including a low corporate tax rate of 12.5%, making it an attractive location for businesses looking to reduce their tax burden. Additionally, Cyprus has a wide range of double taxation treaties with other countries, which can help to further reduce tax liabilities and tax regimes to attract Tech & Crypto / IP Companies.
Strategic Location: Cyprus is strategically located at the crossroads of Europe, Asia, and Africa, providing a gateway to these markets. The island has excellent air and sea connections to major business centers, making it an ideal location for businesses with international operations.
Business-Friendly Environment: Cyprus has a business-friendly environment, with a relatively simple and straightforward company registration process, a flexible legal system, and a highly skilled workforce. Additionally, the country has a stable political and economic climate, which can provide a sense of security for businesses looking to invest.
Access to EU Markets: Cyprus is a member of the European Union, providing businesses with access to a market of over 500 million consumers. Companies registered in Cyprus can take advantage of EU trade agreements and regulations, which can help to reduce trade barriers and increase market access.
Low Operating Costs: Cyprus has relatively low operating costs compared to other European countries, including low labor costs, affordable real estate prices, and low energy costs. This can make it an attractive location for businesses looking to reduce their overhead and improve their profitability.

It’s important to note that each business has its own unique set of circumstances, and there may be additional factors to consider when deciding whether to register a Cyprus company. We can certainly assist you when making such decision.

You can also read an interview with the Head of the Cyprus office for MUFG Investor Services on Why Cyprus Ticks More Boxes Than Competitor EU Countries In Attracting Foreign Businesses which gives you a good understanding on the great benefits of registering a Cyprus Company and also setting up substance in Cyprus.

Accounting & Tax Requirements

After the company has been registered in Cyprus, it is important to ensure that it complies with the accounting and tax requirements of the Cyprus statutory laws.

All companies in Cyprus are required to maintain proper accounting records, including books of accounts, financial statements, and records of transactions.

The financial statements must be prepared in accordance with the International Financial Reporting Standards (IFRS), and they must be audited by a licensed auditor.

Additionally, companies must file annual tax returns and pay corporate income tax, which is currently set at a rate of 12.5%. Cyprus also has a value-added tax (VAT) system, which applies to businesses that are registered for VAT. VAT returns must be filed on a quarterly basis, and the VAT rate is currently set at 19%.

Cyprus registered companies also need to submit an Annual Company Return (HE32). You can see more information on this requirement in our dedicated article here.

Failing to comply with the accounting and tax requirements in Cyprus can result in penalties, fines, and legal action, so it is important for businesses to ensure that they are fully compliant with the regulations.

For more information on the Accounting, Audit & Tax requirements you can read our article titled Do Cyprus Companies Need To Prepare Accounting Records And Financial Statements

Summary

Cyprus is an attractive destination for business owners who are looking to register a company in Europe. We do offer a favorable tax regime, a strategic location and a very efficient business environment, making it an ideal hub for you to register your Cyprus Company.

The requirements for company registration in Cyprus are straightforward, and the procedures are streamlined, making the process relatively quick and efficient.

Overall, Cyprus company registration offers a range of benefits for businesses, making it a popular choice for entrepreneurs looking to start or expand their operations in Europe.

How Asterisk Corporate Services Cyprus can assist

We are well aware what your Cyprus Company will require and are ready to provide quality, responsive service at a reasonable, value-for-money cost.

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*Disclaimer

The Portuguese Non-Habitual Resident program (NHR) is a Portuguese tax regime designed to attract foreign investors, professionals, and pensioners to live and work in Portugal by offering a favorable tax environment. Under the scheme, individuals who become tax residents in Portugal and meet certain criteria can benefit from a flat tax rate of 20% on income from certain categories, such as employment, self-employment, and pensions, among others.

The NHR scheme also provides exemptions or reductions on income from foreign sources, such as dividends, interest, and capital gains, provided that certain conditions are met. This can make it an attractive option for those who have income streams from other countries such as Cyprus. Additionally, there are no wealth taxes in Portugal, and inheritance tax is very low, which can make it an appealing destination for those who want to transfer assets to their heirs.

Why an NHR needs to incorporate a Cyprus Company

If you’re a Portuguese Non-Habitual Resident (NHR) looking to expand your business internationally and take advantage of tax regimes of Cyprus and Portugal, setting up a company in Cyprus may be an excellent option for you. Cyprus is known for its favorable tax regime, making it an attractive destination for businesses looking to reduce their tax liability while accessing EU markets. One significant benefit can be the fact that you can receive ‘tax-free’ dividends from your Cyprus Company to Portugal (certain restrictions/conditions apply).

In this article, we’ll explore some of the tax benefits of setting up a Cyprus company as a Portuguese NHR.

No Withholding Taxes on Dividends

Dividends paid by a Cyprus company to its shareholders are not subject to any withholding tax, unless paid to an entity in a blacklisted jurisdiction. This means that Portuguese NHRs who own a Cyprus company can receive dividends without any tax deduction, both in Cyprus and Portugal, making it an attractive option for investors looking to generate passive income. We strongly suggest to look into this with your Portuguese tax consultant, as the shareholding structure of the Cyprus Company may matter for you to be able to take advantage of such a benefit.

Low Corporate Tax Rate

Cyprus offers one of the lowest corporate tax rates in the EU, with a flat rate of 12.5%. This means that companies incorporated in Cyprus will be taxed at a lower rate compared to other EU countries, reducing their tax liability and leaving more profits for reinvestment or distribution to shareholders.

Double Tax Treaties

Cyprus has signed double tax treaties with over 65 countries worldwide, including Portugal. This means that companies incorporated in Cyprus can avoid double taxation on their income.

No Capital Gains Tax on the Sale of Shares

Cyprus does not impose any capital gains tax on the sale of shares, making it an attractive jurisdiction for companies looking to sell their shares or exit their investment. This means that Portuguese NHRs who sell their shares in a Cyprus company can do so without incurring any capital gains tax.

Favorable Intellectual Property (IP) Regime

Cyprus offers a favorable IP regime, which allows companies to benefit from a reduced tax rate of 2.5% on income generated from IP assets, such as patents, trademarks, and copyrights. This means that companies incorporated in Cyprus can reduce their tax liability on their IP income, making it an attractive destination for technology and innovation-based companies.

In conclusion, setting up a company in Cyprus can provide significant tax benefits for Portuguese Non-Habitual Residents looking to expand their business internationally. Cyprus offers a low corporate tax rate, access to a wide network of double tax treaties, no withholding taxes on dividends, no capital gains tax on the sale of shares, and a favorable IP regime. As with any tax planning strategy, it is essential to seek professional advice and guidance to ensure compliance with local regulations and to maximize the benefits of the program.

*It is important to note that the NHR scheme has specific requirements and conditions that must be met to be eligible for the tax benefits. Therefore, it is advisable to seek professional advice and guidance to ensure that you comply with the regulations and to maximize the benefits of the program.

If you are interested in incorporating a Cyprus Company to take advantage of such a regime contact us today.

Introduction

Incorporating a company in Cyprus can provide numerous benefits, including access to the European Union (EU) market. The EU is a large and lucrative market, comprising over 500 million consumers and offering opportunities for companies to sell their products and services across member countries. In this article, we will explore five reasons why incorporating in Cyprus can unlock the potential of the EU market for your business.

Tax Benefits

One of the primary reasons why Cyprus can be an attractive location for incorporating your business is the low corporate tax rate of just 12.5%. This is one of the lowest rates in the EU and can be a significant advantage for companies looking to minimize their tax burden.

In addition to the low corporate tax rate, Cyprus also has a favorable tax regime for non-resident companies (and individuals). Tax benefits include but are not limited to dividend income been tax exempt and there is no with-holding tax on dividends paid either (both under certain conditions). There are also significant tax benefits for Companies with Intellectual Property (IP). Through the IP Box Regime a Cyprus registered entity can enjoy an effective tax rate as low as 2.5% (normally 12.5%). Disposal of securities (shares, bonds, options, derivatives etc) are also tax exempt. Cyprus is also a part to more than 60 double tax treaties that provide for nil or reduced withholding tax rates on dividends, interest, royalties and pensions received from abroad. Any lump sum received as a retirement gratuity is also exempt from tax.

In relation to individuals, Cyprus offers a 50% tax exemption to employees who earn more than €55.000 provided that they were not tax residents of Cyprus for a period of 10 consecutive years before their employment in the Republic. This exemption is applicable for 17 years. Anyone who earns less than €55.000 and hasn’t been a Cyprus resident for at least 3 years prior to taking up employment in the country will receive a 20% or €8,550 (lower of), for the next 7 years.

Further to the above, non-domiciled individuals can also benefit from tax free dividend income and no deductions on interest income. All these benefits make it easier to attract skilled workforce.

Access to the EU market

As an EU member, Cyprus provides companies with the opportunity to access the EU market. This is especially attractive for companies looking to do business in the EU, as it allows them to take advantage of the benefits of EU membership without having to set up a separate company in another EU member state.

One of the key benefits of the EU market is the ability to sell products and services across member countries without having to deal with customs and other trade barriers. This can make it easier for companies to expand into new markets and increase their customer base.

In addition, the EU has a highly educated and skilled workforce, providing companies with access to top talent. This can be especially beneficial for companies in industries that require highly skilled employees, such as technology and financial services.

Political stability

Cyprus has a stable political environment and is generally seen as a safe place to do business. The island has a long history of democracy and a well-developed legal system, which can provide companies with a sense of security and stability.

In addition, Cyprus is a member of the EU and the United Nations, which can provide additional protections for companies doing business in the country.

Skilled workforce

As mentioned, Cyprus has a highly educated and skilled workforce, which can be beneficial for companies looking to hire employees in a variety of fields. The country has a high literacy rate and a well-developed education system, which has produced a large number of highly qualified professionals.

In addition, you can easily attract expat workers in Cyprus, with the very beneficial tax benefits for individuals mentioned above.

This can be especially attractive for companies in industries that require highly skilled employees, such as technology and financial services. In addition, the country’s skilled workforce can be beneficial for companies in other industries that require a high level of expertise, such as manufacturing and engineering.

In addition, Cyprus has also in place regimes for companies of foreign interests (i.e. companies with shareholders who are not EU Nationals) to setup base and apply for work permits for third country national employees. EU Nationals can also easily work in Cyprus, just by applying for a yellow slip.

Strategic location

Cyprus is strategically located at the crossroads of Europe, Asia, and Africa, making it an attractive location for companies looking to do business in the region. The country’s central location and good transportation infrastructure make it easy for companies to access markets in the Middle East, Africa, and Eastern Europe.

In addition, Cyprus has a well-developed telecommunications infrastructure, which can be beneficial for companies that rely on internet connectivity and other digital technologies.

Advantages of the EU market:

The EU market is a significant opportunity for companies, with over 500 million consumers and a GDP of more than $18 trillion. Accessing this market can provide numerous benefits for companies, including:

A large customer base: The EU is home to over 500 million consumers, providing companies with access to a vast market for their products and services.
The ability to sell across member countries: As an EU member, Cyprus allows companies to sell their products and services across member countries without having to deal with customs and other trade barriers.
Access to a highly educated workforce: The EU has a highly educated and skilled workforce, providing companies with access to top talent.

Tips for accessing the EU market through Cyprus incorporation:

If you are considering incorporating in Cyprus as a way to access the EU market, there are a few steps you can take to ensure a successful entry:

Research the EU market: It is important to thoroughly research the EU market before entering. This includes understanding the needs and preferences of your target customers and identifying potential competitors.
Understand EU regulations: The EU has a complex regulatory environment, and it is important to understand the rules and regulations that apply to your business. This includes obtaining any necessary licenses or permits and complying with consumer protection laws.
Consider working with a local partner: Working with a local partner in the EU can be a helpful way to navigate the regulatory environment and build relationships with customers. We can assist you with anything you need, from incorporation to ongoing maintenance of your Cyprus Company.

Conclusion:

Incorporating in Cyprus can provide numerous benefits for companies looking to access the EU market. The low corporate tax rate, skilled workforce, and stable political environment make Cyprus an attractive location for doing business. By thoroughly researching the EU market, understanding EU regulations, and considering working with a local partner, companies can successfully enter the EU market through Cyprus incorporation.

*This is a guide for information purposes. Laws may change, and you should always take professional advice for the situation in hand. You should seek updated information if required as Asterisk Corporate Services Limited does not take any responsibility for the validity of the material at the time of reading. We suggest allowing qualified professionals to implement and handle the necessary tasks.

Why to start a business in Cyprus – Advantages of a Cyprus Company

Cyprus, is a small island of less than 1million inhabitants situated in the Mediterranean sea, part of the European Union since 2004. Cyprus is now home to more than 200.000 active companies as many businessmen, entrepreneurs, large organizations and groups chose the island to start their business due to the tax benefits, steady political and economic environment, good climate, good telecommunications and infrastructure. In that respect, below we carefully examine the reasons why someone will start a business in Cyprus as well as take you through the process of a Cyprus Company Formation.

Why to start a business in Cyprus – Tax Benefits

For international business companies and expats the main attractiveness factor to start a business in Cyprus (in addition to the above) are the tax benefits, both in terms of corporations and individuals. This is shown from the corporate income tax of 12.5% which is one of the lowest in Europe, no capital gains tax and no tax on dividends (in most instances) for foreign and nondom individuals (as further explained below). In addition, there is a 50% income tax exemption for individuals who earn more than EUR55.000 provided that they were not tax residents for the past 10 years before their first employment in Cyprus. These tax benefits in combination with the one mentioned below make Cyprus an ideal destination to come and live in and start your own Cyprus business.

Moreover, Cyprus is also a very attractive destination for businesspeople, entrepreneurs, and large organizations to start an International Business Company. Such Companies can achieve tax residency by establishing the management and control in Cyprus (as legislation currently stands). That is all decisions of the Company need to be taken in Cyprus. This can be achieved as a minimum by having the majority of the Directors to be Cyprus Tax Residents (this is a service we can offer).

Tax benefits include but are not limited to dividend income been tax exempt and there is no with-holding tax on dividends paid either (both under certain conditions). There are also significant tax benefits for Companies with Intellectual Property (IP). Through the IP Box Regime a Cyprus registered entity can enjoy an effective tax rate as low as 2.5% (normally 12.5%). Disposal of securities (shares, bonds, options, derivatives etc) are also tax exempt. Cyprus is also a part to more than 60 double tax treaties that provide for nil or reduced withholding tax rates on dividends, interest, royalties and pensions received from abroad. Any lump sum received as a retirement gratuity is also exempt from tax. More information on Why Cyprus, can be found here.

Now that we have established why Cyprus is the ideal destination for a Company formation, its now time to see the process.

Cyprus Company Formation: How to start a Company in Cyprus

Firstly its good to know that the authority which is responsible for Cyprus company formation is the Cyprus Registrar of Companies. That is where all documents and levies for the formation are submitted and paid respectively and its the relevant authority with which we liaise with up until the Company is incorporated.

Below we analyze some of the main decisions you need to take before you proceed with your Cyprus Company Formation.

Type of entities

In terms of types of entities the most frequently used in incorporations is Company Limited by shares. This means that the Company will have share capital split in authorized and issued share capital and the liability of the shareholders is limited to the amount which they invest. Issued share capital needs to be subscribed by the shareholders of the Company on the memorandum and articles of association of the Company (more on this below). There are also other types such as Partnerships, Companies limited by guarantee, associations etc, but in this article we shall focus on limited companies.

Company’s officers

In addition to the shareholder(s), the Cyprus Company upon formation will need to have at least one Director, one Corporate Secretary and a Registered office address. The Board of Directors of a Cyprus company have the power to take decisions on behalf of the Company (enter company into agreements, sign financial statements etc) and is basically the administrative body responsible for the day to day management of the company. Any natural person or entity can be appointed as Director of a Cyprus Company.

A corporate secretary ensures that a business complies with legal requirements and makes sure that company records are accurate. This includes reporting changes to a company’s statutory details and books, filing returns and keeping records up to date. Its also worth noting that in case of private companies with a single shareholder, the sole director can also be the secretary of the Company. Corporate secretary does not need to reside in Cyprus but its advisable.

The Company will also need to have a registered office address in Cyprus, which is communicated to the registrar of companies and all other authorities and is general used for communication.

Company Name:

One of the first steps of the Cyprus Company formation is to decide on a Company name. The chosen name is submitted to the Cyprus Registrar of Companies and usually it takes them 1-3 days to revert on whether it is approved or not.

What the registrar examines during the application process, is whether the applied name is the same or similar to one of their existing approved ones, similar or same to an international brand or whether it is a frequently used word.

In that respect in order for the name to be approved there are certain factors that need to be considered, such as the availability of names, whether general words are used, creativity and use of initials. For example the Registrar encourages the use of initials, therefore if initials are added in front (or at the end) of the name, then it stands higher changes to be approved.

In terms of names you can be as creative as you like, but usually generic names are multiuse and highly versatile, and stand more chances to be approved by the Registrar. On their own, generic business names may not signify much, but a suitable slogan, additional keyword, or a fitting logo can turn your generic business name into something meaningful.

You can find more information on how to choose a name for your Cyprus Company in our article here.

Memorandum and Articles of Association

One of the most important documents of a Company upon formation of your Cyprus Company is its Memorandum and Articles of Association. The memorandum states the Company’s name (it needs to be approved by the Registrar as stated above) and the Company’s objects, i.e. what activities the Company can be performing and usually our standard memorandum includes a wide range of objects to cover any sort of activities in case you decide to change or take on additional activities of your Company after incorporation.

Memorandum also states the authorized share capital of the Company which we usually set it at 5.000 ordinary shares of €1 each and we then issue 1.000 shares to the first subscribers of the Company.

Last page of the Memorandum includes the first subscribers of the Company who will need to sign the Memorandum (wet-ink scanned copies suffice) alongside a witness of their signature.

The Articles of Association of the Company specify rules about the governance of the internal management of the company and regulations about the rights of the members (appointment and powers of directors, transfer of shares, quorum for board of directors meetings etc).

For the Company to be incorporated by the Registrar the Memorandum and Articles of Association will need to be signed by a lawyer in front of the court, which is a process we take care of for you.

Submissions to the Registrar of Companies

At this stage we have already ‘decided’ on the name of our Cyprus Company, share capital & shareholders, Directors, Corporate Secretary and Registered Office Address so the next step is to submit all information to the Registrar of Companies for the Company to be able to be incorporated and you to be able to start your business in Cyprus.

This is where we step in, as we will complete all forms informing the Registrar on the above decisions, as well as arrange for the memorandum and articles of association to be signed by one of our lawyers. We will also order all corporate certificates of the Company which when issued are: Incorporation certificate, Directors & Corporate Secretary, Registered Office address and a signed copy of the Memorandum and Articles of Association. These corporate certificates are given in original and shall be kept as they will be needed in a variety of cases such as bank account opening, registrations with Tax and VAT Authorities etc.

After the submissions are made it usually takes 4-6 business days for the Company to be incorporation. After the Company is incorporated it has its own unique Registration Number with the Registrar, therefore you can now start your business in Cyprus.

Initial Registrations

After the Company is incorporated it has 60 days to be registered with the Cyprus Tax Authorities to obtain a Tax Identification Code. This is a process we can ofcourse take care of for you.

In addition to the above the Company depending on activities may need to be Registered with the VAT Authorities and obtain a VAT number. This again is a process we can assist with.

Moreover, Cyprus Companies (certain exceptions apply) have an obligation to submit their information to the Cyprus Register of Ultimate Beneficial Owners. Information needs to be submitted for any individual holding directly or indirectly 25% plus one share (although there are other parameters to consider). This obligation needs to be concluded within 30 days from the incorporation of the Cyprus Company. In case of change of the beneficial owner or their information, the national centralised register should be updated with the relevant information within a period of 14 days. Please note that this is not publicly available information.

A Cyprus Company may also need other registrations depending of its activities, such as registration to the Social Insurance and Tax Authorities as an employer if it will have employees in Cyprus, but additional registrations depend on the activities of the Cyprus Company.

Bank Account Opening

After incorporation a step most of our clients take and is reasonable to do so is to open a bank account with a Cyprus Financial Institution (can be opened also with a foreign bank but with a Cyprus bank it also strengthens the case of tax residency of the Company).

In order to open a bank account with a Cyprus Company you will need to choose the financial institution(s) you wish to proceed with. Thereafter the process of providing them with the documents they require to satisfy their compliance procedures. In particular, the bank will need to know and identify the actual beneficial owner(s) of the company. All such persons, as well as everyone who will be granted account signatory rights, will have to provide a number of documents – such as certified passport copy, proof of address (utility bill or bank account statement), bankers and/or professional reference and detailed business description/plan.

Please note that bank opening procedures became quite strict in Cyprus (and globally we believe), so the process can take 1-2 months.

Accounting, Audit & Tax Requirements

After the above are completed the Cyprus Company is ready to start operations. You need to also bear in mind that the Cyprus Co will need to prepare accounting records and audited financial statements or audit review and submit its Annual Company Return (HE32) to the Cyprus Registrar of Companies maximum 18 months after incorporation. Tax Return needs to be also submitted currently 15 months after the tax year end, which is at 31.12. More information on these requirements can be found here.

Conclusion:

As described above, you can start your company in Cyprus quite easily and straightforward as evidenced in the above. Decisions need to be taken from your side on some key components such as the name, officers, share capital etc, however, the process can be quite straightforward with the involvement of our professionals who can assist you with the whole process from start to finish.

You can click here to learn more information on how we can assist you as well as for more information on Cyprus Company Formation.

*Disclaimer

As mentioned in previous articles Cyprus can be a top destination in Europe to set-up your business. However, we do understand that it can be nerve-racking setting up in a foreign jurisdiction without knowing a lot about it.

In that respect we have compiled below a list of 15 questions and answers to help facilitate your understanding on Cyprus Companies.

Feel free to contact us for any further questions you may have.

1. What are the benefits of a Cyprus Company?

Either the EU Membership, the various Tax Benefits for Companies and Expats or the wonderful climate, Cyprus offers a lot of reasons to establish a Company at. Please refer here for more information.

2. What is the procedure to incorporate in Cyprus?

Please refer to the step by step guideline in our incorporations page for a detailed step plan on the Cyprus Company incorporations.

3. Do I need to come to Cyprus to incorporate my Company?

No, you can sign the Memorandum, Articles of Association and any other document which may be required in wet ink and send us the scanned copies for us to be able to proceed with the incorporation.

4. Does the Cyprus Company need to have a Bank Account before incorporation?

No, the bank account can be opened after the Cyprus Company is incorporated.

5. Can I have a bank account for my Cyprus Company outside of Cyprus?

Yes. You can have a bank account for the Cyprus Company with any bank. However, if the Cyprus Company will have offices and employees in Cyprus we recommend to have a Bank Account with a Cyprus Company.

6. How can I choose a name for my Cyprus Company?

The name of your entity should not be too general or already in used, otherwise the Registrar may not approved. We can provide a free consultation on the name, as this is the first step on the incorporation. You can read our relevant article here.

7. What is the Memorandum and Articles of Association?

Every Cyprus Company must have its own memorandum and articles of association.

The memorandum contains the basic information of the company such as the company name, registered office, the objects of the company and so on. Care must be taken that the first few object clauses are tailored to the specific circumstances and main business objects and activities of the company (we can assist with such).

The articles specify rules about the governance of the internal management of the company and regulations about the rights of the members (appointment and powers of directors, transfer of shares, etc).

8. What is a registered office?

Every Cyprus Company needs to have a registered office in the Republic upon incorporation.

The registered office is the place where writs, summonses, notices, orders and other official documents can be served upon the company. It is at the registered office where the company’s register of members is usually kept. This can be the premises of the entity, or such an address can be provided by us as outlined here.

9. What is a corporate secretary?

Every Cyprus Company needs to have a corporate secretary, which is responsible for the filings to the Registrar of Companies amongst others. Such services can be provided by us, as outlined here.

10. What is the minimum number of Directors and shareholders and who can be one?

The Cyprus Company shall have at least 1 Director and 1 shareholder upon incorporation. Quorum for Directors meetings will be set at the Memorandum and Articles of the Cyprus Company.

11. How can I achieve tax residency for my Cyprus Company?

As the legislation currently stands, management and control needs to be exercised out of Cyprus for the Company to be considered a Cyprus Tax Resident. This means that as a minimum the majority of the Directors need to be Cyprus Tax Residents, so that decisions are taken from Cyprus. However, the more substance you please in Cyprus (offices, employees etc), the more you strengthen the Company’s case for Tax Residency.

Asterisk offers professional, experienced Directors with limited number of Directorships to strengthen the Company’s case for Substance in Cyprus.

12. Does the Share Capital have to be paid at the Companies Registrar upon incorporation?

No, the share capital initially will be shown as receivable from shareholder, and can be settled when the Company has a bank account or when the shareholder pays any expenses on behalf of the entity.

13. What is the minimum share capital I can have on my Cyprus Company?

Usually we incorporate entities with authorized share capital of 5,000 ordinary shares of €1 each, and issue 1,000 ordinary shares of €1 each. After incorporation shares out of the authorized share capital of the Company can also be issued at a premium. The authorized share capital can also be increased at subsequent stages.

14. Does the share capital need to be in EUR?

No, usually we incorporate Cyprus Companies in €, however, this can also be in other currencies such as USD$, GBP£ etc.

15. What registrations I need to do after incorporation?

As a minimum upon incorporation the entity shall register with the Tax Authorities and obtain a Tax Identification Code (TIC), 60 days after incorporation.

There are other registrations that the entity may need such as VAT (if it will conduct vatable activities, or registration with the Social Insurance Authorities if the Company will have employees etc).

The above are provided for indicative purposes only and do not constitute any form of advise. You can contact us for more information and specialized advise on Cyprus Company Formation matters.

Cyprus is now considered as an ideal tech hub for a company looking to launch its business operations. With the growth of various defining sectors, the island has progressively evolved from a vacation resort to a modern entrepreneurial powerhouse for gaming, gambling and tech companies. Wargaming, Outfit7, Melsoft, and Nexters, all of which have their headquarters in Cyprus, have created important video games and other technologies that have influenced the cultural scene in Cyprus and around the world.

There are various reasons for such development, and why you should set up the headquarters of your gaming and IP business in Cyprus as some of the biggest names in the industry already did.

One of these reasons is the beneficial tax regime with significant tax benefits for companies and individuals, specifically designed to attract foreign businesses for headquartering. Others are the location – quality of living of the island, as well as other operational benefits, all of which are explained in detail below, give you a better understanding on why Cyprus is an ideal jurisdiction to come and operate here.

Operational benefits from setting up headquarters in Cyprus

Cyprus over the years has been developed in an attractive destination for gaming/tech companies in general for reasons illustrated below:

Access to EU (EU member state) and adoption of all EU directives.
Cost-effective setting-up and on-going operational services.
Highly educated, qualified and multilingual personnel. Ability to attract more from abroad through incentive schemes (see below).
Tax benefits (i.e. 50% tax exemption) for high-earning employees gives you the opportunity to attract high-caliber employees.
Modern and efficient legal, accounting and banking services based on English practices.
Worldwide connectivity through two modern international airports in Larnaca and Paphos. Easy access to Southwest Asia and Northeast Africa (due to geographical position).
High standard quality of life, with lots of sunshine, good schools and English speaking people, helps attract high-quality workforce from around the world.
Ability to rent / own high quality premises at reasonable prices (depending on the city you set-up base).
Access to certain trade routes that facilitate easier trade within Europe.
Non- residency ownership: This means you can be the direct owner of your business, with no need for a nominee.
Asset Protection – that is limited personal exposure to the owners of the Company.

Tax benefits from setting up headquarters in Cyprus

Some of the tax benefits relevant to a gaming/tech business are as follows:

Low corporate income tax rate (currently 12,5%).
IP Box Regime, can reduce the effective tax rate of the Cyprus company as low as 2.5% (more on this below).
Notional Interest Deduction (NID) is available for ‘new equity’, and can achieve an effective tax rate as low as 2,5%.
Tax residency is based on the management and control concept (from 31/12/2023 incorporation test also introduced).
One of the most favorable EU and OECD-approved tax regimes.
Dividend income for companies is taxable only in rare situations.
Cyprus does not levy any withholding taxes on dividends, interest and royalties paid to non-residents of Cyprus except in the case of dividends paid to a company tax resident of an EU ‘blacklisted’ jurisdiction, and in the case of royalties earned on rights used within Cyprus.
Extensive double tax treaty network.

For more information on the tax benefits of Cyprus and why we advise you to setup base in Cyprus please click here.

Easy to incorporate a Cyprus Company

Before we proceed with anything else, we should note the first step required in the process of coming to Cyprus, is the incorporation of a Cyprus Company. The process is relatively easy and we can assist through all stages of the process. A couple of quick points are that the shareholders/directors do not need to come to Cyprus to incorporate the Company, as well as that no originals are required and that the Company can be incorporated 4-5 business days after the submission of the required documents to the Registrar of Companies. More information on the incorporation process and how we can assist can be found here.

Intellectual Property – IP Box Regime for Gaming & Tech companies

Cyprus is considered as one of the most tax-efficient jurisdictions for holding IP assets in Europe and is a main benefit for setting up base and headquarters in Cyprus. The effective tax on the profits could be as low as 2.5% (depending on several factors). If you have a gaming or tech Company with IP(s) tied to it then you seriously need to consider Cyprus as a jurisdiction for your headquarters for reasons explained below.

To start with, Qualifying Assets (QA) is the term used to describe assets qualifying for this regime. Such assets can be patens as defined in the Patent Law, software computer programs, video games, gambling software, and other intangible assets such as utility models, intellectual property intangible assets which provide protection to plants and genetic material, orphan drug designations and patent extensions and other assets that are non-obvious, useful and novel. Trademarks are exempt, but most ‘software related’ assets usually qualify.

Its worth noting that exploiting an acquired (developed) software does not provide to a Cypriot company the benefits of the IP box of Cyprus; such benefits can be claimed when there is a R&D behind the IP. For example if you just transfer a developed IP from a related party this does not mean that the asset qualifies for the regime.

To continue with, the revenue (royalty, licensing fees, compensation income, trading profits from the disposal of IP, capital nature gains from the disposal) generated by the IP should be considered as ‘qualifying revenue’.

If so, the IP profits’, defined as ‘qualifying profits’ (QP), should be subject to a ‘notional tax deduction’, which effectively reduces the final tax rate. Non-qualifying profits would be taxed at 12.5% (which is still relatively low compared to other jurisdictions).

QP are the profits determined by multiplying the IP profits (revenue less directly related expenses) by a specific formula (the ‘nexus fraction’) shown below.

Depending on the formula’s ‘variables’ (see below), an amount, up to 80% of such profits, could be subject to a ‘deemed deduction’ (hence the 2.5% effective tax).

The fraction is a bit complex, but in brief, it ‘favors’ circumstances whereby the assets are either: 1. Internally developed (on the Cyprus Co – not transferred from related party), or 2. The development is outsourced to a third party, and ‘punishes’ (i.e. by reducing the ‘deemed deduction’) circumstances whereby the asset is developed by a related party.

CyCo’s acquisition price of the IP asset also affects the formula. The higher the price, the worse the formula becomes, and the less the amount of the ‘deemed deduction’.

Internally developing the asset (i.e. using in-house’ Cyprus based programmers) also favors the fraction. Future development undertaken by third parties favors the fraction.

Qualifying profit (QP) is defined as the proportion of the overall income (OI) derived from the qualifying asset, corresponding to the fraction of the qualifying expenditure (QE) plus the uplift expenditure (UE) over the overall expenditure (OE) incurred for the qualifying intangible asset. The amount of qualifying profit can be derived through the application of the following formula:

QP = OI x [(QE+UE)/OE]

For the purpose of calculating the taxable profit, 80% of the qualifying profit derived from qualifying intangible assets is treated as a deductible expense (deducted from the taxable profits of the Co). For each tax year, the taxpayer may elect to waive this allowance, either in part or in whole.

In case where a loss is incurred, only 20% of this loss can be surrendered to other group companies or be carried forward to subsequent years.

A tax ruling is usually a must when it comes to confirming IP cases to ensure that the Tax Authorities are in line that the Company qualifies for the IP Box Regime deduction and to avoid unpleasant surprises in the future.

Subsequently, the IP Box regime can bring multiple benefits to your gaming/tech firm as a total, by reducing the overall tax exposure, therefore its another reason to seriously thing about establishing in Cyprus and operating Intellectual Property from the island.

Easy to obtain work permits

A major headache for GAMING/GAMBLING/TECH companies is to find appropriate, talented personnel to work with them. Cyprus has this challenge in mind and alongside the tax and other incentives indicated in this article, it has already made the process for obtaining work permits more straightforward.

Foreign Interest Companies (FIC) can apply to the Civil Registry and Migration Department an application to be approved as an FIC employer and be able to bring employees on work permits to live and work in Cyprus. One of the main requirements for this is for the Company to have majority of the shareholders to be third country nationals (outside of EU), as well as the Company needs to have proper offices – bank account in Cyprus amongst others.

To continue with, all foreign nationals who want to take up paid employment in Cyprus are subject to a Cyprus work permit, except:

Citizens of other European Union member states (a yellow slip is needed in such cases)
Citizens of Iceland, Liechtenstein, Norway, and Switzerland (EFTA)

In that respect, and in light of the above, is evident that you will be able to bring workforce in Cyprus to live and work, and we do believe by explaining the generous tax incentives for foreign individuals, you will be able to attract most of your workforce on the island. More information on our immigration services can be found here. Information on tax residency, digital nomad scheme and taxation of individuals can be found here.

Tax Incentives for gaming/gambling employees (expats)

Imagine working in a country where the 50% of your income is tax-free. This is what Cyprus offers now to employees who earn more than €55.000 provided that they were not tax residents of Cyprus for a period of 10 consecutive years before their employment in the Republic. This exemption is applicable for 17 years.

In addition, anyone who earns less than €55.000 and hasn’t been a Cyprus resident for at least 3 years prior to taking up employment in the country will receive a 20% or €8,550 (lower of), for the next 7 years.

Further to the above, non-domiciled individuals can also benefit from tax free dividend income and no deductions on interest income.

The above exemptions were specifically designed to attract high-skilled workforce to the island, and in combination with other benefits mentioned above (good schools, good weather, a lot of people speaking English on the island etc), will assist a gaming and tech businesses in general to attract specialized workforce to Cyprus.

Conclusion

As video games are set to remain an integral part of the global entertainment industry, Cyprus continues to attract major international businesses to establish their regional headquarters on the island. Backed by a sophisticated communications infrastructure that can support businesses, in addition to its cost-effective services, favorable tax and business environment, the island is fast becoming the center stage for innovative game development companies who are levelling up the experience, at the same time defining culture, commerce, and community.

You can contact us for more information and how we can better assist you.

Sources and external reading relating to the gaming industry in Cyprus:

Cyprus Mail

In this article we examine what you need to know and think when applying for a name for your Cyprus Company Incorporation.

Choosing a name is the first step in the Cyprus Company Incorporation process. Without an approved name by the Cyprus Registrar of Companies (‘Registrar’) the Company incorporation cannot proceed.

The process is that a name application needs to be submitted to the Registrar, and they usually take 1-3 days to examine provided that the fee for expedition (€20) is paid.

In that respect in order for the name to be approved there are certain factors that need to be considered, such as the availability of names, whether general words are used, creativity and use of initials. For example the Registrar encourages the use of initials, so if initials are added in front (or at the end) of the name, then it stands higher changes to be approved.

Moreover, if the Cyprus Company will be part of an international group, then we will draft for you a letter which needs to be printed on the Groups Letterhead and which letter will explain to the registrar that that Company will be part of the international group of Companies, therefore the approval of the name is vital to the operations of the Group.

We can make the above process easy for you, by providing you with a free Company name consultation, by which we will discuss with you in regards to the name of the Cyprus Company and perform a preliminary check whether there is a possibility for such a name to pe approved.

You can find more information on Cyprus Companies incorporation here as well as read previous articles in regards to incorporations here.

Cyprus Holding Companies are known and used by businesspeople around the world due to the major tax benefits Cyprus offers, the European Union status, as well as many other benefits making them ideal to carry on investments.

What is a Holding Company?

A holding company is a company that controls more than 50% of the share capital of another Company (i.e. the subsidiary Company).

An ultimate holding company is a holding company that is not itself a subsidiary of any other company and holds all the other entities of the Group. The Ultimate Holding Company is then held by the individuals/natural persons, i.e. the Ultimate Beneficial Owner(s).

Cyprus Holding Companies are ideal for carrying on structures because of a variety of reasons such as the below:

Benefits of a Cyprus Holding Company

Attractive tax regime

One of the major advantages of Cyprus as a Jurisdiction is its attractive tax regime which is favorable for holding companies. The main tax attributes relating to Holding Companies are as follows:

Tax residency is determined by the management and control concept, i.e. the management and decision making of the Company needs to be made out of Cyprus. This is achieved as a minimum through having the majority of the Board of Directors to be Cyprus Tax Residents. Asterisk offers professional, highly-experienced Directors with limited appointments who will strengthen the tax-residency case of your company, meaning that such a service can be outsourced.
It is worth noting in terms of substance and tax residency that although the above is set as a minimum requirement currently, the more substance you have in Cyprus the more it strengthens your case for tax residency. That is hiring full time employees on the island, renting fully-equipped offices and others will help strengthen your case for Cyprus Tax Residency.
The Corporate Income Tax rate is currently set at 12.5%, which is one of the lowest in the European Union. Expenses can also be deducted for tax purposes, when they relate to the generation of taxable income.
Cyprus Tax Regime is very beneficial for Holding Companies, as dividends received/paid are generally tax exempt (certain conditions apply), as well as no capital gains tax is applicable on the disposal of titles (except for the disposal of immovable property based in Cyprus). This means that disposal of subsidiaries is generally tax exempt.
Cyprus also offers an advantageous double tax treaty network with 65 countries to avoid international double taxation, i.e. to protect against the risk of double taxation where the same income is taxable in 2 states.

It is therefore clear from the above, that Cyprus offers an advantageous tax regime for Holding Companies, as you can send and receive dividends without been subject to tax / withholding tax, as well as disposal of subsidiaries is also tax exempt.

For more information on Cyprus as a Jurisdiction you can read our ‘Why Cyprus‘ section.

Operational flexibility

Additionally, there are no limitations on the domiciliation of assets in Cyprus. This means that if you set up a holding company in Cyprus, your subsidiaries and assets need not be held in Cyprus. As a result, you can structure your business more flexibly and operate anywhere else in the world where your customer base is, or where your investors might be.

Ease of compliance

Furthermore, it is relatively simple to comply with the regulations of setting up a holding company in Cyprus. Regarding the ongoing compliance obligations of maintaining a holding company in Cyprus, you have to fulfil just two main obligations:

The usual tax filing obligations; and
Financial reporting obligations to the Registrar of Companies.

Under the financial reporting obligations, holding companies in Cyprus have to submit their audited Financial Statements to the Registrar of Companies 18 months after incorporation and once per calendar year thereafter. The Financial year, although recommended to be 31.12 to coincide with the tax year, it can be set in accordance with your Groups Policy. Functional currency can also differ from the Euro. Financial Statements are prepared in accordance with the International Financial Reporting Standards (IFRS), and is a service we can assist you with as described here.

Every Cyprus Company needs also to submit its Corporate Income Tax Return (T.D.4), 15 months after the year end. Therefore for the financial year which ended on 31.12.2021 the deadline for submission is 31.03.2023. This is also a service we can assist you with, so you can be stress-free.

Opening of Bank Accounts

A Cyprus Company can apply and have a bank account opened either with a banking institution in Cyprus or abroad.

Although banks apply significant compliance procedures in recent years, it is still possible to open bank accounts, provided that the source of wealth, activities, and UBO details are communicated to the bank in a clear and cohesive manner.

Our specialized banking team can assist you with all stages of the bank account opening process as described here.

How to Incorporate in Cyprus

Incorporation of a Cyprus Holding Company does not differ from the incorporation of a standard Cyprus Co and we can assist you with all the steps in the process as outlined here.

As a first step you will need to choose a name for your entity, and after that is approved we will work with you to draft the Memorandum & Articles of Association, determine the share capital of the entity, as well as the Registered Office, Corporate Secretary and Directors of the entity. Please note that the Company will need to have the majority of its Board of Directors (i.e it can also be a sole Director) to be Cyprus Tax Residents. These are services we can provide as outlined here.

It is also worth noting that you do not need to visit the island and scanned copies would suffice for the incorporation of your entity.

For more information on how to incorporate in Cyprus you may find useful our article on 3 Steps to Incorporate in Cyprus or our article outlining the 5 Things to know about Cyprus Company Incorporations and our relevant service offering on Cyprus Company Incorporations.

*Please note that the above are applicable at the date of writing of this article and it is not an exhaustive list of Cyprus Tax matters, is shown for information purposes and shall not be taken as tax advise.

Written by : Asterisk Corporate Services Team