As is well known Cyprus has emerged as one of the most favoured holding Company jurisdictions in Europe. The location of the island as well as the tax legislation, which has been developed in accordance with E.U and OECD requirements, have contributed to making Cyprus an attractive location for the setting up of companies. Businessmen will usually decide which jurisdiction provides the most effective means when establishing a company.
General Information about Establishing a Company in Cyprus
Characteristics of a Company
- A Company is a separate legal entity and can be sued or sue in its own name. It usually takes the form of a private limited liability company by shares.
- The registered address of the Company must be in Cyprus.
- The number of shareholders in such a Company may be from one to fifty and in case that there is only one shareholder is should specified in the Memorandum and Articles of Association of the Company.
- Shareholders may either be Cypriot or foreign natural of legal persons.
- There is no minimum authorised share capital but, as a matter of course, such share capital is usually 1000 Euros and the minimum issued share capital is one share of 1 Euro.
- There should be at least one Director and one Secretary.
- Cyprus Companies are taxed at 10% of their profits provided that their management and control is exercised within Cyprus. In such case these companies may be able to take advantage of the Double Tax Treaty Network available in Cyprus. If the management and control is outside Cyprus, then the company would not be subject to taxation in Cyprus.
- A company should submit accounts to the Tax Authorities and the Registrar of Companies.
- Anonymity, if required, is secured by having the shares held by nominees and or trustees.
Advantages that a Company may have:
Gains from buying and selling shares and/or other securities are exempt from tax.
- No capital gains tax on profits made by the disposal of assets exists except for immovable property situated in Cyprus.
- Dividends received from abroad are completely exempted from income tax.
- Lower withholding tax rate in other countries on remittances of income resulting from dividends, royalties, or interest due to the applicability of Double Taxation Treaties.
- Dividends (including payments of interest or royalties) paid to non-resident shareholders are not subject to any withholding taxes.
- Tax losses can be carried forward indefinitely.
- Unilateral tax credit relief is available.
The beneficial owner can remain anonymous by appointing Nominee Shareholders or Director.
- The Employees from member states of the European Union do not require a work permit. Non-EU employees can obtain work permits.
- No exchange control restrictions on companies and their employees in relation to opening and operating bank accounts.
- Relatively low operational cost.
- Cyprus is easily accessible both by sea and air.
It should be noted that Cyprus has a Double Tax Treaty between many countries. From inside information obtained dividends will be subject to withholding Tax of:
a) 5% of the gross amount of the Dividend if the beneficial owner is a company which holds directly at least 25% of the capital of the company paying the dividends.
b) 10% of the gross amount of the dividend in all other cases. These percentages will apply in the case a Cyprus Company receives these dividends from Iran. If a Cyprus company pays dividends to a non-tax resident shareholder there is no withholding tax. In the case of interest, if a Cyprus company receives interest from any country, the withholdings tax applicable will not exceed 5% of the gross amount of the interest. In the case of royalties the withholding tax rate will not exceed 6% of the gross amount of the royalties. It should again be noted that in case a Cyprus company pays either interest or royalties to a non tax resident there is no withholding tax. Under Article 13 of the Double Tax Treaty it is provided that gains derived by the residents of a contracting State from the alienation of shares in a company, deriving more than 50% of their value directly from immovable property situated in the other contracting State may be taxed in that other State.