Cyprus
Company formation

PopulationApproximately 1,207,359 (source: World Bank, 2021)

Why opening a company in Cyprus

Cyprus offers a conducive business environment with attractive fiscal options, making it an ideal choice for entrepreneurs looking to expand their operations. The favorable tax regime, including a low corporate tax rate of 12.5%, encourages business growth and investment. The strategic geographical location, well-developed infrastructure, and access to EU markets further enhance the appeal of Cyprus as a business destination.

Advantages

The Advantages of Incorporating a Company in Cyprus

Tax Benefits

Cyprus offers various tax benefits for companies, including low corporate tax rates, double taxation agreements, and tax exemptions for specific types of income. These favorable tax policies provide businesses with opportunities for tax optimization and increased profitability.

Strategic Location

Located at the crossroads of Europe, Asia, and Africa, Cyprus enjoys a strategic location that enables businesses to access and expand into international markets with ease. Its proximity to major economic centers and efficient transportation infrastructure make it a gateway for trade and investment.

Skilled Workforce

Cyprus boasts a highly educated and skilled workforce proficient in multiple languages, including English. The availability of talented professionals across various industries facilitates business growth and innovation.

Business-friendly Environment

Cyprus offers a business-friendly environment with streamlined procedures for company incorporation, efficient legal framework, and investor-friendly policies. The government’s commitment to supporting entrepreneurship and foreign investment further enhances the ease of doing business in the country.

Disadvantages

The Disadvantages of Incorporating a Company in Cyprus

Compliance Requirements

Businesses operating in Cyprus must adhere to various compliance requirements, including annual reporting, tax filings, and accounting obligations. Ensuring compliance with local regulations can be time-consuming and may require professional assistance.

Market Size

Although Cyprus offers excellent access to international markets, it has a relatively small domestic market. Businesses focused solely on the local market may face limited growth opportunities, and expanding into international markets becomes crucial for sustainable success.

Competition

The competitive business landscape in Cyprus requires businesses to differentiate themselves and develop unique value propositions to stand out among competitors. Market research and strategic planning are essential to thrive in this competitive environment.

Taxes

Cyprus has a favorable tax system designed to attract businesses and investors. The corporate tax rate of 12.5% is one of the lowest in the European Union, providing businesses with a competitive advantage. Additionally, Cyprus has an extensive network of double taxation agreements, ensuring that businesses can avoid double taxation on income earned abroad. The country also offers various tax incentives, such as exemptions for dividends, interest, and royalties. However, businesses must comply with local tax regulations and ensure proper documentation and reporting to benefit from these advantages.

Company Types in Cyprus

Cyprus offers various types of company formations, each with its own characteristics and benefits. Here are the most common types of company incorporations in Cyprus:

1. Private Limited Liability Company (Ltd)

A Private Limited Liability Company, commonly known as Ltd, is the most popular type of company in Cyprus. It is suitable for small to medium-sized businesses and provides limited liability protection for its shareholders. The company’s shares are privately held and not traded on the stock exchange.

A Private Limited Liability Company in Cyprus can be incorporated with a minimum of [insert minimum share capital]. The cost of incorporation varies depending on various factors, such as legal and administrative fees.

2. Public Limited Company (PLC)

A Public Limited Company (PLC) is suitable for larger businesses that intend to raise capital through public offerings on the stock exchange. PLCs have more stringent regulatory requirements and are subject to additional compliance obligations compared to Ltd companies.

Setting up a Public Limited Company in Cyprus involves higher costs compared to a Ltd company due to additional legal and regulatory requirements. The minimum share capital required for a PLC is typically higher than that of a Ltd company.

3. Branch of a Foreign Company

A Branch of a Foreign Company allows an existing foreign entity to establish a presence in Cyprus. It is not considered a separate legal entity but an extension of the parent company. The branch operates under the regulations and laws of Cyprus and is required to register with the Cyprus Companies Registrar.

The cost of incorporating a Branch of a Foreign Company in Cyprus varies depending on the size and complexity of the parent company. It is essential to note that the branch is not considered a separate legal entity, and the parent company remains liable for its obligations.

4. Partnerships

Partnerships are suitable for businesses operated by two or more individuals or entities. There are two main types of partnerships in Cyprus:

• General Partnership (GP): In a General Partnership, all partners have unlimited liability for the partnership’s obligations.
• Limited Partnership (LP): In a Limited Partnership, there are general partners with unlimited liability and limited partners with liability limited to their investment in the partnership.

The cost of incorporating a partnership in Cyprus may vary depending on various factors, such as legal and administrative fees. Partnerships do not require a minimum share capital, and the tax obligations are based on the partners’ personal tax liabilities.

It is important to consult with legal professionals or business advisors to determine the most suitable type of company incorporation in Cyprus based on your specific business needs and objectives.

4. Sole Proprietorship (SP)

A Sole Proprietorship is the simplest form of business structure in Cyprus. It is suitable for individual entrepreneurs who want to operate their business as a single entity without partners or shareholders. The sole proprietor assumes full liability for the business’s obligations.

Setting up a Sole Proprietorship in Cyprus involves minimal costs compared to other types of company formations. However, it does not provide limited liability protection, and the sole proprietor’s personal assets are at risk.

Sole Proprietorships offer advantages such as simplicity in business operations, complete control over decision-making, and direct ownership of profits.

Each type of company incorporation in Cyprus has its own requirements, benefits, and considerations. It is advisable to consult with legal and business professionals to determine the most suitable option based on your specific business objectives and circumstances.

VAT in Cyprus

Cyprus implements a Value Added Tax (VAT) system, whereby businesses are required to charge VAT on taxable goods and services. The standard VAT rate in Cyprus is 19%. VAT registration is mandatory for businesses with taxable turnover exceeding a specified threshold. Proper compliance with VAT regulations, including accurate record-keeping and timely VAT returns filing, is essential to avoid penalties and maintain compliance with tax authorities.

Common Questions