Company registration in Cyprus

Company registration in Cyprus. General information

Why should you register a company in Cyprus?

Cyprus is an island country located in the Mediterranean Sea. It is situated near Turkey, Lebanon, and Syria, making it attractive from a business perspective due to its proximity to many trade routes.

The Cypriot state is widely regarded as one of the most liberal in terms of its tax system. At the same time, its membership in the European Union ensures that there are no trade restrictions for member states.

Although setting up a company in Cyprus is not particularly complicated, the support of an experienced law firm can minimize the registration time. It will also facilitate taking advantage of available tax reliefs and exemptions.

In this post, you will learn about the advantages and disadvantages of having a company in Cyprus.

Company types in Cyprus

Before starting a business, an entrepreneur should decide in what form they will operate their company in Cyprus. Cypriot company law distinguishes several types of entities:

The establishment, operation, and dissolution of companies in Cyprus are regulated by the Companies Law of 2003 (Cap. 113).

Private limited liability company

Limited liability companies can be either single-member or multi-member entities. The maximum number of shareholders is 50. The share capital is divided into shares, and the regulations impose restrictions on their transfer. The liability of the shareholders is proportional to the number of shares they hold.

The company is represented by a single-member board of directors, but all major decisions are made by the shareholders’ meeting. The entity must also appoint a secretary who is responsible for maintaining the company’s documentation, including the register of shareholders, the register of charges, the register of directors and secretaries, the company seal, and the minutes and resolutions book.

All companies in Cyprus must be registered with the appropriate registry (Company Registrar of Cyprus).

Public limited liability company

It is a legal form similar to a Polish joint-stock company. Public companies do not have a maximum number of shareholders, and the trading of shares is not subject to restrictions.

The duration of the company can be specified in the agreement, but in practice, it is most often unlimited. The shares can be listed on the Cyprus Stock Exchange Cyprus Stock Exchange.

Company registration in Cyprus. Company limited by guarantee

This type of company is a replica of the legal structure known from the British system. Such companies are intended exclusively for charitable and non-profit purposes. Their establishment does not require the payment of a minimum share capital.

General partnership

It is based on the cooperation of partners—up to 20—operating under one company name and aiming to achieve a common business objective. In the case of activities related to banking, the number of partners is limited to 10.

A general partnership can be operated by both local and foreign entrepreneurs. The entity must be registered in a special register (Registrar of Partnerships) within 1 month of its formation. 

Company registration in Cyprus. Limited partnership

It is a structure similar to the Polish limited partnership. A Limited Partnership must consist of at least two persons, known as the general partner and the silent partner.

The first type of partner bears full liability for the company’s obligations but is responsible for managing the company’s affairs and representation.

The second type of partner participates in the company through contributed capital or know-how and is liable only up to the amount of their contribution.

Sole proprietorship in Cyprus

This is the simplest form of running a business, intended for small-scale ventures. The entrepreneur is personally liable for all debts with their entire personal assets.

Any foreign entrepreneur can establish branches of their company in Cyprus. The only obligation is to submit annual financial statements in Greek.

To register a branch, it is necessary to submit a certificate of registration of the parent company, the articles of association or statutes, and the details of the managing director.

The choice of the appropriate legal form for a given business should always be consulted with lawyers and tax advisors. Want to establish a company in Cyprus? We can help you with that!

Company registration in Cyprus. How to establish a company in Cyprus?

Establishing a company in Cyprus should be preceded by:

• Choosing the business structure and preparing the necessary documents;
• Drafting the company’s articles of association or statutes (in some cases, a notarized deed is required);
• Preparing a power of attorney document for the person or persons acting on behalf of the company;
• Appointing a director (or two in the case of public companies) and a company secretary, who must be a resident of Cyprus;
• Opening a bank account to deposit the share capital;
• Selecting a company location and address (this cannot be solely a virtual address).

VAT registration for a company in Cyprus

To establish a company in Cyprus, it is essential to submit all documents to the Companies Section of the Department of the Registrar of Companies.

Next, the company receives a tax registration number and a VAT number from the Ministry of Commerce. The final step is to register the company as a payer of social insurance with the Ministry of Labour.

EORI for a company in Cyprus

The company can also obtain an EORI number. This is a unique identifier used by economic operators in EU member states when dealing with customs authorities.

The minimum share capital of a company in Cyprus

In certain cases, it will be necessary to deposit the minimum share capital into a bank account. For public companies, this amount is €25,630. Sole proprietorships, partnerships, and private limited companies do not have a minimum capital requirement.

Taxation of companies in Cyprus

The tax benefits of registering a company in Cyprus include, among others, a low corporate income tax (CIT) rate of 12.5%. Local regulations also provide, under certain conditions:

• Exemption from withholding tax on the payment of royalties;
• Exemption from dividend taxation in holding companies.

Additional tax exemptions may apply to profits from securities trading and income from serving as a company director. For example, dividends received by Cypriot companies and profits from securities trading by Cypriot companies are generally not subject to taxation.

Another advantage is the potential to reduce withholding tax in the IT sector if the rights to software are transferred to a Cypriot company. For this reason, establishing companies in this sector is particularly popular in Cyprus.

Cypriot law also does not provide for wealth tax or inheritance tax.

Registration of a company in Cyprus

Company registration in Cyprus FAQs

Company in Cyprus – Company Registration Procedure

Company in Cyprus. Name of the company in Cyprus

The first step in establishing a company in Cyprus is obtaining approval for the proposed company name from the Registrar of Companies. The Registrar will not accept a name if it:

• Is too similar to the name of an existing company,
• Is considered misleading,
• Is too general,
• Suggests connections with royal families, states, or international organizations,
• Includes words such as “Cooperative,” “Insurance,” “Bank,” “Financial Services,” unless justified by the nature of the company’s business.

It is recommended to propose more than one name to expedite the approval process.

Company registration in Cyprus – share capital

The share capital of the company is expressed in euros and divided into shares of any value. However, it can also be expressed in another currency.

The authorized share capital is the total capital that shareholders have committed to provide to the company. Paid-up capital is the portion of the authorized share capital that has actually been paid. Both the authorized and paid-up capital can be easily increased by passing a resolution to increase it in accordance with the provisions of the company’s founding documents. There are no restrictions on the nominal value of shares, but typically the capital is divided into shares with a value of 1 euro each.

Company registration in Cyprus – shareholders

A company must have at least one shareholder. Each shareholder is required to submit the following information to the registry when registering the company: full name, nationality, address, occupation, a copy of their passport, a resume, and the number of shares they will hold. Cypriot Partnership companies can have up to 100 shareholders.

A foreign company can be a shareholder in a Cyprus-based company—in this case, it must submit authenticated corporate documents to the Cypriot Companies Registry.

Anonymity: All shares are registered, and in the case of a limited liability company, bearer shares cannot be issued to their owners. However, shareholders who do not wish to appear as registered shareholders can appoint nominees who will appear in the register as shareholders, while direct control remains in the hands of the actual owners.

Company registration in Cyprus – directors

A company in Cyprus must have at least one director, but it is recommended to appoint at least two directors. For each director, the following information is required: full name, nationality, address, occupation, and a copy of their passport.

Directors can be either Cypriots or foreigners. However, it should be noted that the residency of the directors of a Cypriot company determines whether the company is considered a tax resident of Cyprus.

Company registration in Cyprus – secretary

The company must have a secretary. Secretaries operate under the control and according to the instructions of the directors, maintain the company’s statutory records, and perform non-executive administrative functions. For practical purposes, the secretary is usually appointed from among the members of the firm establishing the company or a designated representative.

Company in Cyprus – registered address

Cypriot companies must have a registered address in Cyprus. The registered office is the place where legal documents, notifications, and other official documents can be served to the company.

Companies registered in Cyprus have the right to operate through law firms or their own offices if they wish to establish such offices in Cyprus. In practice (at least in the case of companies that do not maintain their own offices in Cyprus), the firm that undertakes to set up the company acts as the company’s registered office.

Company registration in Cyprus – scope of activity

It is customary to define the business activities as broadly as possible, but it is good practice to describe the main activities of the company in the first paragraphs of the founding document. It is also essential to check each time whether a specific activity requires a separate license, such as fiduciary or banking activities.

Company in Cyprus – articles of association and company’s agreement

This document, prepared by our lawyers, defines the company’s structure and consists of two parts:

1. The Memorandum of Association, which primarily includes the company’s objectives and business activities. It also specifies the type of the company—e.g., whether it is a limited company (i.e., limited by shares)—and includes provisions regarding its share capital.
2. The Articles of Association, which contain regulations governing the company’s operations as a legal entity and outline the rights of shareholders. The Memorandum of Association and the Articles of Association, along with other necessary documents prepared by the firm undertaking the company formation, are submitted to the companies register.

Complete sets of registration documents (certificate of incorporation, Memorandum of Association and Articles of Association, certificate indicating the directors and secretary, certificate indicating shareholders, and certificate of the registered office) are provided as soon as the company is registered. The formation procedure takes approximately 10 days from the date of order placement, completion of the form, and submission of the original KYC documents (see below).

Company registration in Cyprus. Confirmation of identity

• A current, valid passport (notarized copy must include nationality, place and date of birth, passport number, expiration date, photograph, and signature).

Company registration in Cyprus. Proof of address

• A VAT invoice for utilities (not older than three months—showing the name, surname, and address of the individual)—e.g., for gas, electricity, water, or landline telephone (but not for a mobile phone).

Company registration in Cyprus. Bank opinion

• The document must indicate the period during which the person is known to the institution (not less than three years) and the nature of the relationship between the individual and the institution. It must be original and dated no more than 3 months ago. Ideally, it should be in English.

Company registration in Cyprus – taxes and finance

A company in Cyprus is required to maintain accounting records in accordance with International Financial Reporting Standards (IFRS).

At the end of the financial year, it is necessary to file an annual report in Greek. The report must be audited by a certified auditor prior to submission. If the company in Cyprus is a VAT taxpayer, quarterly VAT returns must also be submitted.

Company registration in Cyprus – personal income tax

Company registration in Cyprus. Subject of taxation

A tax resident of Cyprus is subject to tax on income from sources located both in Cyprus and abroad. Non-residents of Cyprus are taxed only on income from sources located within Cyprus.

An individual is considered a tax resident in Cyprus if they spend more than 183 days in Cyprus during a given calendar year. Days spent outside and within Cyprus are counted as follows:

• The day of departure from Cyprus is counted as a day spent outside Cyprus.
• The day of arrival in Cyprus is counted as a day spent in Cyprus.
• Arrival in and departure from Cyprus on the same day is counted as a single day spent in Cyprus.
• Departure from and arrival in Cyprus on the same day is counted as a single day spent outside Cyprus.

Company registration in Cyprus. Tax rates for individuals

Foreign pensions and annuities are taxed at a flat rate of 5%. An annual allowance of €3,420 is granted. However, the taxpayer may choose to apply the normal tax rates and brackets mentioned above. This choice can be made on a yearly basis.

Company registration in Cyprus. Tax exemptions

Company registration in Cyprus: Corporate Taxation

Subject of Taxation

All companies that are tax residents of Cyprus are subject to tax on income derived from all taxable sources, both in Cyprus and abroad. Companies that are not tax residents of Cyprus are taxed on income derived from business activities conducted through a permanent establishment in Cyprus and certain types of income from sources within Cyprus.

A company is considered a Cyprus tax resident if it is managed and controlled in Cyprus. Taxes paid abroad may be credited against the corporate income tax liability in Cyprus.

Corporate Income Tax Rate

The corporate income tax rate for all companies in Cyprus is 12.5%.

Types of Income / Exemption Limit

• Profits from the sale of securities (1): Full exemption
• Dividends (2): Full exemption
• Interest not arising from or closely related to the ordinary activities of the company (3): Full exemption (4)
• Profits from foreign permanent establishments, under certain conditions: Full exemption

Notes

1. Definition of securities: As per the taxation system for individuals.
2. Dividend income may be subject to a special defense contribution.
3. Any interest income from a collective investment scheme is considered as arising from or closely related to the ordinary activities of the scheme.
4. Interest income is subject to a special defense contribution.

Corporate Tax Deductions on Costs

Generally, expenses incurred exclusively for generating taxable income and properly documented are deductible under corporate income tax. These include:

• Interest expenses incurred for the direct or indirect acquisition of 100% of the share capital of a subsidiary are deductible, provided that the subsidiary does not own (directly or indirectly) assets not used in the business. If the subsidiary owns (directly or indirectly) non-business assets, the deduction is limited to the portion related to the assets used in the business. This applies to acquisitions of subsidiaries after January 1, 2012.
  Deduction limit: Full interest cost if the subsidiary does not own non-business assets, otherwise limited.
• 80% of the net income from the licensing of intangible assets, as well as 80% of the net profit from the disposal of intangible assets (1,2): 80% deduction.
• Donations to registered charities (with receipts): Full deduction.
• Employer contributions to social insurance and approved employee funds: Full deduction.
• Expenses for the maintenance of a listed building: Up to €1,200, €1,100, or €700 per square meter, depending on the building size.
• Entertainment expenses for business purposes: Up to €17,086 or 1% of gross business income, whichever is lower.

Notes

• The term “intangible assets” includes copyrights, patents, and trademarks.
• Additionally, any investment expenditure incurred for the acquisition or creation of such intangible assets may qualify for a deduction in the year incurred and the following four years using the straight-line method, excluding:
• Expenses related to private motor vehicles: No deduction.
• Interest related to the cost of acquiring private motor vehicles or other non-business assets: No deduction for 7 years from the date of acquisition.

Losses Carried Forward

Tax losses incurred during the tax year and not covered by other income may be carried forward and offset against profits for the following five years.

Current year losses of one company may be offset against the profits of another company if both companies are Cyprus tax residents and belong to the same group. A group is defined as:

• A situation where one company holds 75% of the voting shares of another company.
• A situation where 75% of the voting shares of both companies are held by a third company.

A partnership or sole trader transferring business to a company may transfer tax losses to the company for future use.

Losses from a foreign permanent establishment may be offset against the profits of a Cyprus company. Future profits from such a foreign permanent establishment will be taxed up to the amount of the allowable losses.

Company registration in Cyprus: Corporate Transformations

Transfers of assets and liabilities between companies can be executed without tax consequences as part of a reorganization, and tax losses may be carried forward by the receiving entity.

Transformations include:

• Mergers
• Divisions
• Spin-offs
• Transfer of assets
• Exchange of shares
• Transfer of the registered office of a European company (SE) or a European cooperative society (SCE)

Company registration in Cyprus: Depreciation Allowances for Tangible Fixed Assets

The following depreciation rates, expressed as a percentage of acquisition costs, are deductible from taxable income.

Equipment and Machinery:

• Equipment and machinery (1) – 10%
• Furniture and fittings – 10%
• Industrial carpets – 10%
• Drilling shafts – 10%
• Machinery and tools used in agricultural activities – 15%

Buildings:

• Commercial buildings – 3%
• Industrial, agricultural, and hotel buildings (2) – 4%
• Residential buildings – 3%
• Metal greenhouse structures – 10%
• Wooden greenhouse structures – 33 1/3%

Vehicles and Other Means of Transportation:

• Mechanical vehicles – 20%
• Motorcycles – 20%
• Excavators, tractors, bulldozers, self-propelled loaders, and rollers for oil companies – 25%
• Armored vehicles (e.g., used by security service providers) – 20%
• Specialized machinery for laying railway tracks (e.g., locomotives, ballast spreaders, container wagons, and sleeping wagons) – 20%
• New airplanes – 8%
• New helicopters – 8%
• Sailing vessels – 4.5%
• Motor yachts – 6%
• Steamships, tugs, and fishing boats – 6%
• Barges – 12.5%
• New cargo ships – 8%
• New passenger ships – 6%
• Used cargo/passenger ships – depreciated over their useful life.

Other:

• Televisions and video equipment – 10%
• Computer hardware and operating systems – 20%
• Computer software – 33 1/3%
• Software expenses under €1,709 – fully deductible in the year incurred.
• Wind energy generators – 10%
• Photovoltaic systems – 10%
• General tools – 33%
• Video tapes owned by video clubs – 50%

Company registration in Cyprus: Notes

• Accelerated tax depreciation at a rate of 20% is available for equipment and machinery acquired in the tax years 2012, 2013, and 2014 (excluding assets already eligible for a higher annual tax relief rate).
• Accelerated tax depreciation at a rate of 7% per year is available for industrial and hotel buildings acquired in the tax years 2012, 2013, and 2014.
• VAT is levied on the sale of goods and services available in Cyprus, as well as on the purchase of goods from the European Union and the importation of goods into Cyprus.

VAT for Companies in Cyprus

Companies in Cyprus subject to VAT include VAT in the prices of goods sold that are subject to VAT (output tax) and also account for VAT on goods and services received (input tax). If the output tax in a VAT reporting period exceeds the total input tax, payment is due to the state. If the input tax exceeds the output tax, the excess is carried forward and credited against future output tax.

Company registration in Cyprus: VAT Refunds

A company in Cyprus can obtain an immediate refund of excess input VAT in the following cases:

• A three-year period has passed since the VAT became refundable (reduced to two years from 1/1/2014, one year from 1/1/2015, and eight months from 1/1/2016).
• Input VAT that cannot be offset against output VAT by the end of the last VAT period of the year following the year in which the excess arose.
• Input VAT related to zero-rated transactions.
• Input VAT related to the purchase of the company’s fixed assets.
• Input VAT related to transactions outside the scope of VAT but which would be subject to VAT if conducted in Cyprus.
• Input VAT related to exempt insurance and financial services provided to non-EU residents (services eligible for the right to recover the related input VAT).

Company registration in Cyprus: Intra-Community Acquisition of Goods

For goods acquired within the EU (excluding goods subject to customs duties), the trader does not pay VAT upon receipt of the products in Cyprus but accounts for VAT using the acquisition method. This involves simply recording in the business accounts that VAT has been self-charged and simultaneously recovered if the goods are related to activities where the right to recover input VAT is granted, creating no cost to the business.

If the acquisition is related to a transaction where there is no right to recover input VAT, the trader must pay VAT corresponding to the acquisition.

Cyprus and EU VAT Changes

Since January 1, 2010, significant changes in Cyprus and EU VAT legislation have occurred in the following areas:

• Changes in the place of taxation for services provided between two businesses (B2B) located in different EU member states.
• Changes in the place of taxation for services provided to consumers (B2C).
• Changes to the deadline for when the recipient must pay VAT on services received.
• VAT refund procedure for VAT paid in another EU member state.
• Additional compliance obligations for electronically filing the monthly VIES declaration for VAT-taxable services in another EU member state through reverse charge provisions.

Cyprus VAT on Long-Term Leasing

From January 1, 2013, long-term leasing of means of transport to non-taxable persons (i.e., individuals or entities not engaged in business activities) is subject to VAT in the place where the customer resides or is permanently established.

However, if the lease relates to the rental of pleasure boats, the place of VAT taxation is where the pleasure boat is put at the customer’s disposal, provided the service is supplied from the provider’s business or fixed establishment located where the pleasure boat is made available to the customer.

Company registration in Cyprus: VAT Rates

Legislation provides for the following four VAT rates:

• Zero rate (0%)
• Reduced rate of 5%
• Reduced rate of 8% (until January 12, 2014) and 9% (from January 13, 2014)
• Standard rate of 15% (until February 29, 2012), 17% (from March 1, 2012, to January 13, 2013), 18% (from January 14, 2013, to January 12, 2013), and 19% (from January 13, 2013)

Exemptions

Certain goods or services are exempt from VAT, including:

• Rental of real estate (renting real estate with an option to buy is not exempt).
• Most banking, financial, and insurance services.
• Most hospital, medical, and dental services.
• Certain cultural, educational, and social activities.
• Sale of real estate (except for new buildings before their first use) including land and used buildings.
• Postal services provided by national postal authorities.
• Lottery tickets and betting coupons related to football and horse racing.
• Management services provided to collective investment funds.

Reduced VAT Rate on Purchase/Construction of Residence

A reduced VAT rate of 5% applies to the purchase and/or construction of a residence for use as a primary and permanent place of residence.

The reduced rate of 5% applies to contracts signed from January 1, 2011, if they relate to the purchase and/or construction of a residence that will be used as a primary and permanent place of residence for the next ten years.

Application for Reduced VAT Rate in Cyprus

For contracts signed up until September 30, 2011, for the purchase and/or construction of a residence to be used as a primary and permanent place of residence, the individual eligible for the reduced rate must apply for permission. The reduced rate of 5% applies to the first 200 square meters of residences with a total area up to 275 square meters. For families with more than three children, the allowable total area increases by 15 square meters for each child beyond three.

The reduced rate is applied only after obtaining a certified confirmation from the VAT Commissioner.

The eligible person must submit an application on a special form, issued by the VAT Commissioner, stating that the residence will be used as the primary and permanent place of residence.

The applicant must attach documents proving ownership of the property and confirming that the residence will be used as the primary and permanent place of residence. The application must be submitted before the actual transfer of the residence to the eligible person.

Changes in Cyprus VAT Regulations

From June 8, 2012, eligible persons include residents of non-EU countries if the residence will be used as a primary and permanent place of residence in Cyprus.

Ownership documents must be submitted with the application. Documents confirming that the residence will be used as the primary and permanent place of residence (e.g., copies of telephone, water, or electricity bills or local tax receipts) must be submitted within six months from the date the eligible person takes possession of the residence.

Obligations Upon Change of Use of Residence

A person who ceases to use the residence as their primary and permanent place of residence must notify the VAT Commissioner within thirty days of cessation if it occurs before the end of the ten-year period. They must pay the difference between the reduced and standard VAT rates applicable for the remaining part of the ten-year period during which the residence is not used as the main residence.

Penalties for False Statements

Persons who make false statements to benefit from the reduced VAT rate are required to pay the difference. Additionally, under the legislation, such persons are guilty of an offense and may be fined up to twice the value of the VAT due and/or sentenced to imprisonment for up to three years.

Company registration in Cyprus: Grant for First Residence Acquisition

A grant is provided to eligible individuals for the construction, purchase, or transfer of a new residence that will be used as the primary place of residence. This grant applies to contracts signed up until September 30, 2011.

The grant application is submitted to the Ministry of Finance, applicable to residences for which a planning permission application was submitted after May 1, 2004. Eligible persons for this grant are individuals who are citizens of Cyprus or another EU member state, who permanently reside in Cyprus, and who are at least 18 years old at the time of application.

The grant is awarded for residences with a total area not exceeding 250 square meters.

The amount of the grant is limited to 130 square meters (increased for families with four or more children) and depends on the type of property and whether the house was built or purchased. The relevant regulation states that the grant amount will be adjusted annually in line with the increase in the retail price index.

Company registration in Cyprus: Difference Between Zero-Rated and VAT-Exempt Goods

The difference between zero-rated and VAT-exempt goods is that businesses producing VAT-exempt goods are not entitled to a refund of VAT charged on their purchases, expenses, and imports.

Company registration in Cyprus: Non-Refundable Input VAT

As an exception to the normal rules, input VAT is non-refundable in the following cases:

• Goods acquired for the production of VAT-exempt goods.
• Purchase, import, or rental of passenger cars.
• Costs related to entertainment and guest accommodation (except those related to employees and directors).
• Accommodation costs for directors.

Company registration in Cyprus: VAT Registration for Companies in Cyprus

Registration is mandatory for businesses with taxable VAT turnover exceeding €15,600 in the previous 12 months or with expected taxable VAT turnover exceeding €15,600 in the next 30 days.

Businesses with turnover below €15,600 or with supplies outside the scope of VAT but eligible for a refund of related input VAT may register voluntarily.

Company registration in Cyprus: Obligation to Register for VAT in Cyprus

Companies in Cyprus are also required to register if they acquire goods from other EU member states with a value exceeding €10,251.61 in any calendar year. Additionally, from January 1, 2010, businesses engaged in the intra-community supply of services where the recipient is liable to VAT under the reverse charge mechanism are required to register.

Businesses engaged in economic activity receiving foreign services subject to Cypriot VAT under the reverse charge mechanism must register if they meet the €15,600 registration threshold for any consecutive 12-month period. There is no registration threshold for the supply of intra-community services.

Products and services that are VAT-exempt, as well as the disposal of items of an investment nature, are not considered when determining the annual turnover for registration purposes. Registration is completed by filling out the appropriate form.

Company registration in Cyprus: Trusts

A trust can be defined as an obligation imposed on a person (the trustee) to whom ownership of property is transferred by the owner and trust creator (the settlor) to manage that property for a specified period according to the wishes of the settlor, expressed orally or in writing in the trust deed or will, for the benefit of a specified person, persons, or class of persons (the beneficiaries). A trust is not a separate legal entity.

Cyprus law defines an international trust as a trust where:

• The settlor was not a tax resident of Cyprus during the calendar year preceding the year of establishment of the trust.
• At least one of the trustees is, from time to time, a tax resident of Cyprus during the duration of the trust.
• None of the beneficiaries is a tax resident of Cyprus during the calendar year preceding the year of establishment of the trust.

According to the law:

• If the beneficiary resides in Cyprus, the income and profits of the Cyprus international trust are considered to be earned from sources both within and outside Cyprus and are subject to any form of taxation imposed in Cyprus.
• If the beneficiary is not a resident of Cyprus, the income and profits of the Cyprus international trust, which are earned or deemed to be earned from sources within Cyprus, are subject to any form of taxation imposed in Cyprus.

Transfer Fees Charged by the Department of Lands and Surveys

The Department of Lands and Surveys imposes the following transfer fees on individuals to whom real estate is transferred:

Company registration in Cyprus: Fiduciary Acquisition of Real Estate

To stimulate the real estate market, purchase-sale contracts signed between December 2, 2011, and December 31, 2016, which are subject to VAT, are exempt from the above transfer fees. Those not subject to VAT are entitled to a 50% reduction in transfer fees, subject to certain conditions.

For property transferred from a company whose shareholders are spouses and/or their children to one of the spouses, their children, or a relative up to the third degree of kinship, the following transfer fees apply based on the value of the property:

• If transferred to a spouse – 8%
• If transferred to a child – 4%
• If transferred to a relative – 8%

Additionally, the following rates apply to gratuitous transfers:

• Between parents and children – 0.2%
• Between spouses – 0.4%
• Between relatives up to the third degree of kinship – 0.4%
• Between trustees – 50 Euro

The value in these cases refers to the value as of January 1, 1980. Mortgage registration fees are 1% of the current market value. In the case of company reorganizations, property transfers are exempt from transfer fees and mortgage registration fees.

Company registration in Cyprus: Social Insurance Contributions

Employer: 7.8%
Employee: 7.8%

The social insurance contribution rate is applied to a maximum level of earnings. The maximum earnings level for 2014 and 2013 is €54,396 (weekly €1,046 / monthly €4,533). The rate for 2014 is 7.8% for both the employer and the employee. The rate for 2013 was 6.8% for both the employer and the employee.

Company registration in Cyprus: Other Employer Contributions

The employer pays the following rates based on the employee’s salary:

• Social Cohesion Fund: 2.0%*
• Redundancy Fund: 1.2%**
• Industrial Training Fund: 0.5%**
• Holiday Fund (if not exempt): 8.0%**

* The contribution to the Social Cohesion Fund is levied on the total salary and has no maximum limit.
** These contributions are capped at the same maximum earnings level as social insurance contributions.

Self-Employed Contributions

The contribution rate for self-employed individuals is 14.6% of income (12.6% in 2013). The amount of contributions is subject to minimum and maximum limits, depending on the profession or trade of the self-employed person. These limits are set annually.

Company registration in Cyprus: Stamp Duty

The following table presents the amount or rate of stamp duty imposed on certain actions, such as issuing specific documents. Transactions that are part of company reorganizations are exempt from stamp duty. Additionally, documents related to assets outside Cyprus or business matters occurring outside Cyprus are also exempt from stamp duty.

*Maximum stamp duty of 20,000 euros from March 2013.

Company registration in Cyprus: Capital Duty (for Establishing a Company in Cyprus)

• Authorized share capital: 102.52 euros plus 0.6% of the authorized share capital.
• Issued share capital: No capital duty if shares are issued at par value. A flat fee of 17.09 euros if shares are issued at a premium.

Company registration in Cyprus: Increase of Share Capital

• Authorized share capital: 0.6% on the additional share capital.
• Issued share capital: Flat fee of 17.09 euros for each issue, whether shares are issued at par value or at a premium.

Company registration in Cyprus: Double Taxation Avoidance

The following tables provide a summary of withholding taxes under double taxation treaties concluded by Cyprus. Note that under Cypriot domestic legislation, there is no withholding tax on dividends and interest paid to non-residents, so the treaty rates below do not apply.

Note: In Cypriot legislation, there is no withholding tax on dividends and interest paid to non-residents, so the rates under double taxation treaties apply only where Cypriot domestic law does not already exempt such payments. Specific notes detail exceptions and conditions based on the treaty.

Company registration in Cyprus: Example Tax Calendar for 2014

• End of Each Month:
• Payment of PAYE tax deducted from employees’ salaries in the previous month.
• Payment of special defense contribution withheld on dividends, interest, or rent (if the tenant is a company, partnership, state, or local authority) paid to Cyprus tax residents in the previous month.
• Payment of tax withheld on payments to non-residents in the previous month.
• January 31: Submission of deemed dividend distribution return (IR623) for the year ending December 31, 2011.
• March 31: Electronic submission of the 2012 corporate income tax return (IR4) for the accounting period ending December 31, 2012.
• April 30: Payment of the first installment of the premium tax for life insurance companies for 2014.
• June 30: Payment of special defense contribution for the first six months of 2014 on rents, dividends, or interest from abroad.
• July 31:
• Electronic submission of the employer’s payroll return for 2013 (Form IR7).
• Submission of provisional tax return for 2014 and payment of the first installment.
• Electronic submission of the 2013 personal income tax return for individuals not engaged in trade/business, rental income, dividends, interest, royalties, or brand-related income.
• August 1: Payment of the final installment of 2013 corporate income tax using the self-assessment method.
• August 31: Payment of the second installment of the premium tax for life insurance companies for 2014.
• September 30: Submission of the 2013 personal income tax return for individuals not required to prepare audited financial statements but engaged in trade/business, rental income, dividends, interest, royalties, or brand-related income, and payment of tax using the self-assessment method. Payment of the 2014 immovable property tax.
• December 31:
• Payment of the second and final installment of provisional tax for 2014.
• Payment of special defense contribution for the last six months of 2014 on rents, dividends, or interest from abroad.
• Payment of the third and final installment of the premium tax for life insurance companies for 2014.

Company registration in Cyprus: Interest and Penalties

The official interest rate, set by the Minister of Finance, is 4.50% per annum for all amounts due after January 1, 2014 (4.75% for 2013, 5% for 2012 and 2011, 5.35% for 2010, 8% for 2007-2009, and 9% until December 31, 2006).

In addition to interest, penalties may also be imposed depending on the circumstances.

Company registration in Cyprus: Legal and Tax Services

Global and Local Compliance Services: Indirect and direct tax services, legal services for business.

Global Compliance Services: Private client services, advice on setting

up and administering local businesses, collective investment schemes, UCITS, investment firms, and trusts.

Direct Taxes:

• For Corporations: Tax planning, international tax structuring, mergers and acquisitions, other business matters, tax return administration, tax authority compliance, and obtaining tax rulings.
• For Individuals: Tax planning, tax return preparation and submission, tax services for expatriates, retirees, and other non-resident individuals.

Indirect Taxes:

• VAT: Advisory services, VAT recovery, VAT minimization, and tax compliance (VAT return administration, tax authority communication, and dispute resolution).

Local Compliance Services (LCS): Tailored services for all types of enterprises operating locally, including private and public companies, governmental and semi-governmental organizations, foundations, and personal and family ventures. Services cover a wide range of accounting, tax, VAT compliance, financial structuring, and corporate compliance services.