Company Formation in Cyprus

Introduction

Company formation in Cyprus remains a top choice for entrepreneurs, investors, and business professionals seeking a low‑tax jurisdiction in Europe. Whether you’re planning to start a Cyprus limited company, expand your international business, or set up a Cyprus holding company, this comprehensive guide covers everything you need to know. From legal requirements and tax incentives to company incorporation procedure and residency permits, you’ll find in-depth information to make an informed decision.

Why Choose Cyprus for Company Incorporation?

Attractive Tax Regime (High‑frequency)

• 12.5% corporate tax – one of the lowest in EU.

• 0% tax on dividends, capital gains, and foreign income.

• Double tax treaties with 65+ countries enhance business efficiency.

• Full tax exemption on royalties and intellectual property.

• Notional interest deduction for equity financing.

EU Membership & Regulatory Framework (Medium‑frequency)

Cyprus is an EU member state, fully compliant with EU company law, meaning:

• Access to the European single market.

• Recognition of Cyprus companies across EU jurisdictions.

• Confidence and transparency through harmonized anti‑money laundering regulations.

Strategic Location (Medium‑frequency)

Strategically positioned at the crossroads of Europe, Asia, and Africa:

• Excellent flight connections to global financial hubs.

• Gateway for international trade, especially in the Middle East.

• Dual‑language proficiency: Greek and English official languages.

Reliable Infrastructure (Low‑frequency)

• Modern telecommunications infrastructure and high‑speed internet.

• Quality banking sector with both retail and private banking services.

• Professional service providers: law firms, fiduciaries, audit firms, and trust companies.

Types of Companies in Cyprus

Private Limited Liability Company

• Most common form: “Ltd.” entities.

• Shareholders limited to 50 (unless registered as public).

• Requires at least one director, one shareholder, and an official company secretary.

• No minimum share capital requirement.

Public Limited Liability Company

• Suitable for IPOs and public trading.

• Requires at least two directors and seven shareholders.

• Minimum share capital: €25,629.

Cyprus Holding Company

• Ideal for international investors managing foreign subsidiaries.

• Benefits: 0% withholding tax on dividends from foreign branches.

• With double tax treaties, profits can flow tax-efficiently.

International Business Company (IBC)

• Non‑residents operate globally with Cyprus IBCs.

• Enjoy limited liability and high confidentiality.

• Exemption from capital gains tax and foreign‑source income taxation.

Limited Partnership (LP)

• General partner with unlimited liability; limited partners with restricted liability.

• Used for investment, private equity, and venture capital structures.

Step‑by‑Step Procedure for Company Incorporation

Name Reservation

• Submit application to the Cyprus Registrar of Companies.

• Name must be unique and meet regulatory requirements.

Prepare the Memorandum & Articles of Association

• Define corporate objectives, share structure, director powers, etc.

• Typically drafted by a Cyprus corporate service provider or legal advisor.

Appoint Required Officers

• Minimum one director (natural person or corporate entity).

• One shareholder, can be same as director.

• Company must appoint a secretary. Often the provider offers a registered office address.

Submit Registration Documents

Include:

• Form HE1: Registered office details.

• Form HE2: Particulars of directors.

• Form HE3: Share capital and shareholders.

• Form HE4: Share allocation.

• Articles & Memorandum with signatures.

Pay Registration Fees

• Standard fee: €105, plus €50 for electronic filing.

• Additional for share capital exceeding €50,000.

Issue Share Certificates & Statutory Books

• Official share certificates handed to shareholders.

• Maintain registers and minutes of shareholder/director meetings.

Post‑Incorporation Requirements

Tax Registration

• Apply for Tax Identification Number (TIN).

• Register with VAT if annual turnover > €15,600.

• Withholding tax obligations for dividends, interest, and royalties.

Banking and Corporate Account Setup

• Open a Euro or multi‐currency corporate bank account.

• Completed with Due Diligence (KYC) procedures.

Accounting & Audit Responsibilities

• Annual financial statements following IFRS.

• Prepare audit-ready accounts with an independent local auditor.

• Submit Tax Return (TD4) and Income Tax Return annually before September 30.

Cyprus Payroll & Social Insurance

• For employed staff, register with Social Insurance Services.

• Monthly contributions from employer and employee.

• Non‑resident directors may also require registration.

Corporate and Personal Taxation

Corporate Tax (High‑frequency)

• Standard Cyprus corporate tax: 12.5% on profits.

Dividend and Interest Withholding Tax

• No withholding tax on dividends paid to non‑residents.

• Non‑resident interest also exempt.

Capital Gains Tax

• Only taxable on gains from sale of immovable property located in Cyprus.

• Exemption for gains on disposal of securities.

Personal Income Tax

• Progressive scale up to 35%, with generous allowances.

• Non-domiciled (non-dom) individuals enjoy 0% tax on dividends and interest for 17 years if they become Cyprus tax residents.

Value‑Added Tax (VAT)

• Standard rate: 19%.

• Reduced rates: 9% for hotels/restaurants, 5%/0% for food and medical supplies.

• Registration threshold: €15,600 turnover per annum.

Double Tax Treaties & Tax Planning

• Cyprus has over 65 double tax treaties.

• Enables tax-efficient repatriation, holding company structuring, and IP management.

• Crucial for profit repatriation, transfer pricing, and intercompany financing.

Cyprus Company Residency & Immigration Benefits

Cyprus Permanent Residency Program

• Fast‑track PR by investment from €300,000 in real estate or business.

• Residency usually granted within 2–3 months.

Cyprus Citizenship by Naturalization

• Citizenship after 7 years of legal residence.

• Enhanced benefits: EU passport, visa‑free travel to 185+ countries.

Immigration Options for Business Investors

• Employment Permit for working in your Cyprus company.

• Residence permits for company directors, external staff, and family.

Compliance & Reporting Obligations

Annual General Meeting

• Must be held within 15 months of incorporation, then annually no later than 15 months apart.

• Approve financial statements and dividend payments.

Filing Annual Returns

• Submit Form HE32 via Registrar of Companies before November 30 each year.

• Late filing attracts penalties and fines.

Audited Accounts

• Accounts certified by a Cyprus‑licensed auditor.

• Audit report submitted with annual returns.

FATCA & CRS Reporting

• Compliance with FATCA and Common Reporting Standard (CRS) for transparent information exchange.

• Necessary bank account disclosure to Cyprus Inland Revenue.

Costs and Timelines

Typical Costs

Typical Timelines

• Name reservation: 1–2 working days.

• Incorporation: 3–7 working days after submission.

• Bank account opening: 2–4 weeks (depending on due diligence).

• VAT registration: 1–2 weeks.

Key Considerations & Common Pitfalls

Substance & Economic Activity

• Be mindful of substance requirements under EU “economic substance” rules for tax optimization.

• Maintain office space, local staff, and board meetings in Cyprus.

Transfer Pricing Policy

• Comply with OECD Transfer Pricing Guidelines for related‑party transactions.

• Prepare transfer pricing documentation for intra‑group services and royalties.

Beneficial Ownership Register

• Register ultimate beneficial owners (UBOs) with the TRS system.

• Non‑compliance carries heavy fines.

Protected Legal Structure

• Benefit from limited liability, protecting personal assets.

• Maintain corporate veil by observing governance and separation.

When to Choose Cyprus for Company Setup

Ideal Scenarios

• International holding company for dividend flow.

• Efficient IP management and royalty planning.

• Base for global trading, consultancy, or fintech.

• Family office and wealth management structure.

Considerations

• Not optimal for businesses seeking a large local consumer market.

• Substance requirements demand real activity in Cyprus.

• International banks may apply extensive compliance checks.

Step‑by‑Step Checklist

1. Define business structure: Choose between Ltd., PLC, IBC, or Holding.

2. Choose company name, reserve with Registrar.

3. Prepare MoA & AoA, engage legal counsel.

4. Appoint directors, shareholders, secretary, contract registered office.

5. File incorporation forms, pay Registrar fees.

6. Get Certificate of Incorporation, share certificates.

7. Obtain Tax Number, register for VAT (if applicable).

8. Open corporate bank account.

9. Set up accounting system, appoint auditor.

10. Legal compliance: substance, UBOs, CRS, FATCA.

11. Operate and file annual returns, hold AGMs.

12. Plan exit or expansion according to double‑tax titles.

Working with Professional Advisors

Choose a Corporate Service Provider or Law Firm

• Ensure Cyprus‑licensed.

• Check for experience in international tax planning, firm incorporation, IP structuring, etc.

• Transparent fee structure, no hidden services.

What to Expect

• Full support from initial consultation.

• Preparation of all documentation, board resolutions, and minutes.

• KYC and compliance

• Ongoing accounting, payroll, VAT, and auditing services.

Conclusion

Cyprus stands out for company formation due to its low corporate tax rate, flexible structure, EU access, and advantageous tax planning opportunities. From choosing the right company type to ensuring legal compliance, this guide provides a strong foundation for establishing and running a successful business in Cyprus. With the support of experienced corporate service providers, entrepreneurs can ensure a seamless and efficient setup.