Forming and managing a company in Cyprus, all you need to know to make your business successful

Forming and managing a company in Cyprus, all you need to know to make your business successful

Posted by: Chambersfield Economides Kranos
Category: Business, PUBLICATIONS

Forming and managing a company in Cyprus, all you need to know to make your business successful

Internationally, Cyprus is recognized as an entrepreneurial paradise, shipping hub & tax heaven. Over the past years we have seen an increase in companies registering in Cyprus due to several reasons and it is obvious that there are several benefits.

Being in EU, registering in Cyprus automatically enables companies to enjoy the privileges and international images of having an EU company. Exposing your company to global appreciation, making it easier for you to grow your business.

Cyprus has established a very good reputation for businesses due to several factors:

  • being a safe and reliable jurisdiction
  • having one of the most beneficial tax plans in the world
  • low corporate tax rate
  • over 60 double-tax treaties & double taxation reliefs
  • 0% Dividend tax for non-Cypriot citizens
  • Sale of shares. Tax free sale of shares, ideal for holding companies
  • Adoption of B2B transactions in EU and outside EU with VAT 0% based on EU directives

Incorporating a company as well as opening and running a company in Cyprus can be done in a few days and it’s very easy. In this article we will look at the critical factors you need to consider when setting up a company in Cyprus to avoid any issues.

For non-Cypriot tax residents, the environment is a lot more favourable since they only get taxed on certain income from permanent establishments within Cyprus. Making it particularly favourable for SMEs and start-ups.

Most importantly before registering you need to determine the company’s business structure, it can be a Variable Capital Investment Company, Public Companies, Limited liability company by guarantee or Private Company Limited by Shares. Limited liability company is one of the most common types of business structure in Cyprus.

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Four main steps to form a Cyprus company.

Step 1: Prepare the necessary documents

Here is a checklist of what documents you must have for the incorporation:

  • Company type;
  • Business scope;
  • Registered office;
  • Statement of capital; and
  • Memorandum and Articles of Association (MAA).

Step 2: Name your company

The country will only accept unique names that are different from other already registered companies.

Step 3: Submit required documents and information

After gathering all required documents, you must submit to the Registrar of Companies in Cyprus and wait for the approval.

Step 4: Submit the related fees and receive the result

This process usually takes around 5 to 7 working days. If you submit all required papers, information and fees, your application will most likely be successful.

Company formations in Cyprus are generally linked with certain legal requirements. Every business registered on the island is required to comply with the following mandatory factors:

Registered office: The company is required to have an official address in Cyprus, where notices are sent (e.g. letters from the Registrar of Companies), company registers such as members and director details, charges, and other relevant documents are maintained.

Directors: Businesses in Cyprus must have two directors (or one director if it is a private company), who can either be residents or foreigners. It is advised to appoint local directors to create effective management and control in Cyprus.

Audit: Under the International Accounting and Auditing Standards, Cyprus businesses must be audited annually by a firm of auditors.

Secretary: Every company is required to appoint an individual or secretarial company for this position. The secretary of the company can be Cypriot or foreigner.

Share capital: Under Cyprus Company law, there is no minimum share capital requirement for private companies, while the minimum capital of a public company is €25,629.

Annual general meeting. All Cyprus corporations must hold a meeting of shareholders at least once a year within 18 months from the incorporation date.

Related costs when running a business in Cyprus

Cyprus Company formation costs

The costs related to a company formation in Cyprus, is one of the most complicated aspects to its setup and operation. For a trouble-free process it is important to be aware of these costs and have a fully prepared budget.

Below are some of the major business costs that we think you should be aware of:

Business registration: Business owners can choose to submit payment for company setup online or offline. Online registration is normally payable by credit card, while offline payment can also be submitted.

Name approval: There is a fee of €10 that must be paid for every name application.

Office maintenance: A registered office is considered mandatory; the fees may vary depending on the service providers. Business owners however can choose the options that best suit their needs.

Apart from initial setup costs, it is also crucial for companies to keep track of maintenance costs to sustain business activities.

Annual fee: Every registered company that has established a place of business in Cyprus must submit an annual fee of €350 by the 30th of June for each year of operation.

Accounting service: Every business in Cyprus must keep proper accounting records according to the International Financial Reporting Standards and the provisions of the Companies Law.

If business owners choose to consult a professional accountant, the accounting cost will be imposed depending on the services.

Bank account opening: The costs related to the corporate bank account opening should be taken into consideration. The actual amount can vary significantly depending on the banks and the services attached to the accounts.

Challenges of starting a business in Cyprus

Business challenges - Cyprus company

Besides the plenty benefits, setting up a company in Cyprus has some flip sides. In this section, we will look into some of the challenges when incorporating a company in Cyprus.

Corporate privacy. It can be a bit challenging if you are planning to raise capital from external investors for your company. The country allows nominee services, so you can keep the information more confidential however, the country forces you to publicize the details of all shareholders and directors.

Language: The government projects, regulations and procedures are carried out exclusively in Greek. International business owners should be careful in order to prevent any potential conflict and misunderstandings.

Corporate bank account: All established companies in Cyprus need to have a bank account to ensure a stable flow of business payments.

Banks in Cyprus have a detailed evaluation and strict procedures, which may pose challenges for businesses. One of such challenges is that Cyprus bank may require face-to-face interviews.

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Though the benefits of setting up a business in Cyprus outweigh the challenges, business owners should acknowledge the above factors that may potentially cause problems before taking any further steps with company incorporation.

Key takeaways from this article

All in all, there are several factors that you need to take into account when opening a company in Cyprus:

  • Opening a company in Cyprus is a simple four step application.
  • Companies must pay both registration and maintenance fees.
  • Every business in Cyprus is subject to compliance with the legal framework.
  • Corporate anonymity in Cyprus can be challenging, languages and bank account setup can also be challenging. Global entrepreneurs must stay alert and act carefully to avoid trouble.

If you’d like Chambersfield Economides Kranos to help you set up a company in Cyprus, don’t hesitate to drop a message or talk with one of our expert consultants.