REGISTRATION OF CYPRUS COMPANY – GENERAL OVERVIEW INTRODUCTION Cyprus is a European blossom, conveniently situated in the Mediterranean sea at the crossroads of Europe, Africa and Asia, 65 kilometers south of Turkey, 95 kilometers west of Syria and 385 kilometers north of Egypt. It is the third largest island in the Mediterranean after Sicily and Sardinia and has an area of 9,251 square kilometers and a population of about 800,000 people. For decades now, reputable businessmen and large groups of companies have been using Cyprus as a base for their international business activities. Cyprus can be said to be providing the nectar and is used as a hive through which the businessmen produce their refined honey with the very sweet aftertaste of low taxation. The Cyprus economy is based on the free enterprise system. The private sector is the backbone of economic activity, with the Government’s role being limited to monitoring the economy and the provision of public utilities. The per capita income of Cyprus is today one of the highest in the Mediterranean. The services sector has become increasingly important, as indicated by it’s almost 70% contribution to the GDP and its share in employment, while the importance of agriculture and manufacturing is declining steadily. Services include tourism, financial and legal services, wholesale and retail trade, hotels and restaurants, financial intermediation and real estate operations. The strategic location of the island, its excellent climate, the well-developed infrastructure and the plentiful supply of a high quality, well-trained labour force are just a few of the advantages that Cyprus has to offer. In addition to these, the favourable tax regime makes Cyprus an ideal location for manufacturers, especially those with Middle East/North African export activities. The official government policy is welcoming to foreign investment, provided that this does not have adverse environmental effects. The main body of the law in Cyprus which regulates Cyprus Companies, the Companies Law, Cap 113, has been in force since 1952 and it was an exact copy of the Companies Act 1948 of the UK. Recently, it has been amended to incorporate European Union directives. This guide is aimed at providing general information to those interested in the establishment of a company here in Cyprus, those who wish to start up a new business located in the jurisdiction of Cyprus or those who simply wish to expand their knowledge and gain general information as to the specific requirements and procedures under the Cyprus laws. In the main this publication deals with limited companies, unless otherwise specified herein.
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REGISTRATION OF A CYPRUS COMPANY Cyprus is becoming a very popular choice for businesses to open International Business Companies or IBCs (formerly known as 'Cyprus offshore companies') due to its generous tax incentives. Most companies in Cyprus are limited companies, thereby meaning that the members of the company, the shareholders, are not liable for its debts beyond the amount which they have paid (or should have paid) for their shares in the company. The protection that limited liability offers to those carrying on business through a company is of great importance, both in theory and in practice. The key feature of a company is that it is a separate legal entity from its members; it has a separate legal personality. Every company must have a memorandum and articles of association; these are the company’s ‘rule book’. Cyprus joined the European Union in May 2004 and this, combined with its strategic location at the crossroads with Europe, the Middle East, Africa and Asia, has made it a perfect location for IBCs. Its double-taxation treaties are particularly beneficial and the further advantages of Cyprus as an offshore jurisdiction include: tax benefits - only 10% tax rate for companies. Cyprus has the lowest tax regime in Europe. Cyprus also has one of the lowest VAT rates in Europe - 15% confidentiality - the shares can be held by nominees so that your anonymity is safeguarded low administration costs - low-cost employees, rents, etc. in comparison to other European countries excellent infrastructure, with professional accounting, legal (primarily based on English law) and banking services of a very high standard as well as a very advanced telecommunications network. Cyprus has two airports, in Larnaca and Paphos, providing frequent flights to many destinations, serving a number of international routes. fabulous climate with 340 days of sunshine per year, with long, hot summers and short, mild winters high standard of living with excellent, relatively cheap health care and spacious housing, a beautiful landscape, combining the sea and the mountains
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CHANGES IN LEGISLATION As of 31 August 2011, the Cyprus Government has a m e n d e d t h e C yp r u s C o m p a n i es La w w h e r e b y a l l r e gi s t e r e d C yp r u s c o m p a n i e s wi l l n o w be o b l i ge d t o p a y a n a n n u a l f e e o f €350.00, payable as follows: a) All Cyprus companies registered before 2011 must pay the fee for the year 2011 by 31 December 2011 at the latest. b) For each year thereafter, companies must pay the aforesaid fee by 30 June at the latest each year. In the case of companies that belong to a group of companies, the amount of fees payable shall not exceed the sum of €20,000.00 for the group as a whole, which shall be apportioned to each of them equally. Companies without any assets and which have no activities (dormant companies) are not subject to the fee, at the Companies Registrar’s discretion. Penalties will be payable for any delay in payment as follows: * If the fee is paid within two months from the due date, a 10% additional charge will be imposed. * If the payment is delayed for five months from the due date, then the additional charge will increase to 30%. * If the fee remains unpaid even after five months, the Registrar of Companies will strike the company off the Register of Companies. The Company may be restored to the Register of Companies within two years of the date when it is struck off from the Register by paying the fee of €500.00 and thereafter, by paying a fee of €750.00. REGISTRATION REQUIREMENTS Name of the company First of all, the client has to suggest two or three alternative names, which will then be submitted to the Registrar of Companies for approval. If the company name that is about to be formed already belongs to a group of companies operating abroad under a similar name, then a letter of Registration of a Cyprus Company – General Overview Georgiades & Mylonas – Advocates & Legal Consultants
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consent from those companies is required. Alternatively, our company has a list of already approved names, one of which can be chosen. Objects of the company The main activities of the company must be provided so that the Memorandum and Articles of Association can be drawn up for submission. The objects of the company can be of any nature. Share Capital It is recommended that the authorized and issued share capital of a newly formed company is at least 10,000 shares comprising 1 euro each. No payment needs to be made for the shares. CAPITAL REQUIREMENT OF THE CYPRUS COMPANY There is no minimum capital requirement. The money for the company’s share capital does not have to be paid in a bank account of the company. In case the fees that are paid for the registration and set-up of the company exceed the share capital amount, this automatically means that the share capital has been paid. SHAREHOLDERS Generally, companies have members and officers, the members are the people who own shares in the company whereas the officers are the directors and the secretary. Every company should have at least one shareholder. If the beneficial owners require complete anonymity, then our own nominee companies can be used to hold the shares in trust without the names of the beneficial shareholders being disclosed publicly. If the beneficial shareholders do not require anonymity, then the shares may be registered directly in their names. When a company is formed, the memorandum of the company will lay down the maximum authorised capital, this is divided into shares of a given value, in the vast majority of cases this will be 1 euro. The company does not have to issue the whole of the authorised share capital. DIRECTORS The officers of the company are the directors (and the secretary).The directors are appointed by Registration of a Cyprus Company – General Overview Georgiades & Mylonas – Advocates & Legal Consultants
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the members. The directors have the power to manage the business of the company, but this power is subject to any constraints contained in the memorandum and articles and to any directions given to them by the members by way of a special resolution. In the case of IBCs, it is important, both from a tax point of view and for administrative purposes, that the management and control of the company are exercised within the jurisdiction. The directors owe what is called in law as fiduciary duties to the company, thee duties can be ultimately broken down into the duty to act in good faith in what the directors consider to be in the interests of the company and not for any collateral purpose and a duty not to allow his own interests to conflict with his duties to the company. Our office is able to provide local nominee directors. These directors will be able to conduct the functions through guidance from the beneficial owners, thus ensuring the smooth and timely operation of the company. Under the Cyprus company law there is a minimum requirement of one director who can be of any nationality and residence and can be a physical person or a corporate entity. BANK REFERENCE A bank reference is required for each beneficial owner/shareholder/director. DISCLOSURE OF BENEFICIAL OWNERSHIP There is no requirement to disclose the beneficial ownership to any government authority. It has to be disclosed, in confidence, to banks if a bank account is opened in Cyprus. SECRETARY Company Law requires that every company has a company secretary. Our office can provide this service through a nominee secretary, provided by one of our nominee companies. Please note that this is a secretary in name only. It is merely a post held and does not involve the provision of any actual secretarial services, though we can provide secretarial services upon request, if required. REGISTERED OFFICE Another legal requirement is that a company has a registered office, without implying that this entails the opening of an administrative office. Our own office address may be used as such. The registered office and post of secretary need to be provided by a Cypriot resident for tax residency purposes so that the new company will be considered as being resident in Cyprus and will Registration of a Cyprus Company – General Overview Georgiades & Mylonas – Advocates & Legal Consultants
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therefore benefit from the favourable tax regime in Cyprus. REGISTRATION PERIOD The period needed to register a company is approximately 7-10 days. A shelf company may be used more or less immediately, subject to all of the necessary documents being promptly received by us. RESTRICTIONS UPON ACTIVITIES Special permission is required for some types of services, including banking, insurance and financial services. BEARER SHARES Bearer shares are not permitted in a Cyprus company under the Companies legislation. NON RESIDENT CYPRUS COMPANIES Non-Cyprus resident shareholders of a Cyprus company are not subject to any tax on dividend distributions by Cyprus IBCs. Resident shareholders are subject to an additional tax on dividends of 15% DOUBLE TAX TREATIES Cyprus has tax treaties with many countries, including the main Western European and North American countries and almost all Eastern European countries. The combination of low or no taxation with the benefits provided by its treaties with many countries makes Cyprus a highly desirable location for international tax planning. ANNUAL FINANCIAL REPORTING & ACCOUNTING REQUIREMENTS Every company is under a legal duty to keep accounting records which should be sufficient to show the company’s transactions and disclose the financial position of the company. The accounts must identify all income and expenditure and provide a record of the assets and liabilities of the company. A company must have an accounting reference date, effectively its year end date, to which its annual accounts are made up. Annual Financial Statements are required to be prepared and presented to members. A copy is filed with the Registrar of Companies, together with the Annual Returns. Registration of a Cyprus Company – General Overview Georgiades & Mylonas – Advocates & Legal Consultants
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COMPANY RECORDS The company law requires a company to keep certain records, usually these records are kept at the registered office of the company. The records which are required to be kept include inter alia, the following; register of members register of directors register of directors interests in shares in the company register of company secretary register of charges minutes of company meetings records of any and all notices lodged with the registrar of companies FORMING A NEW COMPANY In order to commence the process of incorporating a new company we require, inter alia, the following; the type of business to be carried out by the company the names and certain basis information about the officers and members of the company (Individuals - true copies of passports, original utility bills evidencing residential address, bank reference letters, due diligence questionnaire & Companies: full true copy set of corporate documents, full due diligence for individuals involved in such companies) the proposed registered office the proposed auditors an over view of the structure REGISTRATION PACKAGE Upon completion of the registration of an International Business Company, we provide our clients with a package that includes the following documentation: Certificate of Incorporation (English and Greek) Certificate of Directors and Secretary Certificate of Shareholders Certificate of Registered Address Memorandum and Articles of Association Trust deeds, if applicable Registration of a Cyprus Company – General Overview Georgiades & Mylonas – Advocates & Legal Consultants
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Instruments of transfer Undated letter of resignation for directors Minutes of the company's first meeting of the board of directors
CYPRUS HOLDING COMPANY A Cyprus Holding Company is a company that holds shares in other companies. It usually refers to a company which does not produce goods or services itself, rather its only purpose is owning shares of other companies. Holding companies enable a reduction of risk for the owners and can allow the ownership and control of a number of different companies. Cyprus is increasingly becoming one of the most popular holding company jurisdictions in Europe. It has a multitude of tax advantages and due to the island's recent EU membership, this has made it extremely attractive to those wishing to establish a Holding Company. WHY USE THE CYPRUS COMPANY There are many reasons: Cyprus has the lowest rate of corporate tax in Europe - just 10% under certain conditions, dividends received by the Cyprus parent company from overseas subsidiaries are exempt from tax no withholding tax on dividends received from EU subsidiaries there is no capital gains tax on the profits from the sale of securities there is no tax on capital gains or income upon the liquidation of the Cyprus holding company there is no tax on the payment of dividends to shareholders of the Cyprus holding company who are resident outside Cyprus double tax treaties for the avoidance of double taxation with more than 40 countries there is no withholding tax on the distribution of profits Types of Holding Companies Holding companies can be divided up into 3 types: Asset Holding Company - this type of company actively looks for the purchase of shares that will be profitable in return and its sole aim is to increase profit on share values. Operational Trading Holding - These are generally formed when the main Holding company has expended and needs to outsource its work to sister companies.
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Management Holding Companies - This is a mixture of the two above named Holdings. Its aim is to manage the shares and assets of its sister companies. This type of Holding can provide loans and services to sister companies but has the advantage of being registered offshore and therefore has no taxation. Advantages of a Cyprus holding company An IBC has the following advantages as a Cyprus holding company; Holding investments in other companies or entities. Tax free income from dividends. No capital gains tax on disposal of capital assets. No tax on profits from trading shares. No tax on profits from a permanent establishment abroad. Tax free distributions by Cyprus Holding companies to their non resident shareholders. Lower withholding tax rates in other countries on remittances of income from dividends. Royalties or interest due to double taxation treaties between Cyprus and over 40 countries.
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OTHER SERVICES Apart from simply registering your company, our company can provide you with a full range of other services including: * Nominee services Provision of advice on international tax planning
Legal services Our highly qualified, dedicated team of legal associates and advisors can provide you with the following comprehensive business-oriented legal services in Cyprus, including: Company, trust and commercial law consultancy; Consultancy in relation to setting up the optimal international business group structure; Formation of companies, branches and trusts in Cyprus; Registration of patents and trademarks; Domiciliation, statutory compliance services and maintenance of statutory records; Drafting of contracts, ensuring successful execution of contracts and agreements, liaising with government departments; Legalisation and apostilling of documents; Liaising with the Tax Authorities and issuing of tax clearance certificates and Double Taxation Certificates; Representations of clients before the courts; Analysis of client’s business and preliminary advice on possible improvements on legal matters; Consultancy on investment opportunities and business proposals; Providing legal advice on property acquisitions in Cyprus; Establishment of trust companies; Corporate restructuring services; Insolvency services and many other legal services. Accounting services Our team of experienced and qualified professional accountant associates are able to provide a wide range of accounting and bookkeeping services, as required by our clients, such as: Registration of a Cyprus Company – General Overview Georgiades & Mylonas – Advocates & Legal Consultants
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Providing you with a Tax Identification Code Obtaining a VAT registration number for your company Book-keeping services based on records kept by the client; Consultancy with regard to the design and implementation of accounting systems; Computerisation of accounting records; Preparation of tailor-made periodic management accounting reports; Maintenance of VAT records, preparation and submission of VAT returns; Preparation of financial statements in accordance with International Financial Reporting Standards; Preparation of budgets and cash flow forecasts Auditing services They will ensure that all accounting records, reports and returns are prepared for our clients in a prompt and efficient manner, at a cost-effective and reasonable price for our clients. Banking services Via our associate bankers, we also provide a full range of banking services, including opening bank accounts, arranging online banking and a debit card for your company. Registration of trust companies We provide a comprehensive range of trustee services, including the establishment, ongoing trusteeship and administration of trusts in Cyprus. Trusts
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Trusts are commonly used for the following: for tax planning purposes; for asset protection purposes; for confidentiality; for the protection of minors' rights. The following requirements must be fulfilled in order for a Cyprus International Trust to be set up: The settlor must not be a resident of Cyprus Similarly, none of the beneficiaries may be a resident of Cyprus (except in the case of charitable institutions) The trust property must not include any immovable property in Cyprus At least one of the trustees should be a resident of Cyprus
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Our trust experts will be happy to discuss with you your particular circumstances and requirements and to provide you with more specific information on how an international trust in Cyprus could be of benefit to you, protecting your business and assets worldwide. International tax planning We continually monitor any changes in tax legislation so that we can advise our clients how to maximise the benefits deriving from any tax benefits in order keep their tax liability to an absolute minimum. In addition to our local tax expertise, our tax consultants are experts in International Tax Planning matters, including the benefits of utilising the Double Tax Treaty provisions.
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