Business entities in Cyprus
Because of its attractive tax system, Cyprus is often a first-choice jurisdiction for the registration of companies aiming at trading with European Union customers and / or holding EU subsidiaries and other assets. The most commonly Cyprus business entity used is the limited liability company. Alternatively, foreign multinationals planning to conduct operations in Cyprus can also register a branch of their overseas office. See below for further information the different legal entities available in Cyprus.
Trading with a Cyprus entity
The Cyprus Limited Liability Company (Limited Company)
- It is possible to setup a Cyprus limited liability company with only i) one shareholder without a mandatory minimum capital contribution ii) one company secretary and iii) one director. Only the company secretary is legally required to be resident in Cyprus;
- Entities managed from Cyprus are deemed as tax resident and hence subject to corporate income tax on their worldwide income, while those managed from overseas are only subject to corporate income tax on their Cyprus income. However, both resident and nonresident companies are required to submit their financial statements and a tax return each year to the Cyprus Tax Department;
- Best uses for an Cyprus LLC: such entity is commonly used to setup an international trading entity, doing business with EU resident customers and suppliers.
The Cyprus Free Zone Company (Larnaca Free Zone Company)
- Foreigners can register their business in the only special economic zone existing in Cyprus, the Larnaca free zone, an industrial estate located near to the airport of the same name approximately 50km from the capital Nicosia;
- The Government does not provide any more corporate holidays to businesses registered in the zone. The main advantages of the zone include i) subsidized industrial space and ii) good industrial infrastructure;
- Transactions conducted from the free zone can also benefit from i) exemption from VAT for non-EU goods in transit ii) deferred VAT payment on merchandise imported into the EU;
- Best uses for an Cyprus free zone company: light manufacturing activities of products re-exported to the rest of the European Union.
The Cyprus Public Limited Company (Public Company Limited by Shares)
- Minimum business setup requirements for a Cyprus public company include: i) 7 shareholders ii) 2 directors iii) a minimum capital of €25,000, of which at least 25% must be paid up before incorporation and iv) one company secretary, who is the only person required to be resident in Cyprus;
- Cyprus PLCs are also required to i) appoint one auditor and ii) submit audited financial statements to the tax authority and the Cyprus Registrar of Commercial Entities every year;
- Best uses for an Cyprus public limited company: registration of this business entity is recommended when the promoters intend to seek significant capital amounts from third party investors or list the company on the Cyprus Stock Exchange or another European stock exchange.
Trading with an overseas entity
The Cyprus Branch Office
- Foreign companies willing to do business in Cyprus can register a branch of their entity. Such registration will not require a minimum investment, but a resident country representative must be appointed;
- Best uses for a Cyprus branch office: the main benefit offered by branch registration in Cyprus is the ability for the head office to prepare only one set of financial statements. However, the head office has also unlimited liability against any debt or loss of the branch office.
The Cyprus Representative Office
Cyprus regulations do not distinguish representative offices from branches. Consequently, representative offices are subject to the same business setup and annual filings requirements applicable to a branch office.
Holding assets with a Cyprus entity
The Cyprus holding company
- Cyprus entities are commonly used as holding vehicles for EU subsidiaries because i) dividends received from global subsidiaries are not subject to local corporate income tax and ii) dividends distribution to overseas shareholders and not subject to Cyprus withholding tax;
- It is additionally possible to structure a holding company as tax resident to avail the 56 double taxation avoidance treaties signed by Cyprus. However, this advantage must be weighed against the risk of dividend income becoming subject to special defense contribution, levied on all resident companies at a 17% rate;
- Best uses for an Cyprus holding company: Holding European subsidiaries and IP assets.
The Cyprus offshore trust (international trust)
- Foreigners can register international trusts legally tax exempt in Cyprus if i) all assets, settlors and beneficiaries are nonresidents and ii) one of the trustees is resident in Cyprus;
- The trust must additionally be registered with the Cyprus Trust Registrar, although the information will not be accessible to the general public;
- Best uses for a Cyprus trust: Cyprus offshore trusts are attractive for family wealth management and asset protection.
Table of Comparison between Cyprus entities
LLC Free zone company PLC Branch Holding company Offshore trust Locally known as? Limited Company Larnaca free zone company Open Limited Company Branch Holding company International trust Operations and logistics Doing business in Cyprus permitted? Yes Yes Yes Yes Yes No Allowed to sign contracts with local Clients? Yes Yes Yes Yes Yes No Allowed to invoice local Clients? Yes Yes Yes Yes Yes No Allowed to import raw materials? Yes Yes Yes Yes Yes No Allowed to export goods? Yes Yes Yes Yes Yes No Accounting and tax Corporate tax rate on local income? 12.50% 12.50% 12.50% 12.50% 12.50% Not allowed Corporate tax rate on foreign income if resident entity? 12.50% 12.50% 12.50% 12.50% 12.50% Not allowed Corporate tax rate on foreign income? (non-resident entity) 0% 0% 0% Always resident 0% 0% Statutory audit required? No No Yes Yes No No Annual tax return to be submitted? Yes Yes Yes Yes Yes No Access to DTAAs? Yes Yes Yes Yes Yes No Company law Issued share capital required? €1 €1 €25000 None €1 €1 Resident director/representative required? No No No Yes No Yes Cyprus shareholder required? No No No No No No Minimum number of directors? 1 1 2 1 1 1 Minimum number of shareholders? 1 1 7 Parent company 1 1 Public register of shareholders and directors? Yes Yes Yes Yes Yes No Immigration Can the entity hire expatriate staff? Yes Yes Yes Yes Yes No How long to get work permit approved 3 months 3 months 3 months 3 months 3 months 3 months Engagement fees Estimate of engagement costs €9,535 Contact us €10,335 €9,705 €9,735 €15,585 Draft invoice Contact us
Frequently asked questions
What is the most common type of entity used for Cyprus business setup?Most of our Clients setup a limited liability company in Cyprus.
How long will it take to setup a company in Cyprus?It takes on average 10 weeks to setup a business in Cyprus including i) engagement planning ii) company incorporation iii) corporate bank account approval iv) corporate internet banking approval and v) engagement completion.
Will I need a resident director for Cyprus LLC setup?No. A resident director is not mandatory to start a company in Cyprus.