Cyprus

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how to start business in Cyprus

ABOUT CYPRUS

Cyprus at a Glance

The strategic location of the island, one of the lowest corporate tax in the EU, a highly developed socioeconomic infrastructure, excellent telecommunications, a sophisticated and sound banking system, a wide range of high quality professional services and a favorable economic and business environment, make Cyprus an ideal center for business activities.

In addition to the above, the wide knowledge of the markets of the Middle East and Central Eastern Europe regions by Cypriot businesses, combined with the large number of International Business companies in Cyprus, constitute a substantial advantage to those who decide to use Cyprus as their base for penetrating markets in these areas.

 

Population: 1,170,125
Form of government: Unitary presidential constitutional republic
Official & spoken languages: Greek, Turkish
Currency: Euro
Time zone: EET (UTC +2)  EEST (UTC+3) Summer DST
GDP (PPP): $29,666 billion
GDP (PPP)/per capita: $18,810 billion
Average salary: 1300 euro
Unemployment: 9.6 %
Major trading partners: Greece, Germany, China, Italy, Korea, France

 

 

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Doing Business in Cyprus

Advantages of doing business in Cyprus

Business registration in Cyprus is fast, stress-free and cost-effective process because:

  • A Cyprus LLC can be 100% foreign owned and requires only 1 shareholder and director of any nationality who can either be an individual or a corporate entity and must not be resident in cyprus.
  • Foreign owned companies are permitted to invest in every business sector in Cyprus without any restrictions or stringent licensing requirements except for a few regulated sectors such a banking and financial services and meida
  • Entrepreneurs registering business in Cyprus will enjoy considerably lower administrative and operational costs compared to most of other countries in the EU region.

Doing business in Cyprus will benefit from various tax incentives including: 

  • The standard corporate tax rate in Cyprus is 12,5% which is one of the lowest corporate tax rates in Europe. Additionally, the governments does not impose any capital gains tax.
  • A Cyprus holding company enjoys exemption form withholding tax on dividends paid to a resident company whether they are received from a foreign company or another Cyprus resident company.
  • Local companies will benefit from a wide network of double taxation treaties, The government of Cyprus had signed over 55 DTTAs with at least 47 countries, including China, India, Ireland, Singapore, the United Kingdom and the United States
  • Companies will enjoy exemption from corporate income tax on income sourced from operations abroad as well as exemption from capital gains tax and estate duty on income from immovable property outside Cyprus

Other advantages prompting foreign entrepreneurs and investors to consider doing business in Cyprus include: 

  • Up to 80% of income generated by Cypriot companies engaged in activities related to Intellectual Property (IP) is exempt from taxes: only 20% of the total profits is liable for taxes
  • Although seen as safe heaven for taxes, Cyprus is listed on the OECD ‘white list’ of global jurisdictions that are fully compliant with the international standards of tax.
  • Tax resident companies can carry forward their tax losses incurred within a fiscal year for the subsequent 5 years and the same can be offset against the taxable income.
  • As a member of the European Union, Cyprus enjoys all the benefits of the EU regulations and treaties including, and particularly, the free movement of capital within and outside the EU region.

 

  Disadvantages of doing business in Cyprus

  • All shareholders and directors details of a Cyprus company are available for public viewing on the Cyprus Department of Registar of Companies website; which may not be ideal for foreign investors seeking anonymity.
  • For a company to tax advantage of the multiple Cyprus’tax treaties and the 12,5% corporate tax rate, a company is required to appoint at least one director who must be resident in Cyprus.
  • Foreign entrepreneurs and investors looking to set up their business in Cyprus must commission the services of a local corporate service provider or law firm to assist with the company incorporation process.
  • Foreign and local companies looking to open a corporate bank account in Cyprus must be introduced to the particular bank by a locally registered fiduciary who must complete a thorough due diligence process with the Client.
  • Setting up a company with a large share Capital in Cyprus can be costly because the government fees for company registration is pegged on the amount of authorized share capital allocated for the new company; usually at 0,6%,
  • Foreign companies looking to secure a non-resident corporate bank account in Cyprus will be required to register and obtain a local tax number and the signatory may also be required to visit the bank branch for a interview.
  • Although, largely, the business language in Cyprus is English, official corporate documents for company registration are generated in Greek and will be a challenge for foreign nationals without the grasp of the language.
  • The resident companies are required to annually submit to the Cyprus Inland Revenue Department all the financial accounts and file tax returns by the 31’st of March following end of the fiscal year.

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The World Bank “Ease of doing Business -ranking”

Overall rank 2018: rank 53
– Starting a business: rank 50
– Dealing with construction permits: rank 120
– Getting electricity: rank 67
– Registering property: rank 92
– Getting credit: rank 68
– Protecting minority investors: rank 43
– Paying taxes: rank 44
– Trading across borders rank 45
– Enforcing contract: rank138
– Resolving Insolvency: rank 21

READ MORE: CYPRUS COMPANY FORMATION SERVICES & FEES

Residency and Moving to Cyprus

Tax Resident in Cyprus

TAX RESIDENCY – INDIVIDUALS:

  • An individual is resident in Cyprus for income tax purposes if he/she stays in Cyprus for a period or periods exceeding 183 days in the aggregate in a tax year.
  • An individual may also become tax resident of Cyprus even if he does not spend more than than 183 days in the Republic, provided that he/she does not spend more than 183 days in any other state within a tax year, is not a tax resident of any other state within the same tax year, remains in Cyprus for at least 60 days in the tax year, maintains a permanent home in Cyprus that is either owned or rented and carries on a business in Cyprus, or is employed in Cyprus or holds an office in a Cyprus tax resident person at any time during the tax year.
  • For SCD purposes, an individual is a resident if he/she also is domiciled in Cyprus.

TAX RESIDENCY – BUSINESS:

  • A company is resident in Cyprus if its management and control is exercised in Cyprus. Registration in the country is not decisive.
  • Resident companies are taxed on worldwide income. Nonresident companies are taxed only on Cyprus-source income. Branches are taxed in the same way as tax resident companies.
  • Corporation tax is imposed on business profits; interest and discounts; rents, royalties, remuneration or other profits from property; and net consideration in respect of trade goodwill.

 

Taxation in Cyprus

Taxes in Cyprus

Residence: A company is resident in Cyprus if its management and control is exercised in Cyprus. Registration in the country is not decisive.

Basis: Resident companies are taxed on worldwide income. Nonresident companies are taxed only on Cyprus-source income. Branches are taxed in the same way as tax resident companies.

Taxable income: Corporation tax is imposed on business profits; interest and discounts; rents, royalties, remuneration or other profits from property; and net consideration in respect of trade goodwill. Expenses incurred for the production of taxable income are tax deductible if supported by invoices or relevant receipts. Losses carried forward or surrendered by other group companies  may be offset against taxable profits.

Taxation of dividends:  Dividends received by a Cyprus resident company are exempt from corporation tax (whether received from a company located in Cyprus or abroad). Dividends received by a Cyprus resident company are exempt from the Special Contribution for  Defense (SCD), unless the dividends are paid out of profits that are more than four years old. Dividends received from a nonresident company also generally are exempt from SCD, although the exemption does not apply if more than 50% of the nonresident payer company’s activities, directly or indirectly, lead to investment income and the foreign tax burden on the income of the nonresident payer is substantially lower than the tax burden of the company in Cyprus (i.e. less than 6.25%). If not exempt, dividends are liable to SCD at 17%.

Capital gains:  Gains derived from the sale of shares are tax-exempt. Capital gains tax at a rate of 20% is imposed on gains from the disposal of immovable property situated in Cyprus and on gains from the disposal of shares in an unlisted company that owns, directly or indirectly, immovable property situated in Cyprus.

Losses: Tax losses may be carried forward for five years for set off against future taxable profits. The carryback of losses is not permitted.

Foreign tax credit:A unilateral tax credit is granted for tax paid abroad, regardless of the existence of a tax treaty. The provisions of a relevant tax treaty will apply if they are more beneficial.

Participation exemption:  Dividends received by a Cyprus company from investments in hybrid instruments that are treated as a tax deductible expense in the country of the payer are treated as trading profits subject to income tax (i.e. they are not considered dividends exempt from SCD). Gains derived from the sale of shares are tax-exempt.

 

Taxable income: 12,5%
Taxation of dividends: 17%
VAT registration:
The registration threshold for VAT purposes is  15,600 EUR
– VAT Rates: The standard rate of VAT is 19% 
Surtax: No
Alternative minimum tax: No
Withholding tax (general): 12,5%
– From Dividends 17%
– From Royalties
5% on film royalties, and 10% on all other royalties.
– From Interests
No withholding tax is imposed on interest paid to a nonresident. Interest paid to a resident is subject to SCD deducted at source at a rate of 30%
Transfer tax:
The transfer of immovable property is subject to a transfer fee ranging from 3% to 8%, calculated on the market value of the property as estimated by the land registry department
Capital gains tax:
Gains derived from the sale of shares are tax-exempt. Capital gains tax at a rate of 20% is imposed on gains from the disposal of immovable property situated in Cyprus and on gains from the disposal of shares in an unlisted company that owns, directly or indirectly, immovable property situated in Cyprus.
Real property tax: No
Social security:
An employer must make social insurance contributions amounting to 9.5% of an employee’s gross salary, subject to a cap on the annual earnings on which the contributions are payable. An employer also is required to contribute 2% of all earnings of its employees to the social cohesion fund.
Payroll tax:
Under the PAYE system, the employer is required to withhold personal tax on the salary of its employees.
Stamp duty:
Stamp duty is payable on a document if it relates to property situated in Cyprus or to an act to be performed in Cyprus. Stamp duty on commercial contracts is charged at rates that vary according to the contract amount. A ceiling of EUR 20,000 per document applies.
Capital duty: Capital duty of EUR 105, plus 0.6%
Tax treaties: Cyprus has concluded 61 tax treaties
Anti-avoidance rules:
– Transfer pricing
Transactions between related parties must be carried out at market value and on normal commercial terms.
– Thin capitalization rule
No
– Disclosure requirements
Cyprus has adopted country-by-country (CbC) reporting. A Cyprus resident parent company of a multinational enterprise must file an annual CbC report with the Commissioner if the consolidated turnover of the group exceeds EUR 750 million. The report, which covers each jurisdiction in which the multinational group conducts business activities, must include, information on revenue, profit before income tax, income tax paid, the number of employees and tangible assets other than cash or cash equivalents. There are also certain notification obligations with respect to informing the Cyprus tax authorities of the identity of the ultimate parent entity and the reporting entity.

Compliance for corporation:

Tax year: Calendar year. The accounts of a company may be closed on a date other than 31 December, in which case, taxable profits areapportioned on a time basis to the relevant tax years

Consolidated returns: Taxation on a consolidated basis is not permitted and each company must submit a separate return.

Filling requirements: Electronic filing is mandatory for companies. The deadline for the electronic submission of the tax return is 31 March of the second year following the tax year of assessment. Companies must make two provisional payments of tax on 31 July and 31 December. If the income declared for the payment of the provisional tax is lower than 75% of the income as finally determined, an additional amount equal to 10% of the difference between the final and provisional tax is payable.

Penalties: Administrative penalties of EUR 100 or EUR 200  are imposed for the late filing of a tax return or the late submission of information requested by the tax authorities. Further, where the tax liability as per the tax return is not paid by the statutory deadline or the date in an assessment issued by the Commissioner, an additional 5% penalty on the tax payable is imposed.

Rulings:  Rulings are available on matters of interpretation of the tax law. A fee of EUR 1,000 must be paid for a tax ruling by the Commissioner of Taxation

Tax authorities: Tax Department

Personal Taxation in Cyprus 2018

Personal taxation basis: A resident individual is subject to income tax on his/her worldwide income. A nonresident individual is taxed only on Cyprus-source income.

Tax Residence: An individual is resident in Cyprus for  income tax purposes if he/she stays in Cyprus for a period or periods exceeding 183 days in the aggregate in  a tax year. An individual may also become tax resident of Cyprus even if he does not spend more than than 183  days in the Republic, provided that he/she does not spend  more than 183 days in any other state within a tax year, is not a tax resident of any other state within the same tax year, remains in Cyprus for at least 60 days in the tax  year, maintains a permanent home in Cyprus that is either owned or rented and carries on a business in Cyprus, or is employed in Cyprus any time during the tax  year. For SCD purposes, an individual is a resident if  he/she also is domiciled in Cyprus.  An individual is “domiciled in Cyprus if he/she has a domicile of origin in Cyprus based on the provisions of the Wills and Succession Law (WSL) , except in specified cases. An individual who is resident in Cyprus  for at least 17 out of the 20 years before the relevant tax  year will be deemed to be domiciled in Cyprus, irrespective of his/her domicile of origin.

Filling status: Joint returns are not permitted.

Income tax rates in Cyprus: Personal income tax is imposed on income from an office or employment; business profits; discounts; pensions; charges or annuities; rents, royalties, remuneration or other profits from property;and net consideration in respect of trade goodwill.

Social security payments in Cyprus: An employee is required to make social insurance contributions at 7.8% of his/her salary Self-employed individuals contribute at 14.6%.

Inheritance/estate tax in Cyprus: No

Net wealth/net worth tax in Cyprus: No

Tax year: Calendar year

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OUR OFFERS IN CYPRUS

  • business planning, tax consulting by Novasigma
    BUSINESS CONSULTING FROM 125€/h
  • TAX PLANNING FOR PRIVATE PERSONS FROM 850€
  • TAX CONSULTING FOR CORPORATIONS FROM 2.490€

 

NOVASIGMA IN CYPRUS

Consulting & Advisory services

Consulting & Advisory services

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Incorporation, Administration & Business services in Cyprus

Incorporation services in Cyprus

  • New company formations in Cyprus | from 1.950€
  • Company Closures and liquidations in Cyprus | Ask for quotation

Company administration in Cyprus

  • Legal registration address service for a Cyprus company |
  • Company secretarial service | 60€/h
  • Nominee director services | from 600€/year
  • Nominee shareholder/ techical UBO services | from 250€/month

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Additional business services in Cyprus (by Novasigma Certified Partners)

Accounting and Bookkeeping services in Cyprus


Some of the common domestic Accounting and Bookkeeping services we provide in Cyprus include

  • Bookkeeping and Accounting Package
    • Invoicing and payments
    • Annual accounts
    • Monthly Reconciliation
    • Monthly financial statements (including balance sheet and income statement)
    • Payroll services
    • Income and tax return
  • Management accounts | Ask for quotation

Value Added Tax (VAT)

  • VAT registration
  • EORI registration
  • Advice on VAT scheme options | Ask for quotation
  • VAT returns and declarations

Audit

  • Annual accounts in view of an annual audit and attend accounting audits | Ask for quotation

Legal services for Cypriot companies and business owners

Legal services in Cyprus for all Novasigma Clients including companies and their owners and directors

Novasigma has built in Cyprus team of lawyers, associates and legal advisers to assist our clients with a business and tax planning, overseas business operations, risk management and other legal matters. Primarily focused on business transactions, Novasigma Accounting & Law corporate attorneys are a great asset to a small and large businesses. With a background on corporate law, our corporate lawyers and legal advisers have an in depth knowledge on the transactions that may put your business at risk of litigation. These include contracts and negotiations, taxation laws, business structuring, buy/sell agreements, and intellectual property, among others.

Send us a Brief for Quotation

Banking, Financial and Insurance services in Cyprus

Banking services in Cyprus

Financial services in Cyprus


 

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