CYPRUS INTERNATIONAL BUSINESS COMPANIES
PRIVATE LIMITED COMPANY
• The liability of its members is limited up to the amount unpaid for their subscribed shares.
• The right to transfer the shares is restricted.
• The word “limited” must appear at the end of the name of the company.
• The minimum number of members of the company is one and the maximum number is limited to fifty.
• Shares cannot be issued to the bearer. In case anonymity is required this can be achieved through local nominees who sign in favour of the beneficial owner of the shares a declaration of trust as well as an instrument of transfer of shares in blank.
• Prohibition as to the invitation to the public to subscribe for any shares or debentures.
• The minimum number for directors is one and there is no maximum. Directors may be local or foreign. Alternate directors may also be appointed. It is not necessary for the directors or the secretary to be shareholders. The appointment and removal of directors is made by the shareholders. Local nominee directors may also be used. Corporate bodies may act as directors and secretary.
• Meetings of the board of directors can be held either in Cyprus or abroad.
• Statutory and reporting requirement are very similar to those of the Companies Act 1948 of the United Kingdom. The statutory books required are:
- The Register of Members: containing details as to their full names, addresses etc, the number of shares held by each one, when they became shareholders etc.
- The Register of Directors and Secretary.
- The Minute Book for all the meetings of directors and shareholders.
- The Register of Charges affecting the property of the company.
• Charges, debentures, floating charges and mortgages must be registered with the Registrar of Companies.
• Bank accounts of any kind may be opened, in any currency, either in Cyprus or abroad. Those opened in Cyprus may be operated without any exchange control permission.
• The Secretary must keep the seal of the company under safe custody.
• Special kinds of shares with preferential or other rights may be issued.
• Annual returns must be filed with the Registrar of Companies at the end of each financial year of the company. Such returns contain information as to any transfer or issue of new shares, changes to directors/secretary/registered office, registration or cancellation of any charges/mortgages etc.
• The company’s file at the Registrar of Companies is available for inspection by the public and therefore it anonymity is required, nominees must be used from the beginning.
• The company must have Memorandum and Articles of Association, both of which must be signed by their subscribers (the first copy must be deposited, together with the other statutory documents, with the Registrar of Companies). Both documents must be printed in the Greek language but provision is also made for printing same in the English language.
Memorandum of Association
The Memorandum must contain the following:
• The name of the company.
• The address of the registered office which must be in Cyprus.
• The main objects for which the company is formed.
• The amount of the authorised and paid up share capital which can be in any currency. The authorised and paid up capital must be a minimum of C£1,000.00 (or equivalent amount in any other currency). For special types of Companies such as insurance companies, IBU’s etc the authorised and paid up capital is higher (there is no maximum capital). The authorised and paid up share capital can be increased at any time by special resolution of its members.
• Special provision as to the liability of the Members of the company, which is limited up to the amounts, they have paid for their subscribed shares.
• Provisions as to the various classes of shares.
• The names, addresses and description of the subscribers together with the number of shares for which they subscribe.
Articles of Association
The Articles of Association contain the regulations for the internal management of the company. In the Companies Law Chapter 113 under the heading “Table A” a specimen of certain statutory provisions regarding the regulations and the functioning of the company is provided. This specimen may be adopted by the Articles of Association fully or partly.
The Articles of Association may be amended at any time by special resolution of the members (majority vote of over 75%).
The Articles of Association may include provisions as to the – dividends – accounts and audit – right of transfer and procedure to transfer the shares – voting rights – debentures – general meetings of the company – the appointment, removal and meetings of the directors – annual general meetings – extraordinary meetings and meetings for special resolutions – winding up of the company – loans to directors etc.
According to Cyprus Law an application for the formation and registration of a company must be carried out through a Cyprus law office.
The formation procedure of a company is, in general lines, as follow:
• Approval of the name of the company.
• Preparation and printing of the Memorandum and Articles of Association of the company in Greek and English languages.
• Filing with the Registrar of Companies the Memorandum and Articles of Association of the company in Greek language (duly signed by the subscribers), together with forms HE1, HE2, HE3, (duly signed by one director or the secretary) and the receipt for the payment of the registration duty. Form HE1 is an affidavit by the lawyer of the company as to the legitimacy of the formation of the company. HE2 provides for the registered address of the company. HE3 provides for the appointment of the first directors and secretary.
• As soon as registration of the company is effected the Registrar of Companies furnishes the secretary with the Certificate of Registration together with certified copies of the list of directors and secretary, shareholders, registered address, Memorandum and Articles of Association, a copy of the Certificate of Registration and a certificate of good standing of the company. Certified copies of the Memorandum and Articles of Association and registration of the company are given in Greek or English. As soon as the certificate of the registration of the company is issued, the company can arrange for the first meeting of the directors for statutory matters such as appointment of auditors, appointment of legal adviser, opening bank accounts, approval of the seal of the company, and of the Memorandum and Articles of Association, appointment of the secretary etc.
• The whole application, formation and registration procedure can be completed within three to seven days.
• There are certain registration fees, which must be paid upon the application for the registration of any company. The registration fees vary, depending on the nominal capital of the company, between C£125.00 up to capital of C£5,000.00 and C£175,00 up to C£10,000.00 capital.
For higher authorised share capital the fees payable are £0.06 of the capital.
Information Needed for Registration
Information needed for registration of an international business company is detailed below:
• The names, addresses, occupations and nationality of at least one person or legal entity who is to be the shareholder or the beneficial owner of the shares of the company, irrespective of whether anonymity is required to be kept and nominees shall be used. Since the Memorandum & Articles of Association of the company must be signed by the subscribers, and in order to save time, the first subscribers of the company are usually employees or nominee companies of a law office who, upon the registration of the company, transfer their respective shares to the real shareholders. (In cases of anonymity the nominees sign a blank instrument of transfer of shares together with a trust deed, and the Share Certificates which they pass over to the beneficiaries who keep these to safeguard their interests.)
• The name of the proposed company to be registered. It is advisable that several alternative names are given in order to save time and unnecessary correspondence. In cases where the name of the company is not an important element law firms have available a list of approved names ready for immediate use.
• The main objects of the company.
• The proposed authorised and issued share capital and the participation of each shareholder or beneficial owner in the company. As previously stated the minimum authorised share and paid up capital is C£1,000.00.
• The name, address, occupation and nationality of at least one person to be appointed as a director, and the same particulars for the secretary. It is advisable, however, to appoint more than two directors, so that a decision may be easily obtained. It is also advisable to appoint local directors if the management and control of the company must be in Cyprus. In case of appointment of local nominee directors, they only act upon the instructions received from the beneficiaries of the company.
Cyprus Company Formation
We offer all-round services to companies and individuals that are relocating to Cyprus or do business through or in Cyprus:
• Selecting the appropriate legal structure
• Incorporation and management of IBC’s in Cyprus and other jurisdictions
• Tax Planning
• Registered address
• Opening of bank accounts, securing financing
• Nominee/ director / secretary facilities
• Trading & Banking back up for IBC’s
• Accounting - Auditing - VAT - payroll/PAYE
• Auditing & preparation of Financial Statements
• Taxation, International tax planning
• Securing residence and work permits
• Legal services
• Company management
The Tax Reasons for the Establishment of a Cyprus Holding Company
'Cyprus', a well-established international centre, has been critically assessed of constituting an attractive location for holding companies from a tax perspective, among others. This is due to the accession of Cyprus to the European Union (EU) and the enactment of the new Cyprus tax legislation, which is now compatible with the acquis communautaire. Cyprus laws and practices are now harmonised with the EU Laws and Directives, the Code of Conduct and the Organisation for Economic Co-operation and Development's recommendation on Harmful Tax Corporation. Cyprus is as an ideal location for establishing an international holding company, mainly due to the extensive network of double Tax Treaties.
Unlike other countries in Europe, a Cyprus Holding Company must only hold at least 1% of the share capital of a foreign subsidiary in order to receive the tax benefits awarded by the new tax reform.
New Tax Legislation
A uniform 10% corporate tax rate, applicable to the worldwide income, is now levied on all resident companies from the 1st of January 2003. This is the lowest corporate tax rate in the European Union and thus the most advantageous standard rate of corporation tax for Cyprus.
The new taxation status on companies is residence-based. A company is only 'resident in the Republic' if its business is centrally managed and controlled in Cyprus. Therefore, under the new rules, a resident corporation is taxable on its worldwide income accrued or arising from sources both within and outside Cyprus if it is managed and controlled from Cyprus.
In view of the new tax legislation, the Holding International Business Companies operating from Cyprus are now in a much more beneficial position because they can enjoy the benefits deriving from the tax exceptions as well as the corporate tax benefits by virtue of the new tax legislation.
50% of interest receivable.
In view of the new tax legislation 50% of interest received by corporation is tax exempt, excluding interest received from the recipient's ordinary course of business or closely connected with the recipient's ordinary business.
• Dividends received
Dividends received from abroad are now totally exempt from corporation tax by virtue of the new tax legislation. Furthermore, they are also exempt from the 15% defence contribution provided that the direct holding is at least 1% of the share capital of the overseas company.
• Restructuring provisions
In view of the incorporation of the EC Merger Directive 90/434/EEC into the new tax law, there are tax exemptions on the transfer of assets (including shares) under a reorganisation (merger/de-merger/transfer of assets).
• Gains on shares and Capital Gains Tax
Profits from buying and selling shares are exempt from tax. Furthermore, there is no capital gains tax except for the 20% capital gains tax applying on gains accruing from disposal of immovable property held in Cyprus and shares in non-listed companies, which own immovable property in Cyprus.
• Profits from activities of Permanent Establishment abroad
The profits from a permanent establishment abroad are exempt from taxation. The exemption does not apply if (i) the Permanent establishment directly or indirectly engages in more than fifty per cent (50%) in activities that produce investment income, and (ii) the foreign tax burden is substantially lower than that in Cyprus.
• Cyprus Branches of Companies
With the accession of Cyprus in the EU, double taxation relief is available to all Cyprus branches of companies resident in other member states in the European Union, since there is no discrimination between the companies resident in a Member state and the branches of such companies residence in another member state.
• Distributions by Cyprus Holding Companies
Dividends paid to non-resident shareholders are exempt from withholding tax. In fact, Cyprus does not impose withholding taxes on payments of dividend, interest and royalties (provided the intellectual property rights are not used in Cyprus) to non-resident recipients.
Corporate Tax Benefits
• Carry forward of Losses
Tax losses for the year 1997 onwards may be carried forward indefinitely. Losses incurred abroad by a permanent establishment of a Cyprus company can be offset against profits of the Cyprus Company.
• Group relief
The Group relief rules are now enacted, providing for group relief of tax losses between a holding Company and its subsidiaries in the event where the Holding Company owns at least 75% of the Subsidiary directly or indirectly and/or otherwise among companies of the same group for the whole year. However, losses brought forward will not be available for Group Relief.
By virtue of the said rules, a company is considered as a member of a group if it is at least a 75% subsidiary of the other, or both companies are at least the 75% subsidiaries of a third company.
Network of Double Tax Treaties
Cyprus combines a low-tax regime with a network of double tax treaties. It has concluded over 42 double tax treaties, which is considered one of the highest number compared to the number of treaties concluded by any other international jurisdiction, particularly with Central and Eastern European Countries and a number of Middle Eastern countries. Most of the Treaties follow the OECD model and all of them have the impact of reducing or eliminating the normal withholding taxes imposed by the Contracting states on dividends, interest and royalty payments. This is beneficial for trade with certain Eastern European Countries and Russia because foreign investors investing in Eastern Europe have the opportunity to channel their investments through a country, such as Cyprus, which has a treaty with the investment recipient country allowing for a reduction and in some cases elimination of the withholding taxes.
To come to a conclusion, Cyprus, one of the smallest European low tax jurisdictions, is a suitable place for locating an intermediary company due to the island's combination of tax treaties and low-tax regime. Dividends can flow through the Cyprus company totally tax free and the company can be used to take advantage of the extensive network of double tax treaties.
Cyprus Trading Company
One of the main advantages of registering a trading company in Cyprus is the favourable tax regime of 10% on the corporate profits, which is the lowest in Europe.
That benefit in collaboration with Cyprus key geographical location, being situated at the crossroads of two continents makes it a very important strategic reason to set up a trading company in Cyprus.
More specifically, in international triangular trading, the Cyprus Company can be used as an intermediary to purchase goods from a third party overseas to be sold to another country, utilising thus the favourable tax system of 10% on the annual profits and reducing the overall tax burden of the transaction.
In addition, due to the numerous double tax treaties that Cyprus has entered into with third countries like those of Eastern and Central Europe, the Cyprus Trading company may enter into trading activities with these countries and its profit will be taxed only in Cyprus at a low tax rate of 12.5%.
As from the 1st of May 2004 the date of Cyprus' accession to the European Union, a Cyprus Trading company that is registered to VAT in Cyprus may sell and receive goods to/from other member states.