cyprus

Key benefits

Located in the Eastern Mediterranean, the island of Cyprus is conveniently situated at the hub of three continents; Europe, Asia and Africa. The population of the Republic of Cyprus currently stands at approximately 850,000 with the majority residing in the four main towns of Nicosia (the capital), Limassol, Larnaca and Paphos.

As a former British Colony, English is widely spoken throughout the island with 80% of the population being relatively fluent. The legal system is structured on its English counterpart and is based on common law with many Cypriot Lawyers being trained in the UK. The Republic of Cyprus is a free market economy providing vast opportunities for international business and efficient tax planning. With first class legal and accounting services, excellent air links with Europe, the Middle East and Asia, Cyprus is a great location to conduct business.

Cyprus is a leader amongst international tax planning jurisdictions and registration of a company in Cyprus is the ideal mechanism for protecting a business. In the last decade the role of Cyprus in international tax planning has increased dramatically. As a member of the EU Cyprus has quickly gained a reputation as a reliable, legitimate jurisdiction with some of the lowest taxes in Europe in addition to having over 40 double tax treaties to assist in international tax planning.

Please contact us if you would like to receive additional information on Cyprus.

Based on new austerity measures there will now be a stronger enforced requirement that Cyprus enterprises are up to date on Annual Returns filing. The penalty for not filing will either be a fine or the legal entity being struck off.

Investment firm

Service Pro can assist clients in setting up a Cyprus Investment Firm (CIF) which would provide them with a license that would enable them to provide the financial services including brokerage and portfolio management. A major benefit of operating a CIF is that there is no tax on the income that is generated from financial instrument transactions.

Establishing and maintaining a holding structure

The formation of a holding structure is a great way to make sure assets are well managed in a way that results in strong growth. By having a holding structure it will be easier to identify where improvements can be made that will improve profitability.

Key benefits of the island

In addition to having the lowest tax rate in the EU and other big tax advantages for enterprises, overall it is a simple and straightforward process to incorporate a company in Cyprus. A corporate bank account can also be opened without delay and the Directors of the entity do not have to be present in Cyprus.

Procedure of company formation in Cyprus

A limited Liability Company is the most popular types of Cyprus offshore company. In order to assist with incorporation, Service Pro helps clients in completing several forms and providing the proper identification for the Beneficial Owner(s), Director(s) and Shareholder(s).

Fee schedule

Prices start at €1550 to incorporate a Cyprus legal entity. Price increase based on additional services required, nominee services, bank account opening, etc. 

Tax and accounting regulations

The following are the different types of taxes in Cyprus: corporate income tax, personal income tax, Value Added Tax (V.A.T.), special defense contribution tax, capital gains tax, Immovable Property Ownership Tax, inheritance tax, stamp duty tax. Entities are required to file every year and have an audit completed. 

Benefits of trading firms

There is no withholding tax in Cyprus. This applies to everything; dividends, interest, etc. In addition there is no capital gains tax. There is also no control of money as you will find in most EU countries.

Benefits of holding companies

A few reasons why Cyprus is a great location for a holding entity include that it has the lowest tax rate in EU at 12.%, tax free intercompany dividends and it is a trustworthy jurisdiction that is feature on the white list of OECD. When a Cyprus holding company disposes shares to the subsidiary or another one of the associated companies there is no tax liability.

Voluntary wind up

The voluntary winding up of a Cyprus legal entity is a 3 stage process. Initially a board meeting must be held where it is decided to proceed. A liquidator must be appointed at the meeting and relevant documentation must be filed. Finally a Certificate of Dissolution must be obtained.

Double taxation treaties

To avoid having to pay tax in more than one country, double taxation treaties have been established. There are a total of 45 such agreements that Cyprus has with other countries. By having these agreements withholding taxes on capital gains, royalties, interest and dividends can be eliminated in some cases.

Acquire temporary work permit for Cyprus employees

Service Pro has experience in acquiring temporary work permits. These are for employees that come from non – European countries. An International Company must first apply to obtain a permit that allows them to employ non – European personnel. Read more

Key benefits

A combination of favourable factors have led to Cyprus becoming a popular jurisdiction to form a company and in the last decade the role of Cyprus in international tax planning has increased dramatically.

The admittance of Cyprus to the European Union in May 2004 has ensured advantages in terms of increased legitimacy and compliancy; Cyprus is now included in the Organisation for Economic Cooperation and Development (OECD) White List.

One of the major benefits of Cyprus is the Corporation Tax Rate; Cyprus has one of the lowest tax rates in the EU with only 12.5% Corporation Tax.

Additional benefits are as listed below:

  • The incorporation process for a Cyprus company is simple and straightforward. A Cyprus company can be incorporated with only one Director and Shareholder in addition and there are no restrictions on foreigners acting as Director or Shareholder. Prior to incorporating the name must be approved by the Registrar of Companies. Providing there are no companies with similar name approval will be granted quickly. Filing in English is permitted.
  • Lowest corporation tax in Europe of 12.5%.
  • Favourable tax regime for Cyprus holding companies, including no tax on consolidation, no controlled foreign company (CFC) rules, etc.
  • No taxation on inward or outward dividends and no Capital Gain Tax (CGT) on sales of securities. Due to this many security traders have trading offices in Cyprus.
  • There are more than 40 double tax treaties (DTT) concluded with other countries.
  • A bank account for a Cyprus company can be open quickly and efficiently without the directors of the company being present. To open a bank account remotely notarisation and legalisation of documents of directors and shareholders of Cyprus company is required.
  • Cyprus has adopted International Financial Reporting Standards (IFRS).

Investment opportunities

The Cyprus Investment Promotion Agency (CIPA) is a registered not-for-profit company limited by guarantee and fully funded by the government of Cyprus, with the aim of encouraging investment in Cyprus.
Please find brochures produced by CIPA that provide additional information about the benefits of Cyprus. In the document CYPRUS FOR FUNDS, you can read about:

 
Setting up funds in Cyprus PDF
  • Cyprus: Solutions in a Changing Fund Industry.
  • Cyprus: The Location of Choice For The Domiciliation and Administration of Investment Funds.
  • Cyprus: The Location of Choice For Asset Management Companies.
  • Taxation in Cyprus.

In the document, Cyprus – Invest with confidence, CIPA gives the current overview on the investment situation on the Island. This report shows you key benefits of Cyprus as a location for your investments, clearly describing reasons. In “Cyprus – Invest with confidence” you can read about:


Invest in Cyprus PDF
  • Reasons to Invest in Cyprus.
  • Glimpse of Cyprus.
  • European Union Membership.
  • Cyprus: A Low Risk Market Economy.
  • Robust Legal & Regulatory System.
  • Favorable Tax System.
  • Double Taxation Agreements.
  • An Enviable Lifestyle.
  • Banking & Financial Services.
  • Investment Funds Centre of the Region.
  • Shipping.
  • Energy.
  • Information and Communication Technologies.
  • Professional Services.
  • Education.
  • Health Services.
  • Cyprus Investment Promotion Agency (CIPA).

 

Tax and accounting regulations

A coherent offshore tax planning strategy is essential to maximise the effectiveness of any offshore company. Service Pro can assist by structuring the most tax efficient strategy to fulfil your requirements.

Service Pro can guide you as to which jurisdictions offer the best tax plan by identifying the types of tax payable as well as applicable exemptions and incentives. Service Pro will provide tax planning advice that can identify which is the best jurisdiction in terms of favourable tax laws efficiency.

Income in Cyprus is administered under a number of Directives. Specific incomes are taxable only under one Directive, depending on how they were derived.

The Tax Categories (Directives) are as follows:

  • Corporate Income Tax.
  • Personal Income Tax.
  • Value Added Tax (V.A.T.).
  • Special Defence Contribution Tax.
  • Capital Gains Tax.
  • Immovable Property Ownership Tax.
  • Inheritance Tax.
  • Stamp Duty Tax.

Corporate Income Tax:

Corporate Incomes for all companies are liable for 12.5% annual Corporate Income Tax, this is the lowest rate in the EU. An exemption to this rule are ship management companies, who are liable to 4.25% annual Income Tax.

Corporate expenses are tax deductible (Tax is levied on Net Income) with the exemption of entertainment expenses (hotels, restaurants, bars etc) for which there is an annual ceiling. Expenses that surpass the ceiling are not tax deductible.

Corporate losses can be brought forward for up to five (5) years, and thus reducing the tax burden of the following year. Please also note that corporate profits fall under double taxation – taxed at the corporate level when the company earns them, and taxed again in the personal level (personal income tax) when the corporation distributes its profits as dividends (Under Special Defence Contribution).

How it is paid:

Cyprus tax is based on the principle of self – assessment, where individuals and corporations have to calculate their tax liabilities themselves. Companies have to estimate their annual income for the current year, estimate the tax payable, and pay it to the government in two instalments within the year, under the temporary income tax provision. (First instalment 31st of July, second instalment 31st of December). When submitting audited final accounts, the audited taxable income / tax liability, should be about 70% of the estimated income declared (and paid) under provisional income tax, otherwise the company is liable to some penalties.

  • Compliance:

Corporations have to complete and submit Inland Revenue 4 (I.R.4) form to Inland Revenue Authorities, along with audited financial statements to the Company House.

Personal Income Tax:

Salary income earned in the republic is taxed with brackets as follows:

Income bracketTax rate
0-19,5000%
19,501 – 28,00020%
28,001 – 36,30025%
36,301 +30%

The first €19,500 is exempt from taxation. Contributions to the Social Insurance fund of the republic are exempted (tax deductible). Donations (to authorised institutions) are also exempt, but the individual has to provide the suitable receipts. (€150 can be claimed as donations without submitting receipts). Subscriptions to recognised professional bodies are also exempt. Premiums paid for life insurance are exempt. Contributions to recognised provident/retirement funds could also be exempt.

How it is paid:

It is the employer’s responsibility to calculate, deduct, and pay the appropriate personal income tax of any employees on a monthly basis via (Pay as You Earn: P.A.Y.E. tax). Which is payable for the current month, and can be delayed for one month, companies usually pay for the previous month, for example, by the end of September they will pay for August.

Compliance:

Individuals who are liable for personal Income tax are obligated to complete and submit a form (IR1) to Inland Revenue once a year. Corporations have to submit an Inland Revenue 7 (I.R.7) form, with the amounts stated or declared / paid as salaries, once a year.

Deemed dividends:

The government assumes that 70% of corporate after tax profits will be distributed to Shareholders within two years. Dividends paid to Shareholders who reside within the republic are taxed under Special Defence Contribution with a 17% Burden. Thus, whether a company chooses to distribute its profits as dividends, or to re-invest them, 70% of profits are taxed as dividends anyhow. This effectively brings the effective corporate tax rate for profitable Cyprus companies to about 15% as opposed to the nominal rate of 12.5%. The above rule does not apply for Shareholders who are non-tax-residents in Cyprus.

Value Added Tax (VAT):

Value added Tax (V.A.T) is a pan European indirect tax on purchases, payable by consumers (end users). Businesses (V.A.T registered companies) are required to act as government agents, i.e. collect V.A.T from their customers and pass it (pay) to the government, even though businesses are not V.A.T taxable themselves. Moreover, it is the legal responsibility of the agent to maintain accurate transaction records and provide V.A.T data to the government.

Currently the standard V.A.T rate in the republic is 19%. Companies invoicing (selling) to individuals or other companies within the republic are required to inflate their products / services by 19%. Some transactions have a 0% V.A.T rate, for example basic food staff, or payments for rent. Other transactions, such as restaurants have a reduced rate (9%).

For EU sales (sales from a company based in one EU member to a customer based in another EU member state) the standard rate of the supplier applies if the customer is an individual. If the customer is a V.A.T registered company then the V.A.T rate is zero.

Sales to Customers whom reside in a non-member state (foreign Sales) are exempt from V.A.T (usually applies for services, not for physical goods).

How is it paid:

Every three months the difference between V.A.T charged on Sales, and the V.A.T incurred on purchases within the republic is payable to the government.

Compliance:

A V.A.T declaration form is submitted quarterly.

V.A.T Information Exchange System (VIES) was introduced by the E.U. in order to prevent and deter the abuse of the 0% V.A.T rate on intra-community transactions (sales from a company based in one EU member state to a company based in another EU member state).

Any V.A.T. registered entity who sells goods or services to a V.A.T registered entity in another member state is required to declare all the intra-community sales made during a calendar month. It is therefore the responsibility of the agent to maintain records of V.A.T. registered customers’ V.A.T numbers.

Capital Gains Tax:

In Cyprus there is no capital gains tax for securities/financial instruments, making the island ideal to set up Financial Services Entities.

Exemption: There is a 20% capital gains tax on real estate. Also the sale of shares of a company that owns real estate is subject to Capital Gains Tax (CGT).

If an individual sells his first property, or the property in which he resides, he is liable to an exemption from capital gains tax (but there is a ceiling to the amount that can be claimed as exempt).

Special Defence Tax:

Rent income, dividends, and interest earned are all taxable under special defence contribution.

Dividends earned by Cyprus residents (note: they don’t have to be Cypriot nationals) are taxed at 17%. Dividends paid from one company to another are not taxed. Dividends paid to non-residents are not taxed.

Interest earned on deposits is taxed at 30%.

Exemptions: Interest Earned from Government Bonds, deposits with semi-government entities etc (example housing finance organisation) is taxed at 3%. Physical persons whose Income is less than €7,000 per annum are exempt.

Note: Interest earned from the normal operations of a business, example late payment interest on invoices, is not considered interest.

Rent Income is taxed at 3%.

Special category: if company Directors have balances with their companies (i.e. borrowed money from the company) the government assumes that the Director earns 9% interest on these loans, and deemed interest is added to their taxable income.

How it is paid:

Companies that pay interest / Dividends are obligated to estimate the tax playable and pay it (SDC is always paid at source).

Compliance:

Individuals that earn dividends, Rent Income, should include them in their annual income declaration form. Companies should prepare and declare dividends payment form.

International aspects of Cyprus taxation:

  • Anti-avoidance regulations are enforced. Cyprus Tax Code follows OECD Recommendations.
  • Transfer Pricing: There is no specific legislation in Cyprus tax code. However, arm’s length test will apply to related party transactions.
  • Double Taxation Agreements: see below.

Double taxation agreements:

See the Cyprus Double Taxation Treaties down on the page.

Annual reporting requirements:

Cyprus international companies are required to comply with the following:

Financial statements:

Every company must prepare a full set of financial statements in accordance with international financial reporting standards.

Annual return:

Annual return must be submitted to the Registrar accompanied by the full set of financial returns.

Audit:

Every Cyprus Company is obliged to appoint a local qualified Auditor to audit the financial records and submit an annual financial report to the authorities. A copy of the audited financial statements together with the Annual Report must be submitted to the Registrar of Companies. The financial statements are required to be prepared and submitted by December 31st of the year following the year of company registration.

Procedure of company formation

The most popular type of Cyprus Company is a Limited Liability Company. Cyprus offshore company formation and administration is done under the Cyprus Company Law Cap.113 which is a virtual copy of the English Companies Act of 1948.

The procedure for incorporation of companies in Cyprus is as follows:

  • An application form is filled in, signed and scanned containing information about a preferred name and details of Directors and Shareholders.
  • A Beneficial Owner declaration is filled in, signed, scanned and sent to Service Pro.
  • A scanned copy of a passport for directors and Shareholders is required.
  • A scanned copy of proof of residence. This can be in the form of a utility bill, bank statement or bank reference and must not be older than 3 months.
  • At this point Service Pro will issue an invoice for a Cyprus offshore company formation.
  • Upon receipt of funds received for formation of a Cyprus offshore company, we start the formation process by submitting a preferred name for approval of Cyprus Registrar of Companies. This takes up to 5 working days.
  • Once the Cyprus offshore company name is approved, a Shareholder of a Cyprus company signs the Memorandum and Articles of Association (M&AA) and sends the originals to Service Pro by courier.
  • Upon receipt of the signed M&AA, we start the Cyprus offshore company incorporation process. It takes up to 15 working days for a Cyprus offshore company formation and apostille of incorporation certificates and up to a maximum of 5 working days for courier delivery.
  • At the beginning of each year we issue an annual invoice for €400 to cover renewal fees which includes the registered office fee and company Secretary.

Company administration guidelines

Share capital:

  • Authorised and issued share capital: The minimum authorised share capital is €1,000 with 1 share of €1.00.
  • Classes of shares permitted: Registered shares of par value is the standard however preference shares, redeemable preference shares and shares with no voting rights are also permitted.
  • Shareholders: The minimum number of shareholders is 1. There are no restrictions on foreign individuals or corporate bodies to be Shareholders.

Directors:

  • The minimum number of directors required is one and names appear on public record but anonymity can be obtained by using nominees.
  • There is no restriction for foreign nationals to act as a director of a Cyprus International Business Company and corporate directors are allowed in Cyprus.
  • Although there is no requirement for a local resident to be a director it is recommended to use a local nominee director in order to obtain a tax residence certificate in Cyprus.
  • An annual general meeting of directors must be held, this must take place within 15 months of the previous one.

Restrictions on Name & Activity:

  • Cyprus International Companies name must end with ‘Limited’.
  • The following cannot be used: Assurance, Bank, Building Society or any words deemed sensitive or offensive.

Local Requirements:

  • Secretary: It is obligatory to appoint a Company Secretary. They may be either an individual or corporate body however it is advisable to appoint a resident company secretary. The secretary is responsible for keeping and filing corporate documents with the Registrar of Companies. Service Pro can provide company secretarial services for an annual fee.
  • Registered Office: It is compulsory for a Cyprus international company to have a registered office in Cyprus which is used as the business address of the company. A register of Directors, Shareholder, Secretary and minutes of general and Director meetings are kept at this location. All changes have to be filed with the Registrar of Companies within a month from the date of change. Service Pro can provide the use of an office address if required.

Confidentiality:

  • All details of Directors and Shareholders appear in the public records. In order to protect confidentiality nominees can be used.
  • Statutory secrecy provisions protect details of the beneficial owners supplied to the Central Bank.

Timescale:

  • From the receipt of the required documentation to the incorporation of a Cyprus international company the approximate time period is 10 working days.

Compliance

Due to the recent austerity measures imposed by the Cyprus government Cyprus company compliance has been tightened and therefore all companies have to be up to date on the filing of annual returns. Prior to the implementation of new measures, the Registrar of Companies had a relaxed approach toward compliance matters.

Failure to submit the annual return could result in the Registrar of Companies imposing a fine and in some circumstances being struck off the register or significant delays in obtaining incumbency or other certificates or executing any changes to a Cyprus company.

Annual return filing is regulated by section 118, 120 and 121. According to section 120, an annual return has to be completed within 42 days after the Annual shareholder meeting. Sections 120 and 121 prescribes that any officer in charge is considered guilty of a criminal offence and shall be liable on conviction of a fine. In addition and irrespective of the provisions of a criminal offence, where company fails to comply with AR preparation and filing, the Registrar of Companies may impose thereto an administrative fine not exceeding €8,500.00

Payments for the annual levy can be executed through the Registrar’s website, at the following URL:

Users will be capable of executing the following payments:

YearAmount

2011

€350

2012

€350 up to the 29th of March 2013. (Applicable for companies that haven’t paid for last year or have previously filed for exemption as dormant).

2013

€350 up to the 30th of June 2013.

2013

€385 from the 1st of July 2013 until the 31st of August 2013.

2013

€490 from the 1st of September 2013 until the 30th of November 2013.

 

  • Levy: renewal of company, to be paid in June every year. Requirement by Company House. Failure to do so results in penalties and in striking off the company from the registry of Company House.
  • Corporate taxation: Submission of IR4 and HE32, compulsory requirements by Inland Revenue and Company House. Needs to be done on a yearly basis. In order to submit these forms, book keeping and audit for the company must be done. If the IR4 for a company is not submitted, the company will not be able to request any tax certificates. When the audited accounts are submitted at a later stage, the company pays penalties to Company House and if applicable, interest on the tax amount payable to Inland Revenue.
  • VAT registration: for companies that are registered in VAT authorities, they need to submit a VAT report on a quarterly basis. To prepare this form book keeping must be done.
  • VIES registration: companies that are selling goods or providing services to EU countries are required to register in VIES. VIES declarations are submitted on a monthly basis.

Once a company is registered in VAT & VIES authorities it must submit its declarations on time. Failure to do so results in the payment of monthly and quarterly penalties.

Double taxation treaties

The development of international trade has increased the issue of double taxation and many countries have entered into agreements with other countries in order to limit taxation. A double taxation treaty enables the offsetting of tax paid in one country against the tax payable in another thus preventing double taxation although the rates and exemptions vary from one country to another. As of January 2010 Cyprus had entered into 45 double taxation agreements, these are listed in the table below. Although Cyprus has fewer DTT’s than some competing EU jurisdictions they are, in many cases, more beneficial such as those with Russia, Eastern Europe and the Middle East.

A significant number of double tax treaties concluded by Cyprus lowers and in some cases eliminates, foreign withholding taxes on dividends, interest, royalties or capital gains. Tax sparing credits (see below) are also prevalent in some jurisdictions.

A list of Double Taxation Agreements which have been concluded and their respective date of enforcement can be found below.

JurisdictionEntry into force date
Austria10/11/1990
Bulgaria03/01/2001
Belarus12/02/1999
Belgium08/12/1999
Canada03/09/1985
China05/10/1991
Denmark10/04/1982
Egypt14/03/1995
France01/04/1983
Germany11/10/1977
Greece16/01/1969
Hungary24/11/1982
India21/12/1994
Ireland12/07/1970
Italy09/06/1983
Kuwait25/09/1986
Lebanon14/04/2005
Malta11/08/1994
Mauritius12/06/2000
Norway01/01/1955
Poland09/07/1993
Romania08/11/1982
Russia17/08/1999
South Africa08/12/1998
Sweden14/11/1989
Syria22/02/1995
Singapore08/02/2001
Thailand04/04/2000
United Kingdom01/11/1974
USA31/12/1985
Serbia*08/09/1986
Montenegro*05/11/2008
Slovenia*08/09/1986
Slovakia**30/12/1980
Czech Republic**30/12/1980
Azerbaijan***26/08/1983
Armenia***26/08/1983
Kyrgyzstan***26/08/1983
Moldavia03/09/2008
Tadzhikistan***26/08/1983
Uzbekistan***26/08/1983
Ukraine***26/08/1983
Seychelles27/10/2006
San Marino18/07/2007
Qatar20/03/2009

* The treaty between Cyprus and the Socialist Federal Republic of Yugoslavia is still in force.

** The treaty between Cyprus and the Czechoslovak Socialist Republic is still in force. The treaty has ceased to apply between Cyprus and Czech Republic as from 01/01/2010 (date of application for the provision of the new agreement).

*** The treaty between Cyprus and the Union of Soviet Socialist Republics is still in force.

Tax Sparing Credits:

Tax sparing is a tax treaty provision whereby the contracting state agrees to grant relief from from resident taxation with respect to source taxes that have not actually been paid (taxes that have been ‘spared’). Tax sparing provisions can provide significant scope for international tax planning.

Tax sparing credit provisions can be found in the treaties concluded with the following countries;

Canada, China, Czech Republic, Slovakia, Denmark, Egypt, Germany, Greece, India, Ireland, Italy, Malta, Mauritius, Poland, Romania, Russia, Syria, Thailand, UK, Yugoslavia.

The taxes that are all or partly spared are as follows:

  • Tax on interest paid on loans for economic development in Cyprus (Canada, Denmark, Germany, France, UK).
  • Tax relieved because of deductions in respect of investment in Cyprus (Canada, UK).
  • Tax on interest or profits which is unpaid because of tax incentives, reliefs or exemptions in Cyprus (Czech Republic, Greece, Ireland, Romania, Slovakia, Yugoslavia).
  • Tax not withheld on dividends (15%) if the exemption is given for the purpose of economic development in Cyprus (Denmark, Germany, France).

If you require a copy of the double taxation agreements between Cyprus and any of the above countries pleasecontact us.

Bookkeeping

Part ADocuments needed from clients for bookkeeping:

Applicable for all jurisdictions for newly incorporated companies:

  1. Detailed description of the company’s activities.
  2. Bank statements for the financial year for all accounts that are under the company’s name.
  3. Sales Invoices issued from the company during the financial year.
  4. Purchases invoices received from the suppliers of the company during the financial year.
  5. Any expense receipts issued under the company’s name.
  6. Any agreements and contracts signed by the company during the financial year.

Part B

Documents needed from companies that were transferred from another agent:

Cyprus jurisdiction:

  1. All the above documents mentioned in Part A.
  2. A set of the financial statements from the previous financial year that were submitted to Cyprus Company House.
  3. A copy of the submitted and stamped IR4.
  4. A copy of the submitted HE 32.

Cyprus investment firm

Service Pro offers comprehensive solutions for the creation of EU-regulated Cyprus-domiciled financial services companies (Cypriot Investment Firms, hereinafter referred to as “CIF”). Such CIFs are licensed to provide brokerage and portfolio management services in the EU and third countries. The major benefit in the creation of a CIF is that income derived from the transactions in financial instruments is not taxed, since there is no capital gains tax in Cyprus. Another advantage of CIF is low corporate tax (12.5%). An investment firm which is involved in proprietary trading activities (dealing on own account) can also benefit from simplified account opening procedure when establishing counterparty relationships with global investment houses. The process of setting up an account with a reputable counterparty normally takes several days and the provision of copy of CIF license will in most cases be sufficient to start trading activities (no disclosure of Shareholders, provision of certified corporate documents will be required).

A Cyprus regulated investment firm can provide one or more of the following services:

Investment services:

  1. Reception and transmission of orders in relation to one or more financial instruments.
  2. Execution of orders on behalf of clients.
  3. Dealing with own account.
  4. Portfolio management.
  5. Investment advice.

Ancillary Services

  1. Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management.
  2. Granting credits or loans to an investor to allow him to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction.
  3. Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings.
  4. Foreign exchange services where these are connected to the provision of investment services.
  5. Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments.

Estimated registration time:

The application process normally takes around 6-8 months.  2 months should be given for preparation and submission of documents to the Cyprus Securities and Exchange Commission (“CySEC”).  CySEC will review the application and grant license within 4 to 6 months period.

Application procedure:

The following main documents will be prepared:

  1. Application form in the name of the company with detailed information.
  2. Application form in the name of Shareholders with supporting documents such as passport copies, non-criminal record certificates, non-bankruptcy certificate.
  3. Organisational structure of the company.
  4. Organisational structure of the group (if any).
  5. Business plan.
  6. Internal procedures manual.

Internal procedures manual is 50-60 pages documents which describes internal policies of the company. It is prepared in accordance with MiFID regulations (Markets in Financial Instruments Directive) and takes into consideration various policies such as conflict of interest policy, best execution policy, risk management policy, business continuity policy, etc.

The business plan is a 30-40 page document which describes company’s strategy, organisational structure, and includes financial projections for the next 3 years of operation of the company based on 3 case scenarios (optimistic, pessimistic, expected results).

Our Firm will prepare full set of documents for our clients.

Apart from obtaining CySEC license, company should also employ certified professionals for positions of a Dealer, Broker, Portfolio Manager.  These persons should hold certificates of Cyprus Ministry of Finance for provision of investment services.

We work with professional partners who have experience in obtaining licenses and have a full understanding of operation of CIF, gained through practical experience. Our services include not only preparation of application package for license, but full support in the set up of business activities such as advice on minimising costs, outsourcing solutions, renting premises in Cyprus, recruitment of skilled professionals to fill in the required positions.

Opening a bank account

Service Pro can open bank accounts in Cyprus for any company regardless of its jurisdiction. Cyprus banks offer multi-currency accounts can be opened with internet access and also managed by telephone / fax.

Service Pro work with the following Cyprus banks:

One of the major advantages of opening a bank account in Cyprus is that it can be opened without the need to travel to Cyprus. Service Pro can manage the process on your behalf.

Corporate bank account

In order to open a Corporate Bank Account the following documentation is required:

  • A completed Bank Account Application Form.
  • A completed Beneficial Owners Declaration Form.
  • All Corporate Documents – These are required to be verified by Notary and Apostille.
  • A Reference Letter – from an existing bank.

Company Director Documentation:

For a physical person we require:

  • Passport Copy – notarised and apostille.
  • Proof of Address (normally a utility bill under 3 months).
  • Specimen Signature on the Company Resolution Bank Form – this is required to be verified by notary and apostille.

For a corporate Director we require:

  • All corporate documents – these are required to be verified by notary and apostille. They also need to show the beneficial owner of the company

Company Secretary documentation:

  • The passport of the company secretary is required to be verified by notary and apostille.
  • Proof of address is required.
  • The specimen signature on the Company Resolution Bank Form is required to be verified by notary & apostille.

Authorized Signatories:

  • The passport(s) of the authorised signatories are required to be verified by Notary and Apostille.
  • Proof of address is required.
  • The specimen signature(s) on the Company Resolution Bank Form are required to be verified by notary & apostille.

Additional documentation:

If the company’s shareholders are represented by nominees then we require:

  • A copy of the Trust Deed appointing the Nominee Shareholders / Original Declaration of Trust or a copy certified as a “True Copy” the introducer (Service Pro).

Personal bank account

Service Pro can open personal bank accounts.

For a personal bank account we require the following documentation:

  • Copy of Passport – this must be verified by notary and apostille.
  • Proof of Residence – in the form of a utility bill / mobile phone bill not more than 3 months old.
  • A Reference Letter – from an existing bank.
  • The specimen signature on the company resolution bank form is required to be verified by notary & apostille.

Please note that the bank reserves the right to ask for additional information in line with the international practice of meeting the required compliance regulations and adequately establishing the “Know Your Customer” principle.

Process:

  • Service Pro send the client the bank application forms and Beneficial Owners Declaration plus a list of all required documentation.
  • The client is to complete the application forms and e-mail these forms plus additional documentation to Service Pro.
  • Service Pro check all documentation and if correct forward the required documentation to the bank.
  • Upon approval of the documentation the bank sends a welcome letter with the account details plus all relevant bank forms to Service Pro and this is forwarded to the client.
  • The client is required to sign all the relevant bank forms, complete the specimen signature on the signature card and obtain the appropriate verification for all documents. Certification can be obtained in one of 3 ways; at a Bank Representative Office in the country of residence (providing there is one, Service Pro will advise on a case by case basis), or alternatively can be verified by Notary & Apostilleor finally at the Cyprus, Greek or UK Consulate. Service Pro will confirm which method is best on an individual basis dependent on the client’s circumstances.
  • Upon receipt of all correct documentation the bank will send the Personal Identification Number (PIN’s) to the client.
  • The client will confirm receipt of the PIN’s at which point the bank will then duly activate the account and the account will become fully operational.

Timescale:

The account is normally fully operational within 7-10 days after Service Pro initially receive all correct documentation.

SHELF COMPANIES

Shelf companies are ready made companies whose primary purpose is to bypass the lengthy registration or incorporation process that can be required when forming a business.

Certain jurisdictions may take from 3 business days up to 3 weeks for the whole incorporation process to be completed. Shelf companies can be up and running within 4 business days. In some cases banks, government projects and investors will not provide credit ratings, projects or be interested to invest in newly formed companies. This is where shelf companies offer invaluable creditworthiness as they are able to show company history.

Benefits of a shelf company include:

  • Saving time involved in taking the steps to create a new company (such as filing corporate documentation).
  • Shelf companies gain the opportunity to bid on contracts. Some jurisdictions require that a company has been trading for a certain length of time to have this ability.
  • To show that the company has been up and running for some time in order to attract consumers or investors.
  • Shelf companies can gain access to corporate credit.
  • Clients generally trust companies that have been trading for a number of years.
  • Usually, the older the company, the higher it's standing in the business community.
  • Opening a bank account for a shelf company is generally a faster process.

If you require additional information please do not hesitate to contact us.

Holding companies

Cyprus is an ideal place for holding company location.

The following factors are important when deciding the location of a holding company:

  1. Tax treatment of inward and outward dividends.
  2. Tax treatment of capital gains arising from sales of subsidiaries.
  3. Taxation of consolidated profit.
  4. Reputation of jurisdiction where the holding company was formed.
  5. Cost of incorporation and maintenance.
  6. Cost of audit of consolidated accounts.

Tax treatment of dividends

Dividends received from subsidiaries are exempt from profit tax.

Dividends paid to non-residents are exempt from withholding tax.

Tax treatment of capital gains

There is no tax liability when a holding company disposes shares in subsidiary or associated company.

Tax treatment of consolidated profit

There is no controlled foreign company rule. There is no income tax on consolidated profit in hands of a Cyprus holding company. This simply means that a profit centre could be in Singapore or Hong Kong (both jurisdictions are applying territorial taxation principle where non-Singapore or non-Hong Kong source income is not a subject to income tax in Singapore or Hong Kong), or even a “tax haven” like Belize where all profit is earned but consolidated in the hand of Cyprus company and show in consolidated profit a loss account and balance sheet without incurring any tax liability in Cyprus.

Reputation of jurisdiction

Cyprus officially joined the European Union from the 1st of May, 2004.

Cost of incorporation and maintenance

Cost of incorporation is relatively low. Registration of a Cyprus holding company is only €1,500, including registered office, Secretary, incorporation set including apostille and all registration fees. Nominee service is available at additional cost.

Annual audit cost

Annual audit cost of a Cyprus holding company is 25%-30% lower than in continental Europe.

Tax calendar for 2015

At the end of each calendar month:

  • PAYE deducted from employees’ salaries for the previous month.
  • Payment of tax withheld on payments made to non-tax residents during the previous month.
  • Defence contribution deducted from dividends, interest or rent* paid in the previous month.

*Companies, partnerships, the Government or any local authority that pay rent has an obligation withhold special defence contribution on the amount of the rent paid.

31 January:

  • Submission of the deemed dividend distribution declaration for the tax year 2012.

31 March:

  • Electronic submission of 2013 income tax return for individuals and companies preparing audited accounts.
  • Submission of return and payment of the first instalment of the special tax levy by Credit Institutions for 2015.

30 April:

  • Submission of personal tax returns for 2014 by salaried individuals whose gross income exceeds €19.500.
  • Submission of employers’ return and employees’ details for 2014.
  • Payment of provisional tax by insurance companies (life business) for the first four months of 2015.

30 June:

  • Submission of personal tax return for 2014 by individuals who do not prepare audited accounts if their gross income exceeds €19.500.
  • Payment of tax balance for 2014 through self-assessment by individuals who do not prepare audited accounts.
  • Payment of special contribution for defence in relation to rents, dividends or interest from sources outside Cyprus for the first half of 2015.
  • Payment of the second instalment of the special tax levy by Credit Institutions for 2015.

31 July:

  • Electronic submission of personal tax returns for 2014 by salaried individuals whose gross income exceeds €19.500.
  • Electronic submission of employers’ return and employees’ details for 2014.
  • Submission of provisional tax assessment for 2015 and payment of the first instalment.

1 August:

  • Payment of 2014 tax balance through self-assessment by individuals and companies preparing audited accounts.

31 August:

  • Payment of provisional tax by insurance companies (life business) for the second four months of 2015.

30 September:

  • Electronic submission of personal tax return for 2014 by individuals who do not prepare audited accounts if their gross income exceeds €19.500.
  • Payment of immovable property tax for 2015.
  • Payment of the third instalment of the special tax levy by Credit Institutions for 2015.

31 December:

  • Submission of 2014 tax returns for individuals and companies preparing audited accounts.
  • Payment of the second instalment of 2015 provisional tax.
  • Payment of special contribution for defence in relation to rents, dividends or interest from sources outside Cyprus for the second half of 2015.
  • Payment of provisional tax by insurance companies (life business) for the last four months of 2015.
  • Payment of the fourth instalment of the special tax levy by Credit Institutions for 2015.

Electronic submission of tax returns:

  • Individuals and companies, that prepare audited financial statements or persons that their tax return is submitted by a professional accountant, may be obliged to submit their tax return electronically in accordance with such means that may be approved by the Commissioner of Income Tax.
  • In case of such electronic submission of tax returns, the deadline is extended by 3 months.

Administrative penalties:

Administrative penalties amounting to €100 or €200 depending on the specific case, will be imposed for late submission of declarations or late submission of supporting documentation requested by the Commissioner. In the case of late payment of the tax due, an additional penalty at the rate of 5% will be imposed on the unpaid tax.

Note:

The rate of interest for late payment of tax is determined by the Minister of Finance through a decree and it is applicable for the whole year. The rate for 2015 is 4%.

The applicable interest rate for the previous years is as follows:

Period                                 Interest rate %
Up to 31.12.06:             9
01.01.07 - 31.12.09:   8
01.01.10 - 31.01.10:                    5.35
01.01.11 - 31.12.12:    5
01.01.13 - 31.12.13:4.75
01.01.14 – 31.12.14:   4.50

 

Cyprus Immigration Services

Cyprus is situated at the heart of Mediterranean Sea, and has been attested as a major international business centre among many European countries.

A substantially increasing number of non-nationals have chosen Cyprus to migrate, set up their business, and employ personnel, due to its favorable location, the low income tax, combined with the warm weather and low crime rate.

Work permits for third country nationals

Service Pro was established by highly qualified finance and corporate management professionals, with over 10 years of sound experience.

Our team of Immigration Professionals can assist you in setting up your business in Cyprus, obtain employment in Cyprus as well as employing other foreign (third country nationals) personnel within your company.

Non-EU/EEA employee registration and employment in a company of foreign interests

Cyprus registered companies of foreign interests that fulfill eligibility criteria or register to become eligible may apply for employment of third country nationals either as Executive Directors, middle management, key personnel, or supporting staff.

Our services for employee registration and employment in a company of foreign interests

A. Registration of a company to become eligible

We can assist you in all steps from gathering information to registration of the company at Civil Registration and Migration Department (CRMD).

This includes, aiding the gathering and organisation of all necessary documentation, and where applicable, dealing with relevant documentation on your behalf. We can additionally organise any translation and/or certification requested to be carried out in Cyprus.

 B. Registration of an employee at a company of foreign interests

We can assist you with all steps of registering employees and obtaining work permits whether the prospective employee is located in Cyprus or their country of origin.

This includes, aiding with the gathering and organisation of all necessary documentation, and where applicable, we deal with relevant documentation on your behalf. We can additionally organise any translation and/or certification requested to be carried out in Cyprus.

 C. Renewal of work permit

We can assist you with all steps of renewing an employees’ work permit, should it be  close to expiring.

This includes, assisting with gathering and organising all necessary documentation, and where applicable, and dealing with relevant documentation on your behalf. We can additionally organise any translation and/or certification requested to be carried out in Cyprus.

 D. Family reunification for spouse/children of the work permit holder

We can assist you in applying for a residence permit for family reunification for your spouse (above 21 years old and married for over a year) or unmarried children under 18 years old.

This includes, assisting with the gathering and organising of all necessary documentation, and where applicable,dealing with relevant documentation on your behalf. We can additionally organise any translation and/or certification requested to be carried out in Cyprus.

What our services entail

A. Registration of a company at migration department

A company of foreign interests, which is registered in Cyprus and has third country national shareholders as a majority- including companies-, can register at CRMD, providing that it delivers the following, amongst others:

  • Bank documents to show that a direct investment of €171,000 was made from abroad by the foreign Shareholders, in a Cyprus bank account.
  • Cyprus bank account with funds of at least €41,006.
  • Incorporation documents.
  • List of company’s personnel.
  • Description of the company’s activities.
  • KYC documents (passports, addresses) of company’s initial Shareholders.
  • Rental/sales agreement of operating offices.
  • Affidavit from company’s Director(s) confirming the company’s Shareholders.
  • Company’s audited accounts for the fiscal years requested by the migration department.

B. Registration of employee following successful company registration at CRMD

Following successful registration of the company at the BCS (part of the Migration department), employee registration can begin. The first third country national to be employed  can  be registered for a maximum of a year, and the following employee for a maximum of two years, depending on their contract of employment with the said company.

If the employee currently resides in their own country, then an entry permit must be issued first.

If the employee has recently entered Cyprus, for example with a provisa which is valid, then the registration can be completed with the prospective employee in Cyprus.

For more details of what documents are required for registration, please contact us.

 C. Renewal of work permits

Prior to the expiration of a work permit, the company must apply for a renewal. Should they wish to renew the employment contract with the respective employee.

For more details of what documents are required for renewal, please contact us.

 D. Family reunification

Once  a work permit has been granted, one can apply for family reunification for close members of family, which includes a spouse who has been married for over a year with the work permit holder, and must be 21 years old and above, Unmarried children under the age of 18 years are also eligible.

For more details of what documents are required for registration, please contact us.

Important notes: All applicants, including children, must be present at CRMD during the application, for the required obtainment of biometric data.

Cost table

Immigration Services in CyprusPrice €Comments
Work permit: For every new applicant (when company is already registered).€950 per applicant 
Work permit: For additional applicants applying simultaneously.€500This price is only for simultaneous applications
Company registration with Migration authorities:
Application for company registration only€500 per company 
Application for company registration accompanied with simultaneous application for individual work permit.€300 per company