Despite having to give up its official offshore status following its EU membership, Cyprus continues to be attractive to many businesspeople. It’s one of the most business-friendly places in the EU these days.
Every month, about a thousand new businesses are incorporated here. Some significant reasons why businesses incorporate or re-domicile to the nation are the secure banking system, the Anglo-Saxon-based laws, the structured road network, and an advanced trade port. Read more about cyprus company formation and its advantages here.
Advantages of Company Registration In Cyprus
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Political and geographical location of Cyprus
Cyprus lies amid three continents. Since 2004, it has belonged to the European Union, and since 2008, it has been a part of the Eurozone. This nation is perfect for the growth of financial cooperation and global trade. When conducting business in Cyprus, the Euro, the common currency of the European Union, offers even more benefits.
Cyprus has excellent infrastructure to meet the needs of businessmen and others using Cyprus as their base for residence or business, and it enjoys very good relations with all countries in the world.
Aside from that, the weather is another ally in business dealings in Cyprus. In Cyprus, there are 360 days of sunshine a year and hardly any winters.
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Double taxation agreements
The double taxation avoidance agreements between Cyprus and more than 60 other countries provide benefits to companies that are registered there. The agreements that Cyprus has signed to prevent double taxation generally follow the OECD model. Foreign investors do not have to pay extra taxes in their home countries as a result.
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Possibility to get a residence permit in Cyprus
To apply for a permanent residence permit in Cyprus, non-Cypriot investors must purchase real estate in Cyprus for at least €300,000 + VAT and have a consistent, dependable source of income that is regularly transferred from abroad.
A two-year work permit and a long-term visa are granted to the owner and his family upon the registration of a Cypriot company. It is possible to extend this visa in the future.
Under the naturalization program, foreign nationals can apply for a Cypriot passport after residing in Cyprus lawfully for seven years.
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Advanced telecommunications and banking systems
A personal presence in offices, financial services, or banking institutions is not necessary for more than 80% of these functions, which can be easily simplified by using advanced banking and telecommunications systems. These systems can also solve time-consuming issues related to reporting, bank transfer processing, and government agency registration.
Depending on the destination country, the Cyprus banking system enables both domestic and international transfers and payments within 1–3 business days.
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Business-friendly tax system
Cyprus has developed a business-friendly tax system that benefits its locally based companies significantly, making it a desirable location for doing business.
One of the main benefits of forming a resident corporation is the flat 12.5% corporate tax rate, which is among the lowest in Europe.
Cyprus, however, fully adheres to EU legislation, so the nation is exempt from the inherent drawbacks of offshores. Cyprus is one of the countries that has largely adopted internationally agreed tax standards; it is listed on the Organization for Economic Co-operation and Development’s (OECD) White List.
Apart from having a low corporate tax rate of 12.5%, Cyprus’s tax laws offer numerous tax advantages in comparison to other European nations. Interest, dividends, and gains from the sale of stocks, bonds, debentures, or other securities are all exempt from taxation. Except for capital gains related to real estate in Cyprus, corporate reorganizations such as divisions, asset transfers, and share exchanges are tax-free.
The IP Box taxation regime, which lowers the effective tax rate to 2.5%, applies to businesses whose operations involve intellectual property. Under this regime, 80% of the profits derived from these activities are free from income tax.
Cyprus also provides a Notional Interest Deduction (NID) Regime, which lowers the income received from funding a business’s operations with new capital contributed after January 1, 2015, by the notional interest expense, which is determined by multiplying the new capital raised by the yield on the state’s 10-year government bonds, plus an additional percentage premium.
This allows the effective corporate tax rate to be lowered to 2.5% or less. The notional interest deduction can be as high as 80% of the profit before the deduction.
Cyprus law offers numerous additional tax benefits. For instance, royalties paid by non-resident businesses from Cyprus are exempt from taxation (a few exceptions apply to intellectual property used in Cyprus). The income and capital gains from the liquidation of a Cypriot holding company are subject to the same rules.
Cyprus has one of the lowest rates of value-added tax in the EU, ranging from 0% to 19%. Triangular trade, or the import and export of goods and services to other EU members, is VAT-free, just like it is for all other EU members.
Disadvantages of Company Registration In Cyprus
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No secrecy
The Cyprus Department of Registrar of Companies website makes all of a company’s shareholder and director details publicly accessible, which might not be ideal for foreign investors looking for anonymity. Since Cyprus is an EU member, the names and addresses of the founders and shareholders of the companies that were incorporated in Cyprus are already accessible to the general public.
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Need for a resident director
A company must appoint at least one director who must be a resident of Cyprus to benefit from the numerous tax treaties with Cyprus and the 12.5% corporate tax rate.
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Costly company incorporation
Establishing a business in Cyprus with a substantial share capital can be expensive since the government charges a registration fee based on the authorized capital allotted to the new company, usually 0.6%.
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Official corporate documents are in Greek
While English is the primary language of business in Cyprus, official corporate documents necessary for company registration are created in Greek, which can be difficult for foreign nationals who do not speak the language.
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Contracts and dispute resolution
Sometimes, the local laws can take a very long time. For instance, it can take 1100 days and cost a significant amount of money to settle a trade dispute. In this section, Cyprus is considered as below-average.
