The Island of Aphrodite is one of the most popular destinations for business relocation and the registration of new companies today. Let's talk about the advantages of Cyprus and how to start your business here.
Cyprus primarily attracts with its favorable tax regime, a stable economy, moderate real estate prices, and favorable living conditions for families on the shores of the Mediterranean Sea.
Currently, Cyprus has two main financial centers - Limassol and Nicosia. Limassol is considered the more popular city in all aspects. Considering the small size of the country, it is still viewed as a single entity. You can reach any major populated area in about an hour.
The official language in Cyprus is Greek, but the English language is even more popular in the business environment.
According to the Cyprus Land Department, in the first quarter of 2023, Cyprus became the leading destination for European real estate investments among Russians. One of the main reasons is the opportunity to obtain permanent residency for the whole family through an accelerated program. After Russian citizens, investors from the UK, Israel, Greece, Lebanon, Germany, Romania, China, Ukraine, the Netherlands, Bulgaria, Poland, Belarus, and the USA follow in the list.
How to Open a Company in Cyprus?
The opportunity to open a company or become a co-founder of a company in Cyprus is available to both local citizens who have reached the age of 18 and foreigners. Since Cyprus is part of the European Union, licenses obtained here are valid throughout the EU territory. Therefore, the island nation can be considered an excellent starting point for something more global.
It's worth noting that Cyprus' legal system is based on English law, which is also followed in international business. In addition, the country has a positive reputation and is currently striving to shed its offshore status.
Cyprus' tax system is favorable for both individuals and legal entities. The corporate tax rate is 12.5%, which can be significantly reduced in specific sectors. When annual income is below 19,500 euros, the tax is zero. VAT ranges from 0% to 19%. The fields of property rental, medicine, culture, and insurance are exempt from value-added tax.
The state actively seeks to create conditions to attract highly qualified specialists, businessmen, and investors, occasionally introducing new incentives for this category of citizens.
Registering a company in Cyprus can be done relatively quickly online. Additionally, founders have the opportunity to apply for residency through the business immigration program, the program for financially independent foreigners, and corporate employee transfers.
Types and Forms of Business
To better understand which form of business suits your needs, it's advisable to consult with a lawyer or business consultant. Currently, there are several options available.
Sole Proprietorship (SP)
To open an SP in Cyprus, the entrepreneur does not need to hire employees, and the business must be self-funded. In the event of bankruptcy, the entrepreneur will have to resolve financial matters independently. However, this form does not require a minimum share capital.
Limited Liability Company (LLC)
The total number of shareholders can range from 1 to 50 people. The business also does not require a minimum share capital. According to Cyprus laws, the abbreviation 'LTD' should not appear in the company name.
Branch of a Foreign Company
In the case of expanding a company, you can open a subsidiary in Cyprus. Depending on the field of activity, this can be advantageous or not.
Trust
This is the term used for a business form where a business owner transfers their assets to be managed by specialists to achieve specific business goals.
Documents Required to Open a Business:
- Founder's passport
- List and information of shareholders
- Name reservation form
- Confirmation of the source of capital
To open a legal entity, you will need an Articles of Association and Memorandum, which must be prepared in Greek and English and notarized. In the case of a sole proprietorship, Articles of Association are not mandatory.
Creating a Business Plan
In the business plan, outline your main plans, goals, and target audience. You should also provide detailed descriptions of the products and services you will offer. Include a marketing plan for product promotion and estimate expected profits. The company name should be unique and not have any equivalents in Cyprus. Additionally, the company name should not include the business form. For example, you cannot name your company "Trust Bank" or "International Store."
Company Registration
You can open a company either by yourself or through a representative. You will need to pay government fees and charges. The registration process typically takes around two weeks. After receiving the certificate, you must register the company with the tax authorities and obtain a tax identification number within two months. The annual fee for company registration is 350 euros on average. The average cost of legal services for opening a company is 1500 euros. Additional expenses may be incurred for opening a bank account in a Cypriot bank, obtaining work permits for employees, and other procedures.
Taxes for Foreign Companies
Cypriot companies pay value-added tax (VAT), tax on dividend payments, and payroll taxes for employees. To qualify for tax reduction programs, the company must have a physical presence in Cyprus. The presence must be documented and confirmed. Requirements include having a physical office (with a lease agreement or ownership of commercial real estate), a local telephone number, proof of business activities in Cyprus (such as utility bills for water and electricity), a local secretary, and a director.
Additionally, you must contact the social insurance service to register the company.
To open a bank account, you will need a separate set of notarized documents, including a copy of your passport, proof of your actual residence (utility bills for electricity and water), income declaration, and a recommendation letter from European financial institutions or companies.
In March 2023, a recommendation was issued to Cypriot banks by the anti-money laundering development group, designating people with Russian passports as a high-risk group. Financial organizations that deal with such clients may face additional scrutiny. In light of these statements, many Russian citizens received letters about the closure of their accounts. In such a situation, you can contact your account manager to clarify how to rectify the situation. It may be sufficient to supplement the documentation, demonstrating that you reside in Cyprus and do not receive money from a business that is currently under sanctions.
Startup Visa in Cyprus
Cyprus remains an ideal place for startups, especially those planning to enter the international market. Both new and existing large companies are attracted to the favorable tax rate and various government support programs. Approximately 91% of local startups have their representations on the island and benefit from tax incentives.
It is considered that launching a project in Cyprus is the most challenging period for a company. They face difficulties in securing financing and access to investors, lack of support in finding qualified personnel, and a lack of quality education and support in the early stages.
However, Cyprus is among the best countries for developing startups due to its legislative framework, the quality of the entrepreneurial environment, the level of English language proficiency, innovation level, as well as the availability of technical services and the quality of higher education. According to the Global Startup Ecosystem Index 2022, Cyprus ranks 55th in the world and 19th among European countries.
This is especially true for the Fintech, Software, Data, Social & Leisure sectors. Limassol is the most popular city in this regard, followed by the capital, Nicosia, and Paphos.
Since 2017, innovative companies can obtain a startup visa that allows them to legally work and reside in the country for 2 years. To qualify, you must be a tax resident of Cyprus, have a capital of at least 20,000 euros, and open an office in Cyprus. The number of employees can range from 1 to 6 people, including the founder. The relevant application, along with a business plan, is submitted online to the Cypriot Ministry of Research, Innovation, and Digital Policy. It takes approximately 5 weeks for the application to be processed.
In case of a successful launch, this period can be extended an unlimited number of times. The concept of an innovative company implies spending at least 10% of expenses on research and development.
IP Box Tax Regime for IT Companies
Cyprus has signed all major international agreements and protocols in the field of intellectual property, including the Madrid Agreement on International Trademark Registration, the TRIPS Agreement, the European Patent Convention, and more. Thus, firms can qualify for favorable taxation of intellectual property.
Under the IP Box scheme (an exclusive program applicable only in Cyprus and the Netherlands), the tax rate can be reduced to 2.5% by compensating income in the form of royalties (in case innovative developments were made in Cyprus). Profits from the sale of shares of such a company are not subject to tax.
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