A small island, Cyprus offers a variety of business opportunities. It has a stable modern, free-market, service-based economy with high household incomes. International investors and domestic businesses can have the confidence to invest, grow, and prosper. More benefits of establishing a company in Cyprus and details of company incorporation are further in our article.
Benefits of setting up a business in Cyprus
Here are six main reasons to establish a company in Cyprus:
Low corporate tax rate
Companies in Cyprus pay only 12.5 % to the local government. It is one of the lowest corporate tax rates in Europe. Additionally, there are more Cypriot tax benefits. The companies have a full tax exemption on the sale of securities, dividends, and, in some cases, capital gains. Good news for international holdings. Companies in Cyprus have a territorial tax system, which means it only taxes locally-sourced income. Therefore, companies can significantly optimize the taxable base through the agreements on avoidance of double taxation.
Many investment opportunities
Cyprus offers many investment opportunities for profitable investments:
- Banking sector and financial consulting. Over the past 20 years, Cyprus has been very popular for international investments. Recently the flow of investments is booming from the East through Cyprus to Asia (especially to China and India), South America, and the Middle East. Besides, companies outside the EU consider Cyprus as the starting point for investments in Europe. Banking activities and financial consulting are the fastest growing sectors of the economy. They are becoming the most important ones among the other industries.
- Shipping Industry. The merchant fleet of Cyprus is operated by more than 130 shipping companies. It is the third-largest merchant fleet in Europe and the eleventh largest one in the world. Local shipping has its historical traditions, it accounts for 6-7 % of GDP.
- Construction and Property Market. The government of Cyprus provides substantial support to individuals looking to start a company in the construction business. Massive infrastructure and development of the private sector are the agendas due to which the authorities try to bring in more people to invest in this sector. The property market is one of the most prosperous sectors of the economy in Cyprus.
- Tourism. Tourism has proved to be the most resilient of Cyprus' commercial sectors, generating 12% of the country's GDP in recent years. Thus, in 2019 the number of tourists exceeded 3.5 million people.
- Transport business. Private enterprises are extremely interested in this sector of the economy. At the same time, several transport directions can be effectively developed in Cyprus: road, sea, and air transportation.
- Insurance. Insurance companies are prospering in Cyprus. The services of such enterprises are in high demand among both private and legal entities.
The minimum of bureaucracy
Compared to continental Europe Cyprus has less bureaucratic oppression on businesses. At the same time, commercial licenses issued in Cyprus have great authority and a good reputation outside the island. This means that investors can easily set up headquarters in Cyprus to conduct business throughout Europe without having to comply with additional licensing requirements.
State business support
The Cyprus State meets the needs of local and foreign businesses. The country has introduced extremely attractive tax benefits and deductions.
Bilingual qualified workforce
More than 70 % of the Cypriot population speaks English and half of all people received higher education. This means that the business can hire first-class specialists who are able to provide accounting and legal services for the company.
High quality and low-cost residency
According to the Knight Frank Global Lifestyle Review, Cyprus is in fifth place among the countries best to move in. The cost of living in Cyprus and the crime rate are ones of the lowest in the EU. It is not surprising that foreigners make up almost 20 % of the island's population. It is convenient, comfortable, and safe to live in Cyprus.
The Legislative framework for the company’s incorporation in Cyprus
To conduct business in Cyprus, companies must register in The Department of Registrar of Companies and strictly follow the rules set out in The Cyprus Company Law. This regulatory provision is the main moderator of commercial activity on the island. It clearly describes the types of businesses allowed in Cyprus. Cyprus Certificate of Good Standing is duly signed by the Registrar of Companies.
The detailed content of The Cyprus Company Law can be found on the page.
Employees of companies are protected by The Cypriot Employment Law and the numerous EU directives. The Cypriot Employment Law sets out all the rights and obligations of employees. There is also the requirement that foreign employees obtain a work permit, which is issued by the Civil Registry and Migration Department in Cyprus.
Let us find out which commercial enterprises can operate in Cyprus.
What a company is, different types of businesses
According to Chapter 113 of The Cyprus Company Law, a company is an independent legal entity established under the provisions of The Company Law for conducting any legal activity. The members of the company are not personally liable for its debts or any other obligations and are protected from any legal actions of creditors.
Sole Proprietor Companies with foreign investors are called International Business Companies. They must meet certain requirements to complete the incorporation procedure in The Cypriot Department of Registrar of Companies.
Partnerships in Cyprus fall under Chapter 116 of The Cyprus Company Law. By the way, Sole Proprietor companies relate to this category and follow the same rules.
There are five different types of companies that you can register in Cyprus.
Private limited liability Company by shares
This is the most common type of company in Cyprus. Such a company does not have a minimum share capital requirement, and the liability of its members is limited depending on the value of their shares. The number of shareholders with non-transferable shares can range from 1 to 50.
Pubic limited liability Company by shares
It can be opened with a minimum capital of 25,629 EUR. Shares are transferable, and there must be at least 7 shareholders (there is no upper limit).
Limited liability Company by guarantee without share capital
Its members act as guarantors rather than shareholders. Each participant is free to set the limit of their liability, which is subject to prior agreement between the participants. Such companies in Cyprus are usually established for charitable or non-commercial purposes.
Limited liability Company by guarantee with a share capital
This company has a share capital. Liability of its members is limited by its memorandum of association:
- up to any unpaid amount for the shares they hold;
- up to the amount that its members have respectively undertaken to contribute to the assets of the company in case of dissolution.
This type of company can be either private or public company.
Variable capital Investment Company
This type of company has shares that do not have a nominal value but rather a variable value. Minimum initial capital for this type of company - from 50 000 to 300 000 ER. This company can be incorporated after it receives a relevant license from the Cyprus Securities and Exchange Commission (CySec) to operate as Collective Investment Funds (CIF). If a company is private, the number of members can range from 1 to 50. If a company is public, the number of members must be at least one.
How to receive the certificate of incorporation in Cyprus
The Cyprus Company Law requires to hire a licensed lawyer to prepare corporate documents and to submit them to The Department of Registrar of Companies and Official Receiver. Read about it in more detail in the article.
The entire registration procedure takes 3 stages:
- Approval of the company name. It takes from 2 or 3 days to one week to review an application for approval.
- Submission of the documents, the Company's Articles, and Memorandum. The documents are accompanied by a lawyer's sworn statement and information about the company, director, and secretary, shareholders
- Receiving a certificate of incorporation and a full set of company documents
After the company is incorporated, the created commercial enterprise must be registered with the tax service and receive the Taxpayer Identification Number within 60 days. In some cases, it is also required to receive a VAT number. Since a Cyprus company is required to hire employees, the company must register in the Ministry of Labour, Welfare, and Social Insurance. Also, you may register a trademark to have commercial and proprietary protections.
The total cost of the company incorporation in Cyprus is approximately 1300 EUR.
George K. Konstantinou Law Firm can help you incorporate your business:
Our company has been providing legal support to local and international clients since 1983. Using the accumulated experience and knowledge, we offer consultations on the most effective structures of the company in Cyprus, take care of the preparation and submission of the documents to The Department of Registrar of Companies, provide tax consulting and accounting services.