Cyprus company establishment is a topic you will most probably be already thinking about. If you are considering expanding your business internationally, relocating to Cyprus is a fast, easy and tax-efficient way to conduct business within the European Union and beyond.
In this article, CX Financia’s team of experts summarizes the following:
- What are the main types of business structure available in Cyprus?
- What are the main types of corporate vehicles in Cyprus?
- What are the uses of a Cyprus company?
What are the main types of business structures available in Cyprus?
Cyprus has one of the most business-friendly environments in the European Union. More specifically, the tax system in Cyprus offers numerous exemptions and a corporate tax rate of 12,5%. As such, relocating or establishing a business in Cyprus is ideal for tax optimization.
Coupled with its robust legal framework which is regularly updated and modernized, Cyprus is expanding and strengthening its international business foundations by offering investors an ideal place to conduct their business and achieve an ideal balance between their personal and professional life.
What are the main types of corporate vehicles in Cyprus?
The main types of corporate vehicles in Cyprus are:
1. Cyprus holding/subsidiary company;
2. Branch of foreign company;
3. Sole proprietor;
5. Cyprus Trusts;
6. Listed company in Cyprus Stock Exchange (“SCE”).
1. Cyprus holding / subsidiary company
There are three types of companies in Cyprus:
(a) companies limited by shares, where liability for shareholders is limited to their shares;
(b) companies limited by guarantee, where the liability of the members is agreed and members ‘guarantee’ the amount for which they will be liable for in the event of liquidation; and
(c) unlimited companies, where the liability of members is unlimited.
A Cyprus private company limited by shares has a separate legal personality and is the most common type of corporate vehicle used by investors and entrepreneurs in Cyprus. There are limitless options for structuring a single limited liability company including as a holding or subsidiary company in a group structure. Cyprus companies benefit from one of the lowest corporate tax rates in the EU (12%) and may also be eligible to benefit from various other incentives which are on offer such as the recent ‘Fast Track Business Activation Scheme’ which targets foreign non-EU/EEA nationals.
A Cyprus company shall comply with certain formalities such as maintaining a registered office in Cyprus, appoint director(s) and a secretary and pay an annual fee to the Cyprus Registrar of Companies (the “Registrar”)
2. Branch of an overseas company
An overseas company (i.e. a company which is not registered in Cyprus) may maintain a ‘branch’ (a place of business) in Cyprus. Branches of overseas companies, as opposed to holding/subsidiary companies that are registered in Cyprus, do not have a separate legal personality but merely constitute an extension of the overseas company. The rate of tax on Cyprus branch profits is the same as on corporate profits (12.5%). No further tax is withheld on transfers of profits or funds to a foreign head office.
An overseas company shall fulfil certain obligations in order to establish a branch (place of business) in Cyprus which are similar to those required by a company registered in Cyprus including, inter alia, maintaining a place of business on the island (similar to the registered address of a Cyprus company), director(s), a secretary and paying an annual fee to the Registrar.
3. Sole proprietor
Sole proprietors are physical persons (individuals) who conduct their business on their own account. They may transact and conduct their business under a trade/business name, but they remain personally liable for all the debts and obligations of their business. A sole proprietor’s profit is subject to income tax, not corporate tax.
Cyprus has three types of partnerships:
(a) general partnerships, where all partners are jointly and severally liable for all the debts and obligations of the partnership;
(b) limited partnerships, where one of the partners (the general partner) has unlimited liability for all the debts and obligations of the partnership and the limited partner(s)’s liability is limited to their contribution amount; and
(c) partnership limited by shares, which was introduced in 2015, is similar to a limited partnership with the general partner having unlimited liability and the limited partner(s)’s liability being limited to the amount unpaid on their shares.
Some of the advantages of forming a partnership include the fewer formalities and costs during the formation of the partnership and the cost for operating and terminating a partnership (depending on the size and nature of the business activity the parties intend to carry out). On the other hand, a few major disadvantages of partnerships include the unlimited liability of the partners and the taxation of the income of the partnership (partners are taxed under the ‘income tax’ regime). Larger and more complex structures tend to opt for structuring their business using a Cyprus company.
5. Cyprus Trusts
The law governing Cyprus trusts is based on the English common law system and constitutes a combination of equity laws and statutory provisions. The trustee holds the legal title of the trust and the beneficiaries of the trust hold the beneficial title. Some trust arrangements choose to appoint a protector (which is not mandatory) for the purposes of protecting the assets of the trust. Cyprus International Trusts are used, amongst others, for tax planning purposes and business restructurings. The incomes and gains from sources outside Cyprus are exempted from any tax imposed in Cyprus.
6. Listed company in Cyprus Stock Exchange (“CSE”)
Listed companies on the CSE are public companies. Listing a company on the CSE provides companies with the option of greater exposure to financing. A few financing options for companies listed on the CSE include investing in the company’s share capital from members of the public or raising capital through the issuance of bonds.
What are the uses of a Cyprus company?
A Cyprus company is the most common type of corporate vehicle used by investors and entrepreneurs in Cyprus. A company may be used for the effective management and running of any kind of business including:
(a) group financing purposes
(b) the holding of various rights including intellectual property rights
(c) ship management and ship owing
(d) Cyprus investment firms
(e) Alternative investment funds
(f) establishing a foreign interest company seeking to expand its operation in the EU
(g) investments in infrastructure and large scale projects such as the renewable energy sectors and the oil and gas industry
How can CX Financia help you?
Cyprus company establishment is our expertise. With years of experience in the financial industry, our team can help you identify the right corporate structure for you and your future (or current) business by establishing or relocating your business in Cyprus.
Amongst others, we offer advisory services including director and secretarial services and a place for your registered office address.
Our team can assist you with establishing a substance in Cyprus for tax purposes and benefit under Cyprus’ favourable corporate tax rate.
CX Financia’s tax experts can also advise you on tax-effective solutions tailor-made to your specific requirements.
If you have any further questions or require assistance, you can send us an email at [email protected].