Cyprus incorporation process– what do I need to know?

Strategically located at the crossroads of Europe, Asia, and Africa, Cyprus offers a business-friendly environment coupled with a robust legal framework.

With a full EU membership supported by a favourable tax regime, Cyprus is an attractive destination for businesses looking to expand internationally. The island of Cyprus boasts excellent infrastructure, skilled workforce, and a high quality of life, enhancing its appeal for establishing a company.

• 5% corporate tax rate, one of the lowest within Europe
• Broad network of double tax treaties
• Unilateral tax credit on any tax paid abroad on the same income, irrespective of the existence of a double tax treaty
• Profit from sale of shares and titles are exempt from taxation
• No capital gains tax other than on the disposal of immovable property situated in Cyprus or shares representing immovable property based in Cyprus
• Payment of dividends and interest to non-Cyprus tax residents are generally exempted from withholding tax (exceptions apply)
• Notional interest deduction on new capital in the form of paid-up share capital or share premium of a Cyprus company
• Transfers of assets and liabilities between companies can be affected without tax consequences within the framework of a reorganisation (mergers and demergers, divisions, exchange of shares)
• IP Box Regime can bring effective tax rate down to 2.5% for IP holding companies with qualifying assets

• Decide on the type of company (ie private or public company)
• Decide on the name of the company
• Determine address of registered office
• Determine directors and secretary
• Decide on the members and the share capital
• Decide on the objects of the company
• Decide on the Memorandum and Articles of Association
• Provided that the Registrar of Companies is satisfied that all relevant legal requirements for the registration of the company have been met, they will proceed with the publication of the Company’s registration to the Official Gazette and issue the certificate of incorporation.

On 31 December, 2022, Cyprus changed its tax residency rules. Previously, tax residency was mainly determined by management and control, but now there is an extra test based on where a company is incorporated. This aims to cover Cyprus-registered companies that aren't tax residents anywhere else.

However, even if tax residency is established in Cyprus from a local perspective, if there is no business purpose and no substance to the decision-making process here, home jurisdictions will increasingly be likely to challenge the host jurisdiction for taxing rights. These challenges are happening more often, so it's important for businesses working across borders to lock in a clear tax position to plan their operations efficiently. One of the ways to strengthen substance is by appointing majority Cyprus resident directors to your company.

Tax snapshot

• All Cyprus resident companies are subject to 12.5% corporate tax and must file an annual tax return to the Cyprus Tax Department.
• Every company is obliged, within 60 days from the date of the incorporation, to apply for Taxpayer's registration with the Tax Department and to obtain a tax number.
• Special defence contribution (SCD) applies to dividends, interest and rental income received by Cyprus tax residents.
• At the same time, any natural or legal person residing or is registered in the Republic of Cyprus, that has made taxable supplies of goods and services within the last 12 consecutive months or will be making such taxable supplies of goods and services over the amount of €15.600 in the next 30 days, is required to submit a supplementary form for VAT Registration.
• Both employers and employees of a Cyprus tax resident company must contribute to the social insurance scheme.

Audit requirements

• All Cyprus companies must have their annual financial statements audited or reviewed by a licensed Cyprus audit firm.
• The licensed auditor must be appointed to the annual general meeting of the company, whereby the auditor’s report must be submitted along with the financial statements to the Cyprus Registrar of Companies.

Corporate compliance requirements

• All Cyprus companies must keep records of all the minutes of the annual general meetings of the company’s shareholders, which are then kept at the Cyprus registered office of the company.
• Every Cyprus company must hold a general meeting in each calendar year as its annual general meeting.
• The company and every officer of the company, has an obligation to inform the Registrar of Companies of any changes to the company’s particulars, such as change of name, change of directors and secretary details, changes in share capital, change of registered office address, registration of charges over the assets of the company, amendments of its memorandum and/or articles of association, etc.
• At the same time, once every calendar year, the company must prepare its annual return (HE32) up to and including its reference date, and submit it to the Registrar of Companies along with its a copy of the company’s financial statements.

Beneficial ownership registry requirements

• A company or other legal entity incorporated or registered must, no later than 90 days from the date of its registration/incorporation, submit all information regarding the beneficial owner(s).
• In the event of a change in the details of the BO, the entity and its officers shall, within 45 days from the date on which the change in beneficial ownership information contained in the Register of Beneficial Owners of Companies and Other Legal Entities became available, submit the information to the BO Registry.
• During the period from 1 October to 31 December of each year, a company or other legal entity and each officer must confirm the information entered in the Register regarding their beneficial ownership.

• Our teams can assist you with all aspects relating to the formation of your Cyprus company, while offering a range of additional services such as company secretary and registered office services to further support your entity’s statutory requirements.
• We provide high-level appointments of individual Cyprus resident directors who understand and can implement complex corporate strategies.
• Our accounting team can help you with your company’s comprehensive bookkeeping and annual financial statement preparation.
• Our teams can facilitate with the seamless opening of bank accounts in Cyprus.
• For legal support, we work closely with our strategic alliance partner, Harneys law firm to provide integrated business solutions.

Reach out to your usual Harneys Fiduciary contact or Theodoros Assiotis.