Cyprus Highlights

Cyprus Offshore Company Formation

Outlined below are the requirements for registering a Cyprus Offshore Company and the processes and procedures, administration issues and reporting requirements.

The most popular type of Cyprus Company is a limited liability company.  Cyprus Offshore Company Formation and administration is done under the Cyprus Company Law Cap.113 which is a virtual copy of the English Companies Act of 1948.

Procedure for Cyprus Company Incorporation:
The procedure for the formation of a Cyprus Offshore Company is as follows:

  • An application form is filled in, signed and scanned containing information about a preferred name and details of directors and shareholders
  • A beneficial owner declaration is filled in, signed, scanned and sent to Eltoma
  • A scanned copy of a passport for directors and shareholders is required
  • A scanned copy of proof of residence. This can be in the form of a utility bill, bank statement or bank reference and must not be older than 3 months.
  • At this point Eltoma will issue an invoice for a Cyprus Offshore Company Formation
  • Upon receipt of money in our bank account for Formation of a Cyprus Offshore Company, we start the formation process by submitting a preferred name for approval of Cyprus Registrar of Companies. This takes up to 5 working days.
  • Once the Cyprus offshore company name is approved, a shareholder of a Cyprus company signs the Memorandum and Articles of Association (M&AA) and sends the originals to Eltoma by courier.
  • Upon receipt of the signed M&AA, we start the Cyprus Offshore Company Incorporation process. It takes up to 15 working days for a Cyprus Offshore Company Formation and Apostille of Incorporation Certificates and up to a maximum of 5 working days for courier delivery.
  • At the beginning of each year we issue an annual invoice for €400 to cover renewal fees which includes the registered office fee and company secretary.

 

Minimum Capital Requirement for a Cyprus Offshore Company:
Shareholders must subscribe at least for two shares. 0.6% of stamp duty is charged on authorised share capital.

Shares in a Cyprus Offshore Company:
There are the following classes of shares that can be issued by a Cyprus company:

  • Ordinary shares
  • Preference shares

Share premium is allowed in Cyprus. Proper application of this concept helps to reduce capital duty on authorised share capital of a Cyprus offshore company.

Proper instrument of share transfer is required to register the transfer of shares in a Cyprus Offshore Company.

Directors of a Cyprus company
The minimum number of directors is one. There is no requirement for a local resident to be a director. However, it is recommended to have a local nominee director in order to obtain a tax residence certificate in Cyprus.

There is no restriction for foreign nationals to act as a director of a Cyprus Offshore Company. Corporate directors are allowed in Cyprus. An annual general meeting of directors must be held, this must take place within 15 months of the previous one.

Shareholders of a Cyprus Offshore Company
There should be at least one shareholder. There are no restrictions for foreign individuals or corporate bodies to be a shareholder of a Cyprus Offshore Company.

Secretary of a Cyprus Offshore Company
It is obligatory to have a secretary for a Cyprus Offshore Company. The secretary can be a natural person or a company. The company secretary is responsible for keeping and filing corporate document with the Registrar of Companies. Eltoma can provide company secretarial services for an annual fee.

Registered Office
Every Offshore Company in Cyprus has to have a registered office in Cyprus which is used as the business address of the company. A register of Directors, Shareholder, Secretary and minutes of general and director meetings are kept at this location. All changes have to be filed with the Registrar of Companies within a month from the date of change. Eltoma can provide the use of an office address to be used as such.

Accounts of a Cyprus Offshore Company
Every Offshore Company in Cyprus has to keep accounts. Accounts of the company have to be audited on an annual basis. Some exemptions however apply for companies with low turnover. Eltoma can provide accounting and auditing services.

Cyprus Tax System
Below are the major taxes in Cyprus

  • Income tax
  • Value Added Tax (VAT)
  • Capital Gain Tax (CGT)
  • Withholding tax on
  • Royalties
  • Dividends
  • Interest
  • Defence Tax
  • Capital and Stamp Duties

Taxable Income
Cyprus Tax Resident Companies are subject to income tax on worldwide basis. In particular, the following income is subject to income tax:

  • Trade profit
  • Interest
  • Dividends (the dividends are listed in the tax list but exempt for income tax calculation)
  • Royalties
  • Net consideration received from sales of trade goodwill

There are following exemptions from income tax:

  • Dividends
  • Capital gain on sales of securities
  • Some interest income

Residence Test for Cyprus Company:
A company is a resident of Cyprus if management and control is exercised in Cyprus

Taxation of Dividends:

  • Dividends are exempt from income tax.
  • No withholding tax is levied on dividends paid to non-residents of Cyprus.

Taxation of Royalties

  • Royalty income received is subject to income tax.
  • Royalty paid to non-residents of Cyprus is subject to withholding tax of 10% unless it is regulated a Double Tax Treaty.

Taxation of Interest:

  • Interest is subject to income tax.
  • Interest paid to non-residents of Cyprus is not subject to withholding.

Capital Gains:
Capital Gain Tax (CGT) only applies to immovable property in Cyprus. Any property outside of Cyprus and gains from sales of securities are not a subject to CGT.

Corporate Income Tax:
Income tax rate in Cyprus is 10%. This is the lowest income tax rate in European Union.

Defence Tax:
Defence tax is levied at 15% on interest and dividends income. There is a number of exemptions applied to the defence tax.
There is a concept of a deemed dividend distribution where undistributed profit is subject to a defence tax. Distribution of profit in form of dividends has to be made within three years from the end of financial year. Otherwise, deemed dividend distribution will be triggered and 70% of retained profit and will be subject to 15% defence tax.

Capital Duties:
Capital duty of 0.6% is payable on authorised share capital of Cyprus Offshore Company.

Net Worth Tax:
There is no net worth tax in Cyprus.

International Aspects of Cyprus Taxation:

  • Anti-avoidance regulations are enforced
  • Cyprus tax code is following OECD recommendations.

Transfer Pricing:
There is no specific legislation in Cyprus tax code. However, arm’s length test will apply to related party transactions.

System of Double Tax Treaties:
Cyprus signed more than 40 Double Tax Agreements (DTA) which can be successfully used for an international tax planning.