Cyprus is one of the most popular locations in Europe for registering companies. A combination of factors, such as the favorable tax legislation, the straightforward corporate legislation and the country’s stable tax policy has led Cyprus into becoming an attractive jurisdiction, in which thousands of new companies set up with the Registrar of Companies every year, making the country a significant international financial center.
Cyprus has an effective and developed legal system and, as a former British colony, it is a common law country with business legislation similar to that of the UK. As Cyprus is a European Union member, a company registered in Cyprus enjoys all the advantages of operating in an E.U. country. Furthermore, the island has well educated, well trained and professional staff who speak English fluently, while Russian is another popular language for business.
Favorable corporate tax legislation
The main reason why Cyprus has become a great attraction as a business location is the business-friendly tax system that offers many advantages to companies that are based in the country. The key benefit of a resident corporation is the uniform 12.5% corporate tax rate which is one of lowest in Europe. However, the country does not carry the disadvantages that the tax haven countries have, as Cyprus complies completely with the E.U. legislation. Furthermore, it is included on the OECD white list.
Creating a holding company or any other type of company in Cyprus is a quick and straightforward procedure. A company is considered to be taxed resident in Cyprus if its business is managed and controlled in Cyprus. However, there is no restriction in relation to the residence and the nationality of the owner, meaning that the owner of the company does not have to be a resident of Cyprus, while the company does not have to limit its operations to Cyprus.
Apart from the low corporate tax rate (12.5%) the Cypriot tax law provides multiple tax benefits compared to other European countries. There is 0% tax on interest income, dividend income, and profits from disposal of shares, bonds, debentures or other securities. No tax is paid for corporate re-organizations, such as divisions, transfer of assets and exchanges of shares with the exception of capital gains related to immovable property in Cyprus. The same applies for profits earned from subsidiaries abroad, subject to certain restrictions.
There are more tax incentives of the Cypriot legislation. For example, royalties paid from Cyprus to non-resident companies are not taxed (with minor exceptions about intellectual property used in Cyprus). The same applies for capital gains and income from the liquidation of a Cypriot holding company. Furthermore, as for all EU members, imports from and exports to other EU countries are completed without VAT.
Double tax treaties
Companies registered in Cyprus also benefit from the double taxation avoidance treaties that have been established between Cyprus and around 45 other countries. There are double tax treaties in effect with multiple European countries (in and outside the EU) and a number of Middle Eastern countries and, in their majority, the treaties follow the OECD model. As a result, foreign investors do not have to pay additional tax in their home country.
Registering a company
The procedure for registering a company in Cyprus is simple, straightforward and fast and this is an extra advantage of Cyprus compared to other countries. The first step of the process is the approval of the name of the company by the Companies Registrar. It only takes 2 or 3 working days for the approval of the name. After the approval, the required documentation must be filled to the Registrar of Companies, and from that date, it takes around 5 working days for the procedure to be completed. Thus, Cyprus provides also the advantage that bureaucracy is kept to a minimum.
Citizenship by investment in Cyprus
Cyprus offers the opportunity to acquire citizenship in Cyprus through investment. A Cypriot citizenship gives to foreign investors all the advantages that an E.U. citizenship has, namely the right to live, work and move freely within all E.U. countries. The minimum required investment is EUR 2 million. Creating or purchasing companies in Cyprus is the simplest way of investing. A second way of investing is through real estate. Another means of obtaining the citizenship is by investing in alternative funds, bonds, debentures or other securities registered and/or issued in Cyprus. Finally, a combination of the above three ways can be used. The program does not require from the investor to live in Cyprus in order to obtain the citizenship, while the citizenship can be obtained by the spouse of the applicant and their children if they are under age (or until the age of 28 for children who undergo education). Parents of the applicant can obtain the citizenship also if they buy a house at a minimum of EUR 500,000 excluding VAT.
Another advantage of registering a company in Cyprus is that the Cypriot law allows investors to retain their anonymity and hold their property under an international trust. Thus, an investor can be the beneficial owner of a Cyprus company, but it does not need to be also the registered shareholder of the company. In this way, a local person, or company, can be the nominee shareholder who holds the property under their name for the benefit of the true shareholders, who prefer to retain their anonymity.
Highly developed and efficient system
Cyprus is also well known for the high level of corporate services offered by professionals, such as lawyers and accountants who are very experienced and highly skilled. In addition, Cyprus provides a modern banking system and financial sector which can support the operation of international firms, offering a secure environment for business.
Despite being among the world´s smallest countries, Cyprus is one of the most significant financial and business centers. The trustworthy legal system, the favorable tax legislation, the double tax treaties that Cyprus has signed, the highly developed corporate services offered and the fast and straightforward procedure of registering a company in Cyprus, has led Cyprus into becoming during the last years one of the most popular places for investment worldwide.