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Incorporation

Setting up a company in Cyprus

When setting up a company you may want to consider these factors:

  1. Business Factors

    Generally, Cyprus does not impose any specific requirements on foreigners wishing to establish a business presence in the country.

    In deciding on whether to invest in Cyprus, you may also want to consider the following when making your decision :-

    • The industry and type of business that will be conducted
    • Nationality of the headquarters / individuals (s)
    • Presence of existing trade agreements or relationships
  2. Location

    Location will be another factor. Separate cities and regions may have different rules, costs and availability. It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.

Your Options

There are three types of business forms available to foreign companies in Cyprus. Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to Cyprus and the planned business activity.

When setting up a company in Cyprus, you have the following options:-

  • Corporation
  • Branch Office
  • Representative Office

This article provides a general guideline for foreign businesses on entering Cyprus for business purposes. In particular, it looks at common pathways to establishing a business presence in Cyprus, generally through a corporation, branch or representative office. In addition, various economic, tax and regulatory factors are provided throughout as a source of useful information to assist those who will enter the Cypriot economy. The guide also looks at some immigration requirements such as obtaining appropriate visa status.

Data is based on the time of writing, August 2015 or closest available dates.

Corporation

There are generally no restrictions imposed on foreigners wishing to set up a company in Cyprus. Incorporation is typically a straightforward and inexpensive process. However, under Cypriot legislation, only lawyers licensed by the Cyprus Bar Association or service providers cooperating with a licensed lawyer are allowed to apply for registration of a Cypriot entity. Only a licensed lawyer is allowed to prepare the Memorandum and Articles of Association and sign the HE1 Declaration Form, although anyone is entitled to file the forms at the Registrar of Companies. As such, foreigners wishing to set up in Cyprus are required to enlist the services of a licensed lawyer and/or service provider.

In Cyprus, there are two main types of corporations that can be set up:

  • Private limited corporation
  • Public limited corporation

 

Types of corporations

1. Private limited corporation

Investment Capital Requirements

There are no minimum or maximum share capital requirements.

A private limited liability company must have between one and 50 members. The right to transfer shares is restricted and shares or debentures cannot be subscribed to the public.

Management

A minimum of at least one director and one secretary is required. If there is only one member, that member may act as the director and the secretary. There are no nationality requirements imposed on directors. The company’s memorandum of association may specify that directors have unlimited liability for the debts/obligations of the company.

2. Public limited corporations

Companies wishing to list on the Cyprus Stock Exchange are required to set up a public limited corporation. In addition to the legislation applicable to limited liability companies, they have to conform to the provisions of the Cyprus Stock Exchange and Cyprus Securities and Exchange Commission regulations.

Investment Capital Requirements

A public limited liability company must have at least seven members. Shares may be transferred and shares and debentures may be offered to the public. The minimum capital requirement for a public limited liability company whose shared are offered for subscription is EUR25,629.

Management

A minimum of at least two directors and one secretary is required.

Accounting / auditing requirements for Cypriot entities

All limited liability Cypriot companies are required to submit audited financial statements to the Registrar of Companies in Greek or English (excluding small sized companies, as defined under Cypriot law).

These financial statements must be prepared on an annual basis, except for the first financial statements of a company which can cover a period of up to eighteen months from the date of the company’s incorporation. Companies having subsidiaries and are not exempted from International Financial Reporting Standards or from the Cyprus Companies Law, Cap. 113, Section 142 are required to file their consolidated financial statements.

Incorporation process

As stated before, incorporation of a Cypriot entity can only be undertaken by a licensed lawyer and/or service provider under Cypriot law.

Step 1: Approval of a company name

The lawyer or service provider that the applicant has engaged will fill in the name application form (i.e., proposed company name, scope of business, applicant’s contact details, etc). After confirming from the Registrar’s website that the proposed name doesn’t already exist, he or she fills and submits the form online and pays the application fee electronically.

It is noted that some lawyers or service providers typically maintain a number of “shelf names” – company names already approved by the Registrar. These are offered to clients whose needs are time-sensitive and who are indifferent of the actual name of the company. This means that the applicant can have an approved company name in virtually no time. In any case, it is always possible to change a company name once the company is incorporated, although this may require some additional time and cost for a registered company.

Agency: Registrar of Companies

Time: Approximately 1 month (2-5 working days under the accelerated procedure)

Cost: €10 (€30 if the accelerated procedure is selected)

Step 2: Lawyers to prepare the Memorandum and Articles of Association

The Registrar of Companies has no standard form for the Memorandum and Articles of association. The Companies Law provides a general template applicable for any kind of activities.

It is a statutory requirement to have lawyers prepare the Memorandum and Articles of Association, who are also required to sign the relevant declaration.

The following information is typically required:

  •  A brief description of the main objects of the company, unless the standard Memorandum and Articles of Association are to be used. (Eventhough it is usual for law firms to use standard M&A for holding companies, some other lawyers may adopt Table A of the Company Law or may draft the M&A according to clients’ instructions);
  • The amount of nominal share capital (i.e., €1000) and how it is divided (i.e., 1000 shares of €1 each). If the company to be incorporated is a public company there is a minimum share capital of €25.629.
  • The names, addresses, passport details of the proposed directors and secretary of the company;
  • The proposed registered address of the company;
  • Certified copies of the passports of the ultimate beneficial owners of the company;
  • Bank or other references on the good standing of the ultimate beneficial owners;
  • The chain of ownership behind the Cyprus Company up to and including the ultimate beneficial owners.
  • Any other information necessary to satisfy the requirements of the Know Your Client requirement “KYC” in order to comply with the Anti-Money Laundering Law and other corresponding guidelines.

Cost: Varies, approximately  €1,000

Time: 1 day on average

Step 3: Submission of documents at the Companies Section of the Department of Registrar of Companies and Official Receiver

The legal representative is required to submit four forms at the Registrar of Companies:

1. Declaration Form (HE1)8

2. Declaration Form concerning the registered office address (HE2)9

3. Form containing details on the Company Directors and Secretary (HE3)10

4. Original Memorandum and Articles of Association which should be signed by:(a) the subscribers to the Memorandum whose signatures must be attested by at least one witness; and (b) the lawyer who has drawn up the same.

Agency: Companies Section of the Department of Registrar of Companies and Official Receiver

Time: 2 working days

Cost: Approximately €205 registration fees + 0.6% on the authorized capital. A full list of Registrar fees can be found here.

After the Registrar processes the application and, provided all the information and documentation submitted is complete and accurate, the company will be issued with a Registration Certificate.

Step 4: Other registration procedures 

All companies must register with the Cyprus Inland Revenue Department and obtain a tax identification number. They may also need to register for VAT, as well as with the employers’ register of the social insurance services. Each registration process should take approximately 1-2 working days, provided that the applicant submits the necessary information and documentation without errors or omissions.

Other matters

From 2011 onwards, the Cypriot Government has also imposed an annual levy of €350 which has to be paid by 30th June each year by every limited liability company that is registered in Cyprus. A penalty is imposed if the fee is not paid within the prescribed period and it increases accordingly to the time of delay of payment. If the fee is paid within 2 months from the appointed date then a penalty of 10% is imposed which increases to 30% if the fee is paid within 5 months from the appointed date. However, if the fee is not paid within the aforesaid time limits then the Registrar of Companies will strike the company off the register. A company struck off as aforesaid may be reinstated in the register within a period of 2 years from the strike off with the payment of a fee of €500 and after the lapse of two years from the strike off with the payment of €750.

Further information about business entities and the incorporation process in Cyprus can be found here.

Branch

Foreign corporations operating in Cyprus can operate as a branch office without the need to incorporate. However, it is generally advisable to incorporate rather than set up a branch office in Cyprus, given the numerous drawbacks associated with having a branch office. Having said that, foreign enterprises wanting to set up a branch in Cyprus for lower levels of activity are allowed to do so.

Branch Investment Capital Requirements

No minimum capital requirements.

The parent company is fully liable for the liabilities of the branch.

Incorporation process

The incorporation process is largely similar to that for corporations.

A branch must apply for registration with the Registrar of Companies or the “One Stop Shop” (for expedited applications) within 30 days of being established in Cyprus. Registration is generally complete within one month, or within one week under the expedited service.

Management

A Cyprus resident must be appointed who is authorised to accept notices etc that need to be served on the company.

 

 

Representative Office

This is the easiest and least expensive type of foreign investment structure to set up and has no registered capital requirements. The defining characteristic of an RO is its limited business scope.  An RO is generally forbidden from engaging in any profit-seeking activities, and can only legally engage in purely marketing or informational activities relating to commercial, financial and economic matters but does not actually conduct any actual business.

ROs are not considered to be a separate legal entity and are not permitted to carry out economic activity in Cyprus. Representative offices may conduct activities, including research, liaison and promotion.

Registration with the tax authority and other agencies may be required.

Other types of business entities

Other types of entities or arrangements that may be considered for operating in Cyprus include:

1. Partnerships (general/limited)

2. International trust (typically used for tax planning purposes as opposed to business reasons)

3. European Company (Societas Europeas)

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Cyprus, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Cyprus they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities. A GEO Employer of Record solution is an attractive alternative where

  • the company is looking to setup an office quickly
  • the company wants to work within a defined budget
  • the company wants to limit its initial commitment in Spain
  • the company needs help with tax, employment, immigration and payroll compliance in Cyprus

The complexity of employment regulations in Cyprus makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Cyprus allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Cyprus.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Cyprus. Read more about outsourced employment through Shield GEO.

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