Cyprus is a low tax jurisdiction, as opposed to an offshore one. As a result there are certain compliance requirements, such as the compulsory submission of audited annual financial statements and taxation, even though the tax regime is extremely favourable. On the other hand, being a white list jurisdiction with over 40 double tax treaties and excellent infrastructure, it offers a reputable and prestigious tax efficient base for your international business.
Cyprus at a Glance
- The third largest island in the Mediterranean
- An EU member state
- Political system: Presidential Republic
- Capital city: Nicosia
- Total area: 9,250 km²
- Population: 0.8 million
- Climate: Mediterranean, with mild, wet winters and hot, dry summers
- Currency: Euro
- Economic Sectors: Tourism, financial services, real estate, shipping, industry
- Official language: Greek. English is also widely spoken
- Over 9,000 years of history
Cyprus is one of the most favoured jurisdictions for international tax planning, offering invaluable tools to reduce or even eliminate the total tax burden of your corporate structure.
Cyprus tax resident companies enjoy the following tax advantages(*):
• One of the lowest tax regimes in Europe
• 12.5% corporation tax on net profits
• Dividend income received from abroad is tax exempt
• Profits earned from a permanent establishment abroad are tax exempt
• Profit from the disposal of shares and other securities is tax exempt
• Interest received not arising from ordinary activities is exempt from corporation tax
• Zero tax withheld on payment of dividends, interest and royalties to non-resident individuals or companies
• Tax losses can be carried forward for up to five years to be offset against future profits
• Losses from a company can be offset against profits of other companies in the same group during the same financial year
• Group reorganisations are possible without any tax implications.
• Over 40 double tax treaties
• Possibility to obtain a European VAT number for intra-European trading
Please note that non Cyprus tax resident companies are only subject to corporation tax on income derived from a permanent establishment or immovable property in Cyprus. However, they cannot profit from most of the above advantages.
Cyprus also offers a number of non tax related advantages such as:
• A prestigious low tax jurisdiction
• The possibility to combine a Cyprus company with companies based in offshore jurisdictions to optimize tax planning
• Confidentiality and anonymity of beneficial owners
• No exchange control restrictions
• Easy migration of legal entities into and out of Cyprus from and to other jurisdictions
• Excellent infrastructure, banking and legal systems
• Access to EU directives
• Work permits granted for staff of Cyprus companies with foreign shareholders
(*) Certain conditions might apply
The Cyprus Limited Liability Company
Cyprus Tax Residency
To qualify as a Cyprus Tax Resident the management and the control of a company has to be exercised from Cyprus. This means that the company should have a registered address in Cyprus, the majority of its directors must be Cyprus residents and most of their meetings should take place in Cyprus.
The first step is to complete some forms and send us the documents required to comply with our Due Diligence / Know Your Client requirements and the relevant anti-money laundering legislation (for example passport copies, utility bills and bank reference letters).
We will then submit the relevant documents to the Registrar of Companies which is the governmental body responsible for company formations and for maintaining their records. If the name of the company is pre-approved the process will take between 5 to 6 working days, otherwise, 8 to 9 working days will be required.
Please note, however, that even though the company will be incorporated within the above time frames it will take longer to receive the relevant corporate documents such as the memorandum, the articles of association and so on. Consequently, if time is of an essence, we suggest that you purchase one of our already registered “shelf companies”.
Once off costs:
- Company formation
- Opening of a bank account
- Other set up expenses such as registration with the Inland Revenue Authority, with the VAT authority and so on.
- Domiciliary fees (provision of a registered address, nominee directors, secretary and shareholders).
- Annual Special Levy payable to the Registrar of Companies which is currently €350-.
- Filing annual returns with the Registrar of Companies.
- Management, administration and bookkeeping costs.
- Auditing costs.
The following apply to Cyprus tax resident companies:
1. Accounting records.
2. Annual Audited Financial Statements.
3. Annual Provisional Tax Returns.
4. Annual Tax returns
5. Annual returns with the Registrar of Companies.
6. Monthly Social Insurance returns (if required).
7. Quarterly VAT returns (if required).
8. Monthly VIES returns (if required)
Management and Administration of the Company
Generally speaking this is exercised like elsewhere in the world according to the relevant laws, the memorandum and the articles of association of the company.
To qualify as a Cyprus Tax Resident however, the management and control of a company must be exercised from Cyprus. Therefore, the company should have a registered address in Cyprus, the majority of its directors must be Cyprus residents and most of their meetings should take place in Cyprus. This is where we, Administrative Service Providers, come into the equation to provide a registered address, nominee shareholders, directors and, in general, everything required to carry out the day to day management and administration of the company from Cyprus.