Incorporation of a Cyprus Company
Without doubt Cyprus has become one of the most attractive destinations in Europe for registering companies. Several factors, such as, the favorable tax legislation, the straightforward corporate legislation, the highly skilled professional services provided, the wide variety of investment opportunities and the expedient double tax treaties, made Cyprus an international business center through which foreigners choose to conduct their business.
The first requirement is the application for name approval. A company name must necessarily end with the word “LIMITED” or “LTD” and must be approved by the Registrar of Companies before the registration procedure commences. The name approval process takes between 3-4 working days. Once the name is approved it can be reserved for a period of 6 months from the date of approval. Should the name be rejected another name application should be submitted.
To register a company, Memorandum and Articles of Association must be prepared and filed at the Registrar of Companies. The main objects/purposes of the company are stated in the Memorandum and the rules governing the internal management of the company in the Articles of Association.
The number of shareholders in a company may be from 1 to 50. A shareholder can be a physical or legal person of any nationality. Shares can be held by nominee, either individuals or companies, in trust for the beneficial owners without public disclosure of the ultimate owner’s identity.
A Cyprus company has no minimum legal requirement as to the minimum or maximum share capital. For practical purposes, it is recommended that companies be incorporated with a minimum share capital of Euro 1,000 made up to 1000 shares of Euro 1.00 each.
Cyprus companies are managed and controlled by a Board of Directors. The minimum number of directors is one. A director can be a physical or legal person of any nationality. Management and control of a Cyprus company will determine the tax status of the company. It is therefore customary for the majority of the directors to be Cyprus residents and for the board meeting to be held in Cyprus. The company must also have a Cyprus resident secretary. The secretary can be a physical or a legal person. Details of directors and secretary are part of public record.
Every company is required to have a registered office address in Cyprus which is also filed with the Registrar’s Office.
It normally takes 2 to 3 weeks for the company to be incorporated. However, there is an expedite process with which the incorporation of the company can completed within 1 to 2 weeks.
After its formation, the company may open a bank account with any bank in any currency. The company may arrange for local bank signatories to be appointed to operate the Bank accounts.
A Cyprus company must appoint a local auditor and subsequently submit the audited financial statements to local tax authorities and the Registrar of Companies along with the annual return form (HE32). The Company Law requires a Cyprus Company to maintain proper accounting records in accordance with the International Accounting Standards. The first reporting period can be up to 18 months from the date of incorporation and thereafter financial statements must be prepared annually.
All Companies registered in the Republic of Cyprus must pay the Registrar of Companies annual levy of €350 by the 30th of each June.
- Failure of payment up to 2 months will result a 10% penalty (€385).
- Failure of payment between 2 and 5 months will result a 30% penalty (€490)
Non-payment of the annual levy will result in a strike off of the company from the Registrar of Companies.
- For legal entities working independently, an annual fee of €150,00.
- For legal entities in a group of companies, an annual fee of €85,00 per legal entity.
- For inactive legal entities (dormant companies), an annual fee of €50,00.
As from the 16th of March 2021 and within 6 months, all Cyprus companies are obligated to keep to their registered office address and submit to the Registrar of Companies sufficient, clear and updated information on their Ultimate Beneficial Owners. For newly incorporated companies, the Information must be submitted within 30 days from their incorporation.
Amendments/changes must be submitted within 14 days from the day they were brough to the attention of the company/Officers.
Lastly, the company and its Officers have an annual obligation to confirm the Information.
In accordance with the Anti Money Laundering and Terrorist Financing requirements, service providers and lawyers are required to maintain updated Know Your Client (KYC) information and documentation of their clients. Therefore, prior the incorporation of a company it is mandatory for the service providers and lawyers to request such information and documentation.
Tax Resident Cyprus Companies
As regards the annual corporation tax of a Cyprus company (excluding ship owning companies and ship management companies were special exemptions apply) all tax resident companies are taxed on their income accrued or derived from all chargeable sources in Cyprus and abroad. In order to be taxed in Cyprus a company must be managed and controlled in Cyprus. One of the determining factors for establishing management and control in Cyprus is to ensure that all board of Directors meetings take place in Cyprus.
The present corporate tax in Cyprus is 12,5%.
A company shall be regarded as managed and controlled outside Cyprus if the majority of its Directors are non-Cyprus residents and the board of Directors does not meet in Cyprus and does not have an operational office in Cyprus and generally there is no management of the day to day operations of the company in Cyprus. For companies not managed and controlled in Cyprus the local corporation tax will not apply in Cyprus and the company will have to be taxed in the country where it is managed and controlled.