Procedure of setting up a business in Cyprus

Part 1: 

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It is generally unchallenging to set up a business in Cyprus, and by following a proper procedure, overseas entrepreneurs can set up their business in several days.

The procedure of a business’s incorporation in Cyprus has, in summary, as follows:

Step 1: Information preparation

The first step in opening a business in Cyprus is to put together a set of the required information, including:

(1) Company’s type – a legal entity that suits the business operations and purposes.

(2) Company’s objects – a list of the intended activities and/or scope of business.

(3) Registered office – a company should have a registered office, where it maintains its register of members and where all official notices are served.

(4) Directors and secretary – a company in Cyprus must have at least one director and one Cyprus-resident secretary, who are responsible for updating the company’s documents to the Registrar of Companies.

(5) Statement of capital – details of the company’s initial share capital and the rights attached to them.

(6) Memorandum and Articles of Association (MAA) – the agreement of all the initial shareholders, the number of shares each wishes to subscribe for, as well as written rules about how the company works.

Step 2: Company’s name submission

Once the above information has been prepared, business owners can proceed with the company’s name application.

To sum up, a company’s name should be unique and not similar to registered trademarks. It must not contain words that cause misleading or confusing, such as democracy, national, imperial, etc.

The proposed company’s name must be applied and approved for by the Registrar of Companies, via e-filing, by hand, or by post.

Step 3: Registration documents submission

Provided that the name is approved, the registration documents must be submitted within six months, a period during which the approved name is reserved.

Regardless of the type of business entity, the submission of a Cyprus company’s incorporation is as follows:

(1) A signed statutory declaration (form HE1);

(2) The MAA, duly signed in the Greek language together with forms H.E.2 and H.E.3 (containing information as to company’s registered office, directors, and secretary) to the Registrar of Companies; and

(3) The solemn declaration of the witness of signatures.

Step 4: Incorporation complete

Upon examination of the aforementioned documents and assuming that legal requirements have been met, the Registrar will proceed with the publication of the Company’s registration.

Generally, the company’s information will be published in the Official Gazette, and a set of certificates will be issued, including

(1) Certificate of Incorporation;
(2) Certificate of Registered Address;
(3) Certificate of Directors and Secretary;
(4) Certificate of Shareholders; and
(5) Certified copy of the MAA.

4. Tax regime for business in Cyprus

This section provides valuable information about the Cyprus tax regime that enables international investors to consider tax planning and compliance obligations towards the Tax Department.

As a matter of fact, Cyprus is considered one of the most favorable jurisdictions within the EU on taxation, offering foreign investors confidence to invest, grow, and prosper.

To summarize, the main tax regimes for business in Cyprus include:

Corporate income tax: A non-Cyprus tax resident company is only taxed on certain income arising from permanent establishments (PEs) within Cyprus.

Personal income tax: A non-Cyprus tax resident individual is subject to income tax only on certain income accruing from sources within Cyprus.

Dividend income tax: Exemptions for non-Cyprus resident individuals in most cases.

Value-added tax: VAT is levied at the standard rate of 19%. Reduced VAT rates of 5% and 9%, and 0% apply to some goods and services.

Social insurance tax: Employees and employers are subject to social insurance contributions at the rate of 8.3%.

Capital gain tax: Profits arising from the disposal of immovable property located in Cyprus are subject to capital gain tax, at the rates of 20% or 50% and higher depending on types of disposals.

5. Additional obligations for doing business in Cyprus

There are multiple compliance obligations that investors should cautiously follow in order to safeguard the business’s interests.

5.1. Bank account opening

As part of the statutory obligations, the opening of a business bank account is mandatory when registering a company in Cyprus.

In general, opening a bank account in Cyprus involves the presentation of a set of documents, which may vary from bank to bank, including:

(1) Proof of ID and address (only for an individual);

(2) Corporate documents (Articles of Association written in Greek/English; Registration certificate);

(3) Signed and notarized board resolution;

(4) Banking resolution; and

(5) Proof of assets origination.

5.2. Annual filings

Annual return: All companies in Cyprus must file an annual return written in Greek (or Turkish) to the Registrar of Companies.

Additionally, the annual return should confirm the company’s particulars up to reporting date, in relation to:

• Capital structure;

• Registered office address;

• Address of the place where registers are kept;

• Registered shareholders;

• Directors and secretary.

Financial statement: must be prepared once a year and presented at the shareholders’ annual general meeting.

All in all, the financial statements must include:

• Profit and loss account;

• Balance sheet signed by directors;

• Notes; and

• Director’s & auditor’s reports (depending on circumstances)

Failing to comply with annual filing will lead to penalty, imprisonment, or strike off from the Registrar of Companies.

5.3. Books and records

Companies in Cyprus need to keep proper books of accounts at the company’s registered office.

These records must indicate the financial affairs of the company, with reasonable accuracy, at any specific point in time.

5.4. Annual fee

Companies in Cyprus need to pay an annual fee of 350 euro (420 USD) by the 30th of June annually.

Moreover, companies failing to comply will have to pay late charges. These charges equal an additional 10% and 30% of the original fee, depending on the date from the deadline.

6. Conclusion

Doing business in Cyprus is a significant undertaking, but when handled properly it will bring countless rewards.

If you have chosen Cyprus as your ideal business location, but are still unsure of the incorporation process, feel free to contact for support via service@bbcincorp.com.