Cyprus Company Formation
Cyprus is one of the most popular locations in Europe for starting a business and to Register a Company.
The Island is an attractive destination and offers a lot of advantages for investors.
Please refer to the link for more information about Cyprus and it’s benefits for local and international investors.
Registering a company is a process that requires knowledge and expertise of certain legal rules and regulations.
The investors has the option of using one of the following legal entities:
- a limited liability Company
- a partnership
- a branch of a foreign Company
A Cyprus company can either be resident in Cyprus (provided its management and control is in Cyprus) or it can be non-resident (if its management and control is outside Cyprus).
The key condition of incorporating a Cyprus Company by a non-resident is the presence of the treaties for the avoidance of double taxation between the country of registration and the countries where the Cyprus Company or its subsidiaries will have activities.
The existence of these treaties, combined with the low tax paid by a Cyprus company offer the possibilities for effective international tax planning.
The main advantages of the Cyprus tax legislation are as follows:
- Taxable profits of all Cypriot companies are taxed at the rate of 12.5%
- Dividend income from abroad to Cyprus is wholly exempt from corporation tax provided the direct holding is at least one per cent (1%) of the share capital of the overseas company. This exemption will not apply if the company paying the dividend engages in more than fifty per cent (50%) of its activities in producing investment income and the foreign tax burden on the income of the company paying the dividends is substantially lower than that in Cyprus.
- There is no withholding tax on the payment of dividends, interest and royalties (provided the intellectual property rights are not used in Cyprus) to non-residents of Cyprus.
- The new tax legislation adopts the appropriate European Union directive which enables reorganizations, mergers, acquisitions and amalgamations of companies without tax implications.
- Dividend income and profits from the sale of securities are exempt from corporation tax.
- Interest income earned from trading activities, including interest which is closely related with trading activities, is subject to income tax at 12.5%.
- Group relief provisions for companies resident in Cyprus.
- Capital gains are not subject to tax, except on sale of immovable property situated in Cyprus.
Requirements and procedures for consideration in relation to set up a Cyprus Company:
- Disclosure to the service provider all the necessary information for “Know Your Client” and Anti-money Laundering procedures.
Due diligence and compliance procedures in the context of Cyprus company formation and Cyprus company registration are, by law, to be provided and also to be repeated on a regular basis, based on the risk classification of the Cyprus company and its beneficial owners. Various directives of the EU, such as the Anti Money Laundering Directive, for example, and various international agreements, such as the Common Reporting Standard, require at least annual updates of due diligence procedures.
- Name of the Company
The first step in the process is to obtain approval of the proposed name of the company from the Registrar of Companies. The Registrar is unlikely to accept a name if: it is too similar to that of an existing company, it is considered misleading, too general or pompous, it suggests a royal, national or international connection or it includes certain words such as “Co-operative”, “Insurance”, “Bank”, “Financial Services. The name must include the word “Limited” or its abbreviation “Ltd” to signify limited liability status.
- Company’s Memorandum and Articles of Association
This is the constitutional charter of the Company and is drafted by a local advocate. It is divided into two parts:
Once approval for the company name is obtained, the Memorandum and Articles of Association of the company are prepared and submitted for registration to the Registrar of Companies.
The Memorandum of Association primarily includes the objects and powers of the Company particularly as regards its dealings with the outside world, its limited liability character and its authorised capital. The Articles of Association comprises the Regulations under which the Company operates as a legal entity and regulates the rights of the shareholders amongst themselves.
- Share Capital
The share capital can be expressed in any currency and there is no minimum paid up capital. Authorised or Nominal Capital is the total capital, which the Company is allowed to issue to shareholders. Both Authorised and Paid up Capital may be increased very easily at any time by a Resolution of the Shareholders and as provided in the Company’s Articles of Association.
By law, each Company should appoint at least one Shareholder. The Shareholder may be either a physical person or a legal entity.
The minimum number of directors is one, who can be either an individual or a legal entity. The same requirement is provided for the shareholders. The difference is that the nationality of the directors is crucial, while the nationality of shareholders is immaterial. It is recommended that the majority of Directors are of Cypriots Residence or foreigners staying permanently in Cyprus. By doing so, the Company will not lose its tax advantage of a low tax rate of 12, 5% since management and control will be taking place in Cyprus. In the case of the Secretary, it is recommended also to be of Cypriot Residence for practical main reasons i.e. immediate signatures of various main Company documents.
The appointment of the secretary is made by the directors and the articles of association should normally contain an appropriate provision to this effect. The existence of a secretary is a requirement of the law. For practical purposes a body corporate (i.e. a company) may be appointed secretary. We can act as secretaries to Cyprus companies and provide efficient and effective service.
- Registered office
Every company must have a registered office from the day it commences business or from the fourteenth day after its incorporation, whichever is earlier. The registered office is the place where writs, summonses, notices, orders and other official documents can be served upon the company. The registered office is usually the place where the company’s Register of Members is kept, unless the company informs the Registrar of Companies of another place.
- Bank account
Clients may open bank accounts (personal or corporate) with their bank of choice in Cyprus, provided that the certain conditions are met. Such bank account/s may have all operations/facilities available including: online banking, visa card, cheque book etc. Only nominated signatories may have access to the bank account.
FSMO team will be glad to assist you with the above services. For more details please refer to our range of services.