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
Cyprus Holding Companies
Since 2003, Healy Consultants Group PLC has assisted our Clients to incorporate their businesses in the Republic of Cyprus. We provide a wide range of services including i) Cyprus business registration, ii) assistance to license the company, iii) corporate bank account opening services with a local bank and abroad, iv) quality employee recruitment, v) employment and residence visa strategies and vi) office rental solutions.
Advantages of a Cyprus Holding company
- Capital gains in Cyprus are corporate tax exempt. Consequently, all forms of income resulting from trading in shares, securities and debentures is tax exempt;
- Dividends and interest paid to non-resident individuals or corporations are legally tax exempt;
- Dividends received from abroad are legally tax-exempt, provided they are not used as tax deduction abroad;
- Cyprus enjoys a wide network of 64 Double taxation avoidance treaties that allows easy access to tax credit;
- R&D expenses for companies dealing only with innovation technologies will be fully deducted from corporate tax;
- Qualifying IP income can secure up to 80% corporate tax exemption, together with 5-year amortization provision for IP rights obtained after 2012;
- Both realized or unrealized forex gains or losses will be considered as tax-exempt. This regime is not applicable to forex companies;
- Cyprus allows 75% group relief on tax losses for the current year, which can cross the country’s borders to other EU countries;
- There are no thin capitalization rules in Cyprus.
Disadvantages of a Cyprus Holding company
- There are no deductions of capital losses (both unrealized and realized) or a deductibility of amortization of underlying goodwill;
- Every resident person receiving any dividend from a company is subject to Special Contribution for Defense Tax (SCDT) except the following cases:
- A Cyprus resident company pays dividends to another Cyprus resident company;
- A resident company of Cyprus obtains dividend from an overseas company.
- A non-resident IBC would not be entitled to a Cyprus Tax residence certificate and thus would not be able to take advantage of the double tax-treaty network;
- The government of Cyprus does not allow the taxation on a consolidated basis. Each company must file a different tax return;
- Cyprus wholly abides by all EU Tax related Directives which comprises of the Parent-Subsidiary, the Interest and Royalties, the Merger Directive, the Directive on Administrative Cooperation in Direct Taxation;
- Cyprus tolls a 10% withholding tax on the gross income derived from the services of technical assistance rendered to the non-residents in Cyprus.
Requirements to register
Company incorporation in Cyprus is largely attractive due to:
- Ease of trade with European Union customers and /or holding EU subsidiaries and other assets;
- Lower administrative and operational costs than other EU regions; and
- Attractive tax incentives.
The main steps to register a Cyprus holding company are:
- The Client proposes a company name which is then submitted to the Registrar of Companies for approval. If the name of the company already belongs to another operating company, then a letter of consent must be obtained from the operating company;
- The optimum corporate structure including the directors and shareholders should be determined and a detailed project plan for the company registration process is prepared;
- After submission of the above set of certified documents, the DR-COR approves the company registration and issues the Certificate of Incorporation;
- A corporate bank account must be opened after company incorporation and the Clients deposits the confirmed shared capital, if any.
Learn more about the differences between various business entities in Cyprus on our Cyprus companies entities page.
Differences between a Cyprus holding company and other holding companies
The table below outlines the major differences between a Cyprus holding company, a Malta company, a Swiss holding company, and an Ireland LLC:
Factors Cyprus holding company Malta holding company Swiss holding company Ireland LLC Dividend withholding 0% 0% 0% - 35% 0% if paid to another Irish company. 20% if paid to a non-resident company. Capital gains 0% 5% - 10% 0% 33% - 40% Standard VAT Rate 19% 18% 8% 23% Local corporation tax rate on IP income? 2.5% or less 0% 9.5% 25% Must register for EU VAT? No No No No Minimum number of directors required? 1 1 1 1 Minimum number of shareholders required? 1 2 1 1 Corporate tax payable % 12.5% 0% - 10% 10% 12.5% Total number of double tax treaties the country has access to 64 74 94 73
For a deeper insight into the details of business incorporation in the above listed countries you can read our tax exempt companies in Europe page.
Cyprus LLC setup costs in Year 1 will amount to €2,500. The average fee per engagement amounts to €9,735 including i) Cyprus company incorporation, ii) corporate bank account setup, iii) legal registered office, and iv) all government registration fees.
Cyprus entity Fees Draft invoice Cyprus holding company €9,735 View invoice PDF
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 €12,335 €11,705 €9,735 €15,585 Draft invoice View invoice PDF View invoice PDF View invoice PDF View invoice PDF View invoice PDF View invoice PDF
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.