Company Formation in Cyprus: What you need to know

One of the biggest benefits of establishing a company in Cyprus is that the country offers tax benefits on both a business as well as a personal level.

Corporate Tax Benefits in Cyprus

The tax benefits for businesses are one of the main reasons for registering a company in Cyprus. With a corporate tax rate of only 12.5%, Cyprus is known as one of the most tax-efficient countries in Europe, second only to Bulgaria.
 
Further tax advantages for businesses include the following:

• 2.5% tax on profits from possession or trading in Intellectual Property Rights 
• Fast, efficient VAT registration 
• 12.5% taxation on net profits, making Cyprus an ideal low tax jurisdiction 
• 0% taxation on dividends paid out to shareholders
• Notional Interest Deduction (NID) available for new capital introduced
• Double taxation avoidance treaties with 60+ countries as well as bilateral investment treaties 
• Cyprus’ strategic location at the crossroads of Europe, Africa, Asia and Middle East makes it the ideal business hub
• Business-friendly tax office, which means for example that they are more deductible expenses than in other countries 
• Cyprus is a business-friendly jurisdiction with a highly skilled workforce, stable economy and established legal system combined with its membership to the EU and Commonwealth.

Private Tax Benefits in Cyprus

Alongside the tax benefits for businesses, Cyprus offers multiple benefits on a personal level. As a tax resident in Cyprus, one receives the non-dom status, abbreviation of non-domiciled, which ensures various tax advantages, such as:

• 100% exemption on remuneration for salaried services provided out of the Republic to a non- Cyprus resident employer
• 100% exemption on lump sum repayments from life insurance schemes or from approved provident funds
• No inheritance and gift taxes
• No wealth taxes
• No taxes on dividends or income from interest – regardless of the company's domicile 
• No Special Defense Contribution is payable on dividend, interest and rental income
• Minimum stay of only 60 days per year.

Other reasons why Cyprus is the ideal place for company formation

Moreover, there are multiple other reasons that prompt entrepreneurs and investors to choose Cyprus as their place of residence and the headquarters of their companies. Those include the highly qualified workforce as well as the fact that establishing a Cypriot company is very cost- and time-efficient. Additionally, companies based in Cyprus receive and benefit from EU-status, while still being situated at an intersection of Europe and the Middle East. On top of this, the advantages also include the low cost of living, air connections to destinations worldwide and Cyprus’ very agreeable climate. Furthermore, Cyprus is rich in cultural heritage and has evolved into a cosmopolitan European country, making Cyprus a good place to settle and set up your business.

In the beginning of 2024, it was announced that the Council of Ministers decided to abolish the annual government levy fee of € 350.-, which now makes Cyprus even more attractive as a business destination for investors and entrepreneurs.

Who benefits from establishing a company in Cyprus?

Cyprus is a very suitable location for companies with a focus on the EU, since the EU-status offers access to global markets. Additionally, location-independent entrepreneurs as well as businesses that focus on intellectual property benefit greatly from the tax advantages and the protection of intellectual property. Because of the cost-efficient company formation process and the affordable living conditions, a relocation to Cyprus benefits even freelancers or small companies, provided they are able conduct their business in Cyprus as well.

Cyprus Limited Liability Company: the most common legal form of company formation

There are various forms of Cypriot limited liability companies. The most popular is the private limited company (Ltd/ Limited). A private limited company can be founded with 1 to up to 50 shareholders and the shares cannot be made available to the public.

There are quite a few advantages of private limited companies. For one, the process of establishing a limited company is simple and can be done without minimum amount of share capital . The common practice is usually issued share capital of 1.000 shares issued at a nominal value of EUR1.00 each.  

Moreover, shareholders profit from limited liability protection, since they are only liable for the capital invested in the company. This way, their private possessions are safeguarded, even if the company faces financial issues. Other benefits of Cyprus limited companies include the flexible structure of the company (as it can be founded with only 1 shareholder), the protection of intellectual property and the status of an EU-company.

If you are unsure if the private limited company is the right company structure for you, our experts will gladly assist you.

Requirements for company formation in Cyprus

The following legal requirements must be fulfilled to register a Cyprus Limited:

• A company name, which must be approved by the Registrar 
• Registered office located in Cyprus
• A banking account with a reputable banking institution or EMI (which does not have to be with a Cyprus bank) provided that management and control of the company is in Cyprus 

The required company structure: 

• A minimum of 1 shareholder is required
• A secretary 
• A director who is residing in Cyprus and is involved in the company’s daily business
• If the company has more than one shareholder, then 2 directors need to be appointed 

The Company’s founding documents are its Memorandum and Articles of Association (MAA):

(i) the Memorandum, contains information about the limited liability company setting out the objectives of the company as well as its  name, address share capital and shareholders. The Articles of Association, set out the the internal policies and procedures for the management of the company.

Procedure, duration and costs of setting up a Cyprus Limited Liability Company

It is a relatively straightforward process to set up a Cyprus Limited. Some of the required steps can be done digitally,. 

1. Choose the legal form of the company.
2. Select a name that is approved by the Registrar of Companies all the requirements.
3. The Articles of Association and the Company Memorandum are drawn up by an attorney and signed by the shareholders and the attorney attends at court to confirm under affidavit the verity of English and Greek MAA . 
4. The incorporation documents are submitted at the Company Registrar.
5. Once the company is incorporated, the company must register the Ultimate Beneficial Owner with the Registrar of Companies within 90 days from the date of incorporation
6. Obtaining a Tax Identification Number. The company may also apply for a VAT number (if required)
7. Open a banking account with a  Cyprus bank or abroad.
8. Register with all the mandatory offices.
9. Obtain any further permits and licenses if required.

 The process usually takes about 2 to 4 weeks.

Cyprus company formation cost:  

Fees for Cyprus company formation are tailored depending on each clients needs dependent on the complexity of the structure and compliance requirements. However, it is recommended to rely on local experts for company formation in Cyprus. That way you profit from expert guidance and administrative assistance. In most cases, it is beneficial to seek a provider who can also continue to offer support after the company is registered.

Are you considering company formation in Cyprus? We will gladly assist you in the process – from consulting on how to establish a Cyprus Limited to accompanying your business activities in Cyprus.