Cyprus companies

Cyprus is situated at the crossroads of major international trade between Europe, Asia and Africa, which makes it a natural international business hub and an ideal investment gateway between Europe and the rest of the world. The Republic of Cyprus has been a full EU Member since 2004 and a eurozone member since 2008. Thus, today Cypriot companies are considered to be an excellent business vehicle, and Cyprus itself as one of the most appealing and trusted tax regimes and go-to jurisdictions.

Cyprus’ competitive advantages include an effective legal system based on the principles of English Common Law, a pro-business tax regime with a wide range of incentives and benefits for both companies and individuals, an extensive network of more than 60 double taxation agreements worldwide. Finally, business establishment in Cyprus, including executives relocation, obtaining permanent residency and even acquiring the citizenship for investors, is fairly simple and does not require complex time-consuming procedures.

* Information about Directors, Secretary and Registered office of a Cyprus company is available to the public online. Information about shareholders can be obtained by anyone on request.

** Although there is no requirement that the director(s) are of local origin, the company is considered to be a tax resident of Cyprus only if the majority of the board are Cyprus residents.

*** A company Secretary is a high-ranking administrative officer of any private or public company or organisation. Their role is to ensure that the company complies with all procedural, financial, and legal standards and requirements.

Business owners who want to manage several other companies can use a Cyprus private or public company as a holding structure that  owns equity stakes in other companies, and thus may control and manage these subsidiaries. This structure with a Cypriot holding company helps to reduce or eliminate taxes charged on dividend income and gains.

In addition to the favourable 12,5% income tax, the following advantages encourage the application of a Cypriot company for holding purposes:

• No withholding tax on dividends paid to non-resident shareholders; on interest paid from Cyprus; and on royalties paid from Cyprus in respect of intellectual property exploited outside of Cyprus;
• No tax on disposal or trading of securities;
• Only 2,5% effective taxation on profits from qualifying intellectual property;
• No tax on dividend income received from another Cyprus tax resident company; and (under certain conditions) no tax on dividend income received from abroad and from a foreign permanent establishment of a Cypriot holding company.

An important feature is the absence of any regulatory restrictions on Cyprus holdings.  As a result, in addition to participating in other subsidiaries, a holding company can develop other activities, such as commercial, financial, development, etc. without any restrictions.

To act as a CIF a company must obtain a licence from the Cyprus Securities and Exchange Commission (CySEC), the country’s financial regulatory authority. CySEC's regulations are fully compliant with the Markets in Financial Instruments Directive 2004 (MiFID), MiFID II 2014, and other relevant EU Directives, thus CIFs are internationally recognised.

To obtain a licence, an application package must be prepared and submitted for approval by CySEC, which can review it for up to six months or longer if additional requirements arise.

There are certain criteria that a company must meet to be granted a licence:

Minimum capital is required in an amount that depends on specific activities. It has to be retained at the CIF at all times:

• € 50,000 if a CIF does not hold clients’ assets and/or financial instruments;
• € 125,000 if a CIF holds clients’ assets and/or financial instruments, but it is involved only in portfolio management and execution of orders on behalf of clients;
• € 730,000 if a CIF may deal on its own account, underwriting/placing of financial instruments without or on a firm commitment basis, and operating Multilateral Trading Facilities.

Transparent Ownership of a CIF is a prerequisite. In case that the shareholder(s) of a company are legal entities, Directors - the physical persons that manage the shareholding company must be identified and disclosed, as well as the shareholders of the shareholding company and this procedure repeats until the ultimate beneficial owners (physical persons) are reached. Information regarding beneficial owners is not made public anywhere.

Qualification of Directors in charge and persons employed for performing any of the licensed investment services must be examined and licenced by the relative authorities (SyCEC and the Ministry of Finance). The firm's head office in Cyprus must be fully staffed, and the Board of Directors must consist of at least two executive directors and two independent non-executive directors.

For now Cyprus has established itself as an EU jurisdiction of preference for the provision of Investment Services such as Asset and Wealth Management, Financial Advisors, Brokers and Dealers, Payment and E-Money service providers, Fund Management and Regulated Funds and Insurance. 

The main characteristic of this type of company is that, in accordance with its memorandum of association and the rules governing its operation, its shares do not have a nominal value but rather a variable value. 

A variable capital investment company (VCIC) can be incorporated after it receives a relevant license from the CySec to operate as Collective Investment Fund.  It can take the form of either a private or a public company, depending on the type of the collective investment fund (CIF) that such variable investment company will take (UCITS, AIF, AIFLNP, RAIF). The memorandum of association provides inter alia the following in relation to its share capital:

• the issued share capital of VCIC at any given time, is equal to the net asset value of the company, less its obligations;
• the share capital of VCIC is subdivided to a number of shares without nominal value, since their nominal value is variable;
• the shares of VCIC are redeemable by itself, upon request of its members, directly or indirectly, from its assets.

In the case of a variable capital investment company (VCIC), if it is a private company it may have from between one (1) and fifty (50) shareholders, while if it is a public company, it must have at least one (1) member.

Cyprus is considered to be one of most attractive shipping centres in the world. The Republic of Cyprus has the unique advantage of being a member of the UN, Council of Europe, Commonwealth, member of the Conference for Security and Cooperation in Europe, as well as, a member in the Group of Non-Aligned Countries. Cyprus is an active member in many international Maritime Organisations, such as The International Maritime Organisation (IMO), the international Labour Organisation (ILO) and the European Maritime Safety Agency (EMSA), thus the shipping industry benefits from all of the above, along with the EU Flag and Bilateral Cooperation in Merchant Shipping Agreements with 28 countries.

There is a range of competitive advantages to Cyprus Shipping Companies, such as:

• Well-developed and professional maritime services infrastructure with no restrictions regarding the nationality of crews and officers;
• Competitive ship registration costs and fees, stamp duty exemption on contracts related to Cyprus flag vessels, and  full protection for financiers and mortgagees;
• Group relief of tax losses between a Holding Company and its subsidiaries. Tax losses can be carried forward for five years following the end of the financial year under consideration;
• Extended tax incentives for expatriates taking up employment in Cyprus and further tax exemptions for qualifying ship owners, charterers and ship managers.

But the most crucial benefit is a modern and very advanced Tonnage Tax System (TTS), Cyprus Shipping Companies may opt to use. In the end of 2019, it was successfully prolonged for another 10 years by the European Commission. The TTS allows mixed activities within a company/group (shipping subject to TT and others subject to 12,5% corporation tax). The TTS regime applies to ship owners, ship charterers and ship managers who own, charter or manage one or more qualifying ships in qualifying shipping activities. Ship owners of Cyprus flag ships automatically fall within TTS whereas Cyprus tax resident ship owners of EU/EEA flag ships and of fleets consisting of EU/EEA and third country flag ships may opt to be taxed under TTS on certain conditions.  The Cyprus Tonnage Tax rates applying for ship managers are 25% of the general Cyprus Tonnage Tax System applying for ship owners, regardless of the flag of the ship, as long as it is managed or chartered by a Cyprus Shipping Company registered in Cyprus and having its physical office and staff in Cyprus.

The Cyprus Tonnage Tax is calculated based on a sliding scale according to net tonnage of vessels:

The System covers the following types of revenues: from shipping operations, proceeds from the sale of ships, and interest gained on funds used as working capital or for the financing, operation and/or maintenance of ships.

Cyprus Ship Owner Companies that opted for the Cyprus Tonnage Tax System must remain in the system for at least 10 years. Early withdrawal will lead to fines compensating to the level of the corporate tax rate.

Stelios Americanos & Co. LLC can assist you to pass all the requirements and stages of setting up of any of many types of Cypriot companies, opening a bank account and with ongoing administration of your legal entity. We also provide full service, including:

• Registered office; 
• Corporate and secretarial support - preparation of directors’ minutes, annual returns, resolutions, certification and 
legalisation of documents, keeping the various registries up to date; 
• Legal support – preparation and review of various agreements, investment contracts, licensing applications and overall supervision of the legal aspects of transactions;
• Taxation support – in cooperation with our preferred service providers we assist with accountancy, tax and regulatory compliance and tax advice. 

If you are interested to register your company in Cyprus, you may download the questionnaire below, fill it out and send it back to our e-mail address.