Cyprus, located at the crossroads of Europe, Asia, and Africa, is renowned for its robust business infrastructure and investment-friendly environment.
As an established member of the European Union, Cyprus boasts a unique blend of Western business practices and Eastern European entrepreneurial spirit. Its strategic location, coupled with a diverse and skilled workforce, makes it an appealing destination for entrepreneurs worldwide. Furthermore, its modern legal and regulatory framework, rooted in English common law, ensures transparency and reliability for investors. Cyprus has meticulously carved a niche for itself as a reputable international business center, enhancing its desirability for company formations and international trade.
| Country | Cyprus |
| Language | Greek (80.9%) Turkish (0.2%) English (4.1%) Russian (2.9%) Other (11.9%) |
| Time in Cyprus | GMT+2 (GMT+3 during daylight saving time) |
| Population | Approximately 1.21 million (source: World Bank, 2021) |
| Currency | € (EUR) |
| Religion | Orthodox Christianity (main religion) |
| Tax regime | 12.5% |
| VAT | 19% (Standard rate) |
| Average salary | €1,800 (source: Numbeo, 2021) |
| Types of incorporations | Private Limited Company (Ltd) Public Limited Company (PLC) Partnerships (General and Limited) Branch of a Foreign Company International Business Company (IBC) Variable Capital Investment Company (VCIC) Non-Governmental Organization (NGO)/Non-Profit Organization Trust Sole Proprietorship |
Opening a company in Cyprus offers unparalleled advantages, especially for those looking to capitalize on tax benefits and a strategic location. Cyprus’s fiscal policies are entrepreneur-friendly, particularly suitable for businesses that engage in international trade, shipping, and financial services. Moreover, the local government provides incentives for startups, ensuring that new ventures get a head start in the competitive market.
Cyprus is often the preferred choice for international business because of its myriad advantages:
| Advantages | Details |
| Strategic Geographical Location | Being at the crossroads of Europe, Asia, and Africa, Cyprus offers an unrivaled advantage for businesses aiming to operate on an international scale. This positioning facilitates smoother trade relations with countries across these continents, especially for import/export businesses. |
| Strong Banking and Financial Infrastructure | Cyprus has a solid banking sector equipped with modern financial services and infrastructure, making financial transactions seamless for businesses. |
| Attractive Tax Regime | With one of the lowest corporate tax rates in the EU, Cyprus is a tax haven for businesses. The non-levy of withholding taxes on dividends, royalties, and interest payments to non-residents further amplifies its attractiveness for international operations. |
| Skilled Multilingual Workforce | Cyprus boasts a well-educated, skilled, and predominantly English-speaking workforce. The proficiency in multiple languages facilitates ease of business operations, especially for international companies. |
| Access to European Market | Being an EU member, companies in Cyprus can leverage the benefits of trading with the vast European market without facing tariffs or custom duties. |
| Investor-friendly Climate | Government incentives and support for startups and foreign investors. |
While Cyprus offers numerous benefits, there are certain considerations to keep in mind:
| Disadvantages | Details |
| Geopolitical Tensions | The unresolved political situation between the Greek and Turkish Cypriot communities could be a concern for potential investors, as it brings an element of uncertainty in the region. |
| Small Market Size | Given its small population, the internal market of Cyprus is limited. Companies focusing primarily on the local market might face growth constraints unless they plan to expand abroad. |
| Regulatory Changes | Due to its EU membership, Cyprus is bound to align its policies and regulations with EU directives. These frequent changes can sometimes be cumbersome for businesses to keep up with. |
| Dependence on Few Economic Sectors | The Cypriot economy heavily relies on sectors like tourism, real estate, and shipping. This dependence can be a double-edged sword, as downturns in these sectors might have pronounced impacts on the entire economy. |
Cyprus is particularly popular for businesses in the sectors of shipping, financial services, tourism, and real estate. Its strategic location, combined with favorable maritime laws, makes it one of the top destinations for global shipping companies. Additionally, its robust banking sector and transparent financial regulations attract international financial institutions and investors.
Cyprus has designed its fiscal system to be competitive yet compliant with international standards. With double taxation treaties with over 60 countries, it ensures that businesses operating in Cyprus do not face taxation in two jurisdictions for the same income.
Cyprus’s tax system is one of its most attractive features for businesses and investors. The corporate tax rate is one of the lowest in the European Union at 12.5%. Additionally, Cyprus does not levy withholding tax on dividend distributions, interest, and royalty payments made to non-resident individuals or companies. This makes the country highly favorable for holding companies, trading companies, and royalty companies. Furthermore, Cyprus offers a range of deductions on expenses incurred wholly and exclusively for the production of taxable income. This includes interest, royalties, and other relevant business expenses. The country also has an Intellectual Property (IP) tax regime that provides for an 80% tax exemption on net profit earned from the exploitation of IP. This regime is compliant with the ‘nexus’ approach of the OECD.
Cyprus implements the European Union’s VAT directives. The standard VAT rate is 19%, with reduced rates of 9%, 5%, and 0% applying to certain goods and services. Registration for VAT is mandatory for businesses with taxable supplies exceeding €15,600 in a calendar year.
Yes, Cyprus has Controlled Foreign Company (CFC) rules in place. They are designed to prevent Cypriot tax residents from shifting large amounts of profits to subsidiaries in low-tax jurisdictions. The CFC rules come into play if a Cypriot tax resident has a direct or indirect participation of more than 50% in a foreign entity, and the foreign entity pays taxes at a rate lower than 6.25% in its country of residence.
There is no mandatory requirement for a Cyprus company to have a local director. However, having a local director can help in establishing tax residency in Cyprus.
While it’s common to have a local secretary for administrative convenience, it’s not a legal requirement in Cyprus.
All companies in Cyprus are required to file an annual return. This provides details of the company’s officers, registered office, shareholders, and share capital. It is submitted to the Registrar of Companies and is publicly accessible.
Companies in Cyprus must have their accounts audited annually. These audited accounts should be prepared following the International Financial Reporting Standards and must be filed with the Cyprus Tax Department and the Registrar of Companies.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| Private Limited Company | Limited (Ltd) Limited Liability Company (LLC) |
No minimum requirement | Corporate tax: 12.5% on net profits |
A Private Limited Company (Ltd) in Cyprus is the most common form of business entity, ideal for both local and international business investors. This type of company is particularly appealing for small to medium-sized businesses, startups, and family businesses due to its features of limited liability and flexibility in terms of management and operations. Entrepreneurs, startups, and small to medium-sized businesses typically choose this form of incorporation due to its ease of setup, limited liability protection for shareholders, and operational flexibility. It is also a preferred choice for foreign investors seeking to establish a presence in Cyprus, given the country’s strategic location, robust legal system, and favorable tax regime.
The primary reason for choosing a Private Limited Company is the limited liability protection it offers. Shareholders are only liable to the extent of their share capital, protecting personal assets. Additionally, the corporate tax rate in Cyprus is one of the lowest in the EU, standing at 12.5%, which is particularly attractive for businesses. Confidentiality, ease of control, and succession planning are additional benefits, as shares can be easily transferred or bequeathed. Furthermore, Cyprus Ltd companies are reputable and recognized entities across the European Union, facilitating trade and business operations within the EU market.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| Public Limited Company | Public Limited Company (Plc) | €25,629 | Corporate tax: 12.5% on net profits |
A Public Limited Company (Plc) in Cyprus is designed for businesses that intend to list their shares on a stock exchange and have them publicly traded. It is suitable for larger enterprises and those that seek to raise capital from the public. This form of company is typically chosen by larger corporations or those planning to go public. It is suitable for businesses that require a more substantial capital investment, those that intend to have more than 50 shareholders, or those that aim to enhance their visibility and credibility in the market by being publicly listed.
One of the primary reasons for opting for a Public Limited Company is the ability to raise capital through public funding by listing the company on a stock exchange. This enhances the company’s ability to invest, expand, and develop various projects. A Plc has a separate legal identity, offering limited liability protection, which means shareholders are protected from the company’s debts. Like the Ltd, a Plc enjoys a 12.5% corporate tax rate on net profits, one of the lowest within the EU. Additionally, being a publicly listed company increases the business’s visibility, enhances its corporate image, and may provide greater negotiating power with suppliers and customers.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| General Partnership | N/A | No minimum requirement | Profits taxed as personal income |
| Limited Partnership | N/A | No minimum requirement | Profits taxed as personal income |
Partnerships in Cyprus are categorized into General Partnerships and Limited Partnerships. Both types are suitable for professionals who wish to engage in a joint business venture, and are often utilized by individuals in similar professions, such as lawyers, accountants, and consultants.
General Partnerships are formed by two or more persons and do not have a separate legal entity from the partners. Each partner is jointly and severally liable for the debts of the partnership to an unlimited extent. This type of partnership is relatively easy and cost-effective to set up and operate, making it an attractive option for local small businesses and professionals. However, the liability aspect can be a deterrent for some.
On the other hand, Limited Partnerships consist of one or more general partners with unlimited liability and one or more limited partners whose liability is limited to the amount of their contribution to the partnership. Limited Partnerships are often used for investment purposes, where the general partner manages the business and the limited partners act as silent investors.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| Branch of a Foreign Company | N/A | N/A (Dependent on parent company) | Corporate tax: 12.5% on net profits derived from Cyprus |
A Branch of a Foreign Company is not a separate legal entity but an extension of the foreign parent company. It is suitable for foreign companies that wish to establish a presence in Cyprus without incorporating a separate legal entity. The process for registering a branch in Cyprus is straightforward, requiring the foreign company to register with the Cyprus Companies Register and appoint a local representative.
Branches are typically utilized by large international corporations seeking to expand their operations into Cyprus for various strategic reasons, such as tapping into the Cypriot market, leveraging the country’s favorable tax system, or using the branch as a regional base for operations in the Middle East, Europe, or Africa.
The main advantage of establishing a Branch is that it is subject to the same corporate tax rate of 12.5% on net profits derived from Cyprus, one of the lowest in the EU. However, unlike Cypriot companies, a Branch is only taxed on income sourced in Cyprus. Additionally, depending on the tax laws of the parent company’s home country, it might be possible to offset profits and losses in the Cyprus branch against the profits of the parent company.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| International Business Company | IBC | No minimum requirement | Corporate tax: 12.5% on net profits |
International Business Companies (IBCs) in Cyprus are entities that conduct their business operations outside of Cyprus, though they are incorporated and managed within Cyprus. They are established by non-residents and foreigners, often used for international or regional trade, investment activities, and as holding companies. The IBC model is suitable for business owners and investors seeking confidentiality, a favorable tax regime, and an efficient corporate structure for international operations.
IBCs are subject to a corporate tax rate of 12.5% on their net profits, one of the lowest within the European Union, and they are exempted from dividend withholding tax. The low tax rate, combined with a wide network of double taxation treaties, makes IBCs an attractive vehicle for international tax planning and investment. Moreover, IBCs benefit from the absence of exchange control regulations, allowing free movement of funds.
Another significant advantage is the confidentiality provided by Cypriot law regarding the identity of the ultimate beneficial owners, directors, and shareholders, which is protected and not disclosed to any third parties, with limited exceptions mainly concerning criminal investigations.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| Variable Capital Investment Company | VCIC | €125,000 | Corporate tax: 12.5% on net profits; Exemption on dividend income and profits from the sale of securities |
Variable Capital Investment Companies (VCICs) in Cyprus are flexible investment vehicles aimed at professional and well-informed investors. They operate under the regulatory framework provided by the Cyprus Securities and Exchange Commission (CySEC) and are typically used for collective investment schemes, including mutual funds or hedge funds.
VCICs are required to have a minimum share capital of €125,000, which can be increased or decreased based on the company’s investment activities and needs, providing significant operational flexibility. This type of company is ideal for fund managers, professional investors, and high-net-worth individuals who require a regulated vehicle for pooled investments.
The main tax advantage of a VCIC is the exemption on income received in the form of dividends and profits generated from the sale of securities, regardless of their origin. Furthermore, no withholding tax is applied to dividend payments made to non-residents of Cyprus, both corporate entities and individuals. Also, there are no taxes on the net asset value of the investment.
VCICs also benefit from the wide network of double taxation treaties Cyprus has established with numerous countries, providing significant opportunities for efficient international tax planning and structuring. The regulatory framework for VCICs in Cyprus is in full compliance with EU directives, ensuring high standards of operation, transparency, and investor protection.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| NGO/Non-Profit | N/A | No minimum requirement | Generally exempt from tax |
Non-Governmental Organizations (NGOs) or Non-Profit Organizations in Cyprus are typically established for the promotion of social welfare, education, charity, art, religion, culture, sports, or environmental protection. These entities do not operate to make a profit, and any surplus funds are reinvested into the organization’s activities.
NGOs/Non-Profits are generally exempt from corporate tax, as their operations are not carried out for the purpose of generating profits. However, they are required to keep proper accounting records and may be subject to an audit depending on the level of revenue or funding they receive. They might also qualify for various grants and funding from both the government and international bodies, especially if their activities align with broader social, educational, or environmental goals.
Establishing an NGO/Non-Profit is a suitable option for groups whose primary aim is social work or community service, and not profit-making. These organizations often enjoy a good reputation and credibility, which can be advantageous in fundraising and mobilizing community support.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| Trust | N/A | N/A | Subject to certain tax exemptions |
Trusts in Cyprus are established under the Cyprus International Trusts Law and are an effective vehicle for asset protection, estate planning, and investment. A trust is a legal arrangement whereby a person (the settlor) transfers assets to another person or entity (the trustee) to hold and manage for the benefit of specified persons or entities (the beneficiaries).
One of the key advantages of Cypriot trusts is the high level of confidentiality they offer, as there is no requirement to register the trust or disclose the beneficial owners. Moreover, Cyprus International Trusts enjoy significant tax advantages, including exemption from income tax, capital gains tax, and estate duty or inheritance tax in Cyprus.
Trusts are commonly used by high-net-worth individuals for wealth and estate planning, by families seeking to establish a legacy for future generations, and by individuals who require an efficient asset protection mechanism. They are also used for charitable purposes.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| Sole Proprietorship | N/A | No minimum requirement | Income tax on business profits |
A Sole Proprietorship in Cyprus is the simplest form of business structure, owned and operated by one individual, and there is no legal distinction between the owner and the business. It’s easy to set up and operate, with fewer formalities, administrative requirements, and lower costs compared to corporations or partnerships.
The owner of a Sole Proprietorship has unlimited liability, meaning that if the business incurs debts or is sued, the owner’s personal assets can be used to settle those obligations. All profits generated by a Sole Proprietorship are taxed as the personal income of the owner, and they are subject to Cyprus’s progressive income tax rates.
This type of business is ideal for freelance professionals, consultants, and small business operators who want to maintain full control of their business operations and keep administrative complexities to a minimum. However, the key drawback is the exposure to personal liability for the business’s debts and liabilities.
