Overseas Corporate Services Ltd

What are the benefits of starting a company in Cyprus? Find out why business owners choose to create an off shore company in Cyprus.

Company Registration in Cyprus

Despite having to give up its formal status as an offshore entity after it acceded to the European Union, Cyprus, a former British colony, remains an attractive opportunity for business owners looking to incorporate in a different country.

As an official European Union member, Cyprus is one of the friendliest locations for incorporating your business anywhere in the union. The proof of this popularity can be seen in the fact that over a thousand new companies are established in Cyprus every month.

But what is it that makes Cyprus so attractive to business owners? Cyprus tax legislation is primarily focused on aiding business success. This article will take you through all the benefits and intricacies of incorporating Cyprus companies. 

Why incorporate local companies in Cyprus?

Cyprus has one of the most liberal ranges of tax policies for businesses out of all the EU member states. Business owners incorporated in Cyprus won't have to pay income tax on the following:

1. Re-registration of real estate
2. Operations of subsidiaries and external branches
3. Securities transactions

The Cypriot government not only want business owners to incorporate their businesses on the island, but they also want the owners themselves to live there. Alongside the numerous advantages of moving your business to Cyprus, the low property maintenance costs compared to other European countries make it an ideal place for company leaders to live. 

 The Cyprus Low Corporate Tax Rate 12.5%

The corporate tax rate in Cyprus is significantly lower than in the other EU countries at just 12.5%. Alongside this favourable tax rate, there are other financial exemptions that businesses can benefit from.

These include full tax exemptions on dividend income, withholding taxes, profits gained by disposing of securities, and reduced capital gains tax when you sell assets or on interest income. The Cypriot government also operates a territorial tax system, unlike other EU nations.

This means they only tax income that is generated in Cyprus itself. They also employ robust double tax treaties with a network of more than 60 other countries, offering even more benefits to businesses looking to incorporate on the island.

With the wide range of financial advantages available in Cyprus, it's easy to see why the island is the ideal place for registered companies to operate. But they aren't the only entities that can benefit from these advantages. The financial benefits available in Cyprus are uniquely well-suited to holding companies. 

 Investment Opportunities & Investment Programs in Cyprus

Alongside the many tax benefits companies in Cyprus can benefit from, there are plenty of promising investment opportunities on the island. For example, Cyprus is one of the hottest European tourist locations in the Mediterranean.

Those looking to invest in tourism and travel can find fantastic opportunities here. Alternatively, Cyprus is one of the global shipping powers, with endless cargo coming in and going out from the island in addition to its two international airports. 

There are also very lucrative real estate opportunities for those looking to invest their money in secure assets. Their financial industry is on the up, with plenty of commodity investments available, given the island's prevalence of agricultural goods, fishing and natural gas. 

 Cyprus Is the Gateway to Europe

Cyprus is one of the best routes for businesses looking to begin operations in new markets in Europe. While other European Union countries have a host of joint bureaucratic regulations and business legislation that foreign companies must adhere to even to get their foot in the door, Cyprus law has none.

This allows you to incorporate a business within EU borders without all the paperwork and hassle and maintain good relations with European partners. Cyprus' business-friendly regulations make incorporating and running your business a breeze as one of the safest countries for company formation.

For financial services, Cypriot financial licenses hold a good international reputation. Securing one of these licenses will give your investors and shareholders great peace of mind and even come with certain passporting rights your business can benefit from.

Ultimately, incorporating your business in Cyprus and stationing your headquarters there allows you to enter European markets without fulfilling any licensing requirements for other EU members. There is also no need to set up a business branch, offices or subsidiaries abroad within the European Union to do this, making business incorporation that much easier in Cyprus.

Benefits of company incorporation in Cyprus

So far, we've covered the general benefits of incorporating your business in Cyprus, but now we'll look at all the advantages in specific detail. The speed, ease and cost-effective nature of registering companies in Cyprus are shown in the following:

1. A Cypriot LLC (Limited Liability Company) can be completely foreign-owned, with requirements for only a single shareholder and managing director, which can be of any nationality. They can either be individuals or corporate entities that do not reside in Cyprus.
2. Any foreign company can invest in almost any business sector in Cyprus with no restrictions or licensing requirements, save for the banking, finance and media sectors.
3. Using appropriate channels, you can incorporate your business with full Cyprus company registration and tax numbers in a matter of weeks, making it a quick and easy process.
4. You can open a corporate bank account with any of the leading banks on the island, including the Bank of Cyprus and Alpha Bank, without having to visit the country. You are also free to use any legal services available in the country.
5. The low cost of running operations and administration for registering a company in Cyprus is far more attractive compared to its European counterparts.

Here we'll look more closely at the tax situation in Cyprus:

The standard corporation tax rate in Cyprus is 12.5%, one of the EU's lowest corporate tax rates. They also do not impose any capital gains tax on selling assets, shares or other securities.

Any Cyprus holding company is also exempt from withholding taxes for any dividends paid to the resident corporation, regardless of if they are received from overseas companies or another Cyprus resident company.

Cyprus has numerous double taxation agreements with countries such as Ireland, India, China, Singapore, the UK and the USA.

Companies incorporated in Cyprus won't have to pay any corporate income tax on earnings from your company's operations outside of Cyprus and are exempt from estate duty and capital gains related income from immovable property outside the island. 

Other incentives for potential business owners, non-residents and companies, commercial activities or foreign investors in Cyprus include:

The vast majority (80%) of a company's income earned through royalties paid on Intellectual Property Rights (IP) is exempt from taxes. Only 20% of the profits from your intellectual property are liable to be taxed by the Cypriot government.

While many think of Cyprus as a "tax haven", it is amongst the nations on the OECD's safelist of global jurisdictions. This means Cyprus is fully compliant with international standards for tax, giving investors and shareholders great peace of mind.

Companies resident in Cyprus can carry any tax losses incurred during a fiscal year forward for the next five years, allowing you to offset the same against any taxable income your company receives.

Being an EU member state, companies established in Cyprus can benefit from any EU regulations or treaties. These include things such as the free movement of capital inside and out of the EU region. 

Cypriot laws also have many benefits to offer potential investors, including:

Anyone who chooses to invest in companies and sectors or is a Cyprus tax resident of the island can acquire citizenship.

This means investors can benefit from subsequent EU citizenship, giving you the right to live and work within the EU and entitling you to free movement agreements between all European countries.

Under Cypriot law, investors can remain anonymous and hold any assets or property under an international trust or Cypriot holding company for added anonymity. Any inbound or outbound dividend payments are entirely exempt from taxation for investors in Cyprus. 

Best uses for a Cyprus-based company

While establishing a company in Cyprus may sound easy and beneficial thanks to its business-friendly tax system, there are certain situations where it is a better idea than others. For example:

1. Cyprus is the ideal location to establish a regional headquarters for companies with international reach. Sitting between Europe, the Middle East and North Africa, Cyprus is the perfect jurisdiction to act as a central hub to coordinate your international operations.
2. Companies looking for greater tax efficiency will naturally find a happy home in Cyprus for the reasons we've already mentioned.
3. International film producers can also benefit from the various incentives the Cypriot government offers. These include a 35% rebate on any expenditures incurred during the production of any film or a 50% tax credit; a 20% tax discount on any infrastructure or equipment investments during production; if you acquire any qualifying expenditures during the production of your film, your company can benefit from a complete VAT refund.

With all these benefits in place to help your company, it's easy to see why Cyprus is so attractive to business owners and entrepreneurs. The country is eager to engage with new and growing companies in emerging markets, meaning start-ups are particularly favoured.

The various tax incentives make forming new businesses in Cyprus a prudent move for any business owner. Small foreign companies and foreign investors might particularly enjoy the deduction of any qualifying expenditures from your taxable income.

For investments in Cyprus, this works out at an exemption of 50% of your entire taxable income or €150,000, whichever of the two is the lesser. And don't forget the double taxation avoidance treaties for global businesses and investors, meaning you won't pay additional tax if you are a resident of a foreign country or own a foreign company.