Overview of Company Formation in Cyprus
The most commonly used legal form is Limited Company (LTD). The size of a standard authorized capital is 1000-5000 EUR. The minimum authorized capital is 1 EUR. The contribution of the declared authorized capital of the company is not required. Depending on the size of the declared authorized capital, a capital fee is charged, which is withheld upon registration in amount of 0.6% of the declared authorized capital.
The director of the company does not have to be a resident of Cyprus, but it is necessary for the company to obtain the status of a tax resident in Cyprus. The position of a company secretary is mandatory.
The minimal amount of the shareholders is 1. It can be either an individual or a legal entity. Information about the shareholders of the company is not publicly available. Due to the arrival of the era of transparency on a global scale, the simpler the structure of the company, the easier it is to open an account, the less problems the company has, therefore, without special need it is not rational to use a shareholder as a legal entity.
There are ready-made (already registered) companies that have not been used by anyone before. The timeframe of transferring a ready-made company, taking into account the preparation of standard documents and their delivery, are about 1-2 weeks. Upon request, we will provide an up-to-date list of ready-made companies.
Registering a company with your name takes about 3 weeks. The name needs to be approved by the Registrar of Companies. The standard timeframe for agreeing a new company name with the Registrar are 5 business days. Timeframes of registration and preparation of necessary documents – 2-3 weeks.
Company Formation in Cyprus and Types of Activities
Company in Cyprus is a good option to perform the following activities:
International trading;
Import-export transactions with other EU and non-EU countries;
Holding activities – receiving and payment of dividends, income in the form of interest;
E-commerce business;
Forex brokerage;
Shipping and logistics;
Ownership of intellectual property (special regime of taxation of intellectual property – IP Box).
Company Formation in Cyprus and Services We Provide
Company in Cyprus is a good option to perform the following activities:
Company formation in Cyprus;
Legal address and Secretary service in Cyprus;
Bank accounts opening in Cyprus;
Legal support in Cyprus;
Assistance in obtaining licenses in Cyprus;
Accounting and audit services in Cyprus;
Mergers and acquisitions, restructuring;
Liquidations in Cyprus;
Assistance in obtaining residence permits in Cyprus;
Company Formation in Cyprus and Taxation in 2022
Taxation is definitely one of the reasons why company formation in Cyprus is so popular.
Corporate Tax — 12,5%
Income tax is withheld from the resident companies from profits that are made from any commercial activity both from Cyprus and outside. Non-resident companies are subject to income tax on income originating in Cyprus.
Not a subject to income tax: income from trading securities, receiving dividends, and interest from side activities (but the latter type of income will be subject to the defense tax).
Annual Levy
Annual Levy is obligatory for payment for all companies (even those that do not operate), starting from the first year of registration in amount of 350 euros. Payment must be made by June 30 of each year. In case of delay in payment of Annual Levy, a penalty fee is charged. Delay in payment for up to 2 months – a penalty of 10%, for a period of 2 to 5 months – a penalty of 30%. Delay for more than 5 months may result in liquidation of the company.
Capital Gains Tax – 20 %
Capital gains from the sale of shares of a foreign company and income from foreign securities are exempt from this tax.
Value Added Tax – VAT
The standard rate is 19%, the reduced rate is 9% and 5%. If the company exports goods, then the rate is 0%. VAT depends on the field of activity of the company.
Withholding Tax
The tax is being charged from a source (that is, in Cyprus), when a Cypriot resident company pays income in the form of interest, dividends, royalties to a non-resident.
– Payment of income in the form of dividends in favor of a non-resident – 0%;
– Payment of income in the form of interest in favor of a non-resident – 0%;
– Payment of income in the form of royalties in favor of a non-resident – 0%, if the intellectual rights are used outside of Cyprus, and 10% if the intellectual rights are used in Cyprus.
Special Tax Regime IP BOX
In case of meeting several conditions, taxes in Cyprus can be optimized and the income tax rate can be reduced by 2.5% if the Cypriot offshore receives profits from the ownership of intellectual property (IP).
This interest rate is achieved due to the fact that 80% of the income received from the ownership of intellectual property can be exempt from income tax, while 20% of IP income is subject to income tax at the standard rate of 12.5%.
Benefits may be used provided that the Cypriot company has been involved in the creation of these intellectual property rights and its main activity is related to this IP.
Company Formation in Cyprus and Value Added Tax (VAT)
Registration for VAT can be either voluntary or mandatory.
Mandatory VAT registration occurs when the company achieves one of the following factors:
– The total amount of taxable supplies exceeds 15,600 EUR;
– The total volume of taxable purchases exceeds 10,252 EUR;
– Since the beginning of the calendar year, the volume of remote sales to clients residing in the EU and not registered for VAT has exceeded 35,000 EUR.
If the above thresholds are not reached, the company can apply for voluntary registration, justifying the need for a VAT number by the transactions in the future.
After the registration of a company in Cyprus is completed, VAT returns are submitted quarterly. The report must be filed within 40 days of the end of the quarter for which the report is being submitted, even if the company had no transactions in that period.
The companies that provide services or supply goods to EU companies that are also registered for VAT are obliged to register in the VAT Information Exchange System (VIES) system and submit monthly VIES reports.
The VIES system is used primarily for statistical purposes for the exchange of information between EU member states. The VIES report will contain information on all sales of goods and services by the Cyprus company and must be submitted within 10 days of the end of the reporting month.
Late submission of the VIES report or provision of an incorrect VAT number of the buyer/customer entails penalties – 51 EUR per month for each report.
You can check the VAT number of the buyer/customer on the official website of the European Commission.
Our colleagues, Cypriot auditors, will help you to fulfill the requirements for preparation and to submit reports on time. In order to do this, the company must provide copies of the invoices of sale, purchase and other documents confirming the expenses incurred in the reporting period with the EU countries.
Company reporting in Cyprus
Companies registered in Cyprus are obliged on an annual basis to:
– prepare an audited financial report;
– on the audited financial report basis, submit a tax return to the tax authorities of Cyprus;
– to submit a statistical report (Company Returns) to the Registrar of Companies.
The fiscal year is equal to the calendar year (from 01.01 to 31.12).
The Companies Law of Cyprus provides that the directors of companies must ensure that proper books of accounting are kept which are necessary for the preparation of financial statements, give a true explanation of the transactions, enable the financial position of the company to be determined with a reasonable accuracy at any time, and include supporting documents (including contracts and invoices). The auditor has the right to request additional information that will allow them to prepare statements most accurately.
In case of company registration for VAT, it is required to submit quarterly VAT reports and monthly submission of VIES report.
Company Formation in Cyprus
and Bank Account Opening
Before you start with company formation in Cyprus it’s worth to consider bank account opening. In order to open an account in Cyprus you will need:
Justification of the source of income and wealth of the ultimate beneficiary owner (UBO);
Provision of a complete and convincing set of KYC documents in relation to the UBO;
For companies older than a year – reports for at least the last year and the company’s balance sheet for the date of opening an account;
The bank must understand the field of the company’s activities and the commercial usefulness of transactions conducted by the company;
Banks will be more willing to open accounts for companies with physical offices (and working staff) in Cyprus.
Links to the public sources regarding the activities of the company and biographies of participants;
Professional letters of recommendation (including one from a bank);
Confirmation of payment of personal income tax by the UBO in the country of their tax residence;
Account statements in other banks and information about the assets owned by the UBO and the signatory, and the relevant documentary evidence;
Company Formation in Cyprus or Company Redomiciliation to Cyprus?
In simple terms, it is the transfer of a company from the jurisdiction of primary registration to an alternative jurisdiction with the company retaining all assets, rights and obligations. All business relations of the company are preserved in full. The company does not cease to exist, but transfers its registered office to another country.
The change of domicile can be useful for companies whose functioning is difficult due to recent changes in the offshore industry, but the liquidation of the company is not possible (for example, the company owns assets or litigations are ongoing, etc.).
Cypriot legislation allows redomiciliation both to and from Cyprus. For the transfer to happen, it is necessary that the legislation of the country of primary registration allows the change of domicile.
Lots of well-known businessmen and entrepreneurs from all over the world have already opened their companies in Cyprus and benefited from all the advantages of having a company in Cyprus. Private Financial Services has been registering companies in Cyprus and providing full support to Cyprus companies for over 20 years, and our first company was registered in Cyprus back in 2002.
We, at Private Financial Services, take care of you and your business!