How to Start a Business in Cyprus and Why It’s Beneficial

How to Start a Business in Cyprus and Why It’s Beneficial

Cyprus, officially known as the Republic of Cyprus, is an island nation situated in the eastern Mediterranean Sea. As a member of the European Union since May 1, 2004, and the Eurozone since 2008, Cyprus offers a favorable tax environment that has earned it the reputation of being a European tax haven, making it an attractive destination for businesses.

Cyprus is a reputable offshore jurisdiction suitable for a wide range of purposes. Its advantageous tax system enables local companies to effectively utilize double taxation avoidance agreements. Moreover, there are exemptions from tax on dividends, licensing fees, and foreign-sourced income.

Foreign entrepreneurs are drawn to the prospect of starting a business in Cyprus due to the low taxes and ease of operations.

Steps to Incorporate a Company in Cyprus

To be eligible to register a business in Cyprus, you must first meet two key requirements:

• Obtain a Cypriot residence permit.
• Reside on the island for at least six months annually.

The process of establishing a company in Cyprus involves the following steps:

1. Select the Appropriate Legal Structure

The most common form of business entity in Cyprus is the private limited company (Ltd.).

2. Prepare the Required Documentation

This includes drafting the memorandum and articles of association, choosing a company name, and determining the capital structure.

3. Register the Company

Registration is handled by a local lawyer who will submit the documents to the Department of Registrar of Companies. The process typically takes between 2 to 4 weeks.

4. Obtain the Necessary Certificates

Upon successful processing of the documents, you will receive a certificate of incorporation, a tax identification number, and a tax registration number.

5. Open a Corporate Bank Account

To facilitate business operations, you will need to open an account with a Cypriot bank.

What Taxes and Incentives Does Cyprus Offer for Businesses?

Cyprus provides businesses with attractive tax conditions, including a corporate tax rate of just 12.5%.

The island is particularly appealing for establishing a parent (holding) company, as there is no tax on dividends or income from the sale of securities. Unlike many other European countries, a local holding company in Cyprus only needs to own 1% of the share capital of a foreign subsidiary to benefit from these tax advantages.

In practical terms, this means that if a Cypriot company holds a stake in a foreign company, the income from profits and dividends from that foreign company is taxed at a rate of 0%. The Cypriot company can distribute these earnings to its shareholders without any additional withholding taxes.

Furthermore, there are tax incentives for companies involved in international trade and investment. Income generated from permanent establishments abroad is also exempt from taxes in Cyprus.

An interesting aspect of the Cypriot tax system is that the deadline for filing a tax return is March 31 of the year following the end of the tax period, unlike in the Czech Republic, where it’s due on March 31 of the following year. This gives entrepreneurs an extra 12 months to prepare their tax return documents. 

Exemption from Double Taxation in Cyprus

Cyprus has established double taxation treaties with over seventy countries, including Russia, Ukraine, Singapore, and the Seychelles, among others.

Considering the treaty with the Seychelles, a corporate structure that combines a Cypriot company with a Seychellois company can be advantageous. This structure aims to reduce the tax burden on the Cypriot company.

With all these benefits in mind, a company in Cyprus can either be integrated into an existing structure or a new structure can be created with a local holding company.

Support for Startups in Cyprus

Cyprus is home to business incubators and various startup support programs. If your project piques the interest of local authorities, you may be eligible for additional tax incentives and improved business conditions.

Professional Assistance for Starting a Business in Cyprus

With its low taxes, stable economy, and government support, Cyprus is becoming an increasingly attractive location for business. With the help of legal professionals, you can quickly and effectively set up a business in Cyprus.

The administrative burden for companies in Cyprus is relatively light, requiring only basic bookkeeping and the submission of audited financial statements. It’s worth noting that Cyprus is one of the few European jurisdictions that does not have any signed Tax Information Exchange Agreements (TIEAs).

For expert guidance, consult with the specialists at 360WEDO. We will handle everything from document preparation to business registration, as well as provide ongoing business support and cost-effective outsourced accounting services.