Offshore Company in Cyprus

Since joining the EU, Cyprus has ceased to be a global tax haven but has not lost its key advantages for international companies:

• Possibility of cooperation with any European parties. If you open a company in European jurisdiction, you can duty-free transport of goods throughout the EU.
• The island applies the most EU-friendly VAT rates (19%) and corporate tax rates (12.5%).
• You can get a residence permit in Cyprus for an investment of 300,000 euros.
• All income received by Cypriot firms from the purchase/sale of securities, interest, dividend income and royalties shall be taxed at zero rate.

Cyprus benefits

The Republic of Cyprus, previously considered a colony of Britain, since 2004 is in the European Union, is not in any «black list» offshore jurisdictions, but still offers the most advantageous tax rates in the EU. Today, you can register an offshore company in Cyprus for literally 4-6 working days if you have the necessary documents and requirements.

The logical question – why offshore, if the Cyprus state is not considered a classic offshore? In fact, an offshore company is called any company, registered in another jurisdiction. The island state itself is located in the offshore zone thanks to tax relief and an attractive tax system. If we consider the key sectors of the economy of Cyprus, the largest number of companies, including enterprises with foreign participation, open in the spheres of tourism, insurance and financial sector, IT, as well as in the field of commercial construction. Registration of investment funds and trusts is quite common in Cyprus.

Benefits of establishing offshore companies in Cyprus

Every investor and businessman wants to reduce tax payments and optimize the operating costs of their companies. Not surprisingly, Cyprus receives an impressive annual increase in the number of new legal entities that are registered by third-country persons. The second important point, which is often seen as an impediment to effective action – public authorities, which often impede the development and prosperity of business. Cyprus is almost an ideal state, both in terms of taxation and economic, political stability.

Key advantages of the Republic of Cyprus for international and cross-border business:

• positive geographical localization (access to markets in Europe, Asia, Africa)
• the large number of tax agreements (SIDCs) that allow for double withholding of taxes
• the opportunity to use EU trade agreements
• licenses, permits of Cyprus permit to operate/provide services in any country within the EU
• total absence of exchange control
• a wide range of income classes fully exempt from taxation in Cyprus
• special tax regimes for VAT payers (effective rate can be 9% or 5% instead of standard 19%)
• state protection of assets with guarantee of confidentiality, etc.

In fact, all the advantages of jurisdiction are difficult to describe. In addition to the above-mentioned points, there are special stock agreements, by which you will protect yourself from unlawful actions of other owners. In the country is quite simple evidence of the economic presence of companies, as well as completely legal activities of a registered offshore company in Cyprus.

Cyprus terms of development of international and local business

The opening of a company in the current circumstances should not be linked to the illegal withdrawal of capital, the erosion of the tax base or the concealment of income, so Cyprus is so often seen as the ideal option to legalize its business with savings on tax payments. The great advantage of the desire to register an offshore company in Cyprus is the possibility of foreign employees with third-country citizenship to move to the country, officially find employment and reside in the country with family members  (may apply for a residence permit under the procedure of family reunification).

Regarding the general atmosphere and business climate, offshore companies in Cyprus receive the following conditions:

• net profit is taxed by a corporate tax of 12.5% (the lowest rate among EU countries)
• when exporting/importing goods, services within the European Union, VAT is zero
• does not tax dividend, interest income, and royalties
• 0% capital gains tax, except for the rapid sale of real estate outside Cyprus
• 80% of royalty income can be exempted from tax by obtaining an effective tax rate of 2.5%
• IT companies receive a special tax regime IP BOX
• in a reorganization of a company, there may be a full exemption from taxation if the legal entity has no economic presence, no commercial purpose

Lawyers at RUE will help to properly register an offshore company in Cyprus, taking into account all the intricacies and nuances of local legislation.  To open offshore in the Cyprus jurisdiction is quite advantageous for those who conduct their activities in the field of investment and trade in financial instruments – Cyprus license allows providing services to professional and retail investors in any of the EU countries.

What conditions must be observed to register an offshore company in Cyprus?

The existence of a licensed Cyprus Law Company is a prerequisite for the registration authorities to establish a new company in Cyprus. The future legal entity must then meet a number of requirements:

• to have a registered capital of at least 1,000 EUR;
• to appoint at least one director (preferably from the tax residents of the Republic of Cyprus);
• to appoint a secretary (similarly to the director, decided at the general meeting of shareholders);
• rent or buy into the property office, where key decisions will be made, documents will be stored;
• submit documents about shareholders (from 1 to 50 persons are allowed in the form of LLC) and beneficiaries;
• attach to the application the necessary information (articles of association, memorandum, personal data of shareholders, director, secretary, beneficiaries, etc.).

Mandatory steps for the opening of an offshore enterprise in Cyprus

The procedure for registration is established by the current Cypriot legislation and begins with the choice of company name. All legal entities of the island state are required to have the termination of Ltd (Limited), the name is checked by the business register (it is prohibited to have two companies with identical names).

Regarding names, firms are prohibited:

• assign unsounding names
• issue titles that imply illegality as well as any connection with royal families
• choose names that defame the reputation of any country

With RUE it is much easier to register an offshore company in Cyprus – our lawyers will quickly check the selected names, in the absence of similar – reserve the selected name for you. The next steps for the opening of the Cyprus firm are as follows:

• the company is entered in the register
• documents are legalized
• opens a corporate bank account in Cyprus
• documents are issued for the operating company (from now on, the firm can start legal activities)

In advance, you will need to select an office and conclude a lease agreement for at least 1 year. In Cyprus, the use of a virtual office is allowed, it is possible to place employees in common offices, where staff of other companies are already working. You can also rent a personal specialized office in Cyprus for your legal entity.

Important information about Cyprus offshore companies

At the moment in Cyprus there is no official requirement for the residency of directors and secretaries, but with such Cyprus resident officials it is much easier to prove the real presence of the company and obtain tax incentives. In any case (even if the company does not have an activity), annual financial statements with the opinion of a certified auditor are attached to the accounts for the previous reporting period.

In other important aspects arising when registering an offshore company in Cyprus:

• There is a procedure of advance payments on the tax on the planned profit, adjustments are made in the second half of the year when calculating the final tax amount.
• Subsidiaries have the right to transfer losses to the parent company’s income (including when in a different jurisdiction) without any time limit.
• Due to the crisis measures, the Government of Cyprus has delayed the liquidation of companies without commercial activity.
• Information on the beneficiaries of Cypriot companies is not available in public registers.
• Cyprus is almost in full compliance with all international standards and the provisions of the pan-European directives.
• All legal procedures for the registration of a Cyprus company must be conducted by a representative with a legal education and a license to practice law.

It should also be borne in mind that Cyprus has a special public body called the Business Information Base. Its task is to alert large, medium and small companies about changes in existing legislation, unique proposals and new state incentives.