The Republic of Cyprus (joint stock companies with limited liability, limited liability companies (IBC)

The Republic of Cyprus (joint stock companies with limited liability, limited liability companies (IBC)

Currently, Cyprus is very attractive for many foreign investors. Efficient and highly organised business environment coupled with enterprise income tax at the rate of only 10% are the main reasons for its popularity.

Cyprus signed agreements for avoidance of double taxation with 27 states, including Western Europe countries with high taxation and many countries of Central and Eastern Europe. As an area with low taxes, Cyprus is particularly advantageous location for companies oriented toward developing markets.

Any private company registered in Cyprus, with 100% foreign capital, is regarded as an offshore company, although the term 'international business company' (IBC) is also used .

Regulatory environment for offshore companies has been tightened as compared with the period up to 2003. Before, the Government implemented the most gentle approach, and offshore companies were completely exempted from income tax. Currently, the island remains a zone with low taxes, favourable business activity - 10% corporate income tax and lower rates of withholding tax. The regulatory requirements, however, are currently on of the same level as in many European Union countries.

Cyprus does not offer special benefits for foreign investors, although the low taxes are themselves a sufficient benefit. Nevertheless, there are various grants and loans for investors in certain sectors both of high technology and traditional economics, and free economic zone in Larnaca is offering exemption from customs duties. In addition, there are income tax incentives for foreign employees.

Cyprus companies are often used as:

• Trading companies. This type of companies best suits for international trade transactions; net income is subject to the lowest tax in Europe: 10%. In addition, the payment of dividends to nonresident shareholders is not taxed.
• Holding companies. If all the minimum requirements are met, the payment of dividends of the company to its branches from abroad is taxed at zero rate of tax.

The Most Popular Forms of Incorporation for Companies Established in Cyprus are:

• Limited Liability Company
• Branch
• Limited Liability Partnership

Main Features of a Limited Liability Company:

• No minimum fixed capital is required;
• Number of participants is one to fifty;
• At least two directors;
• Annual reporting should be submitted in Greek and subject to an audit.

Main Features of a Branch:

• Foreign parent company is fully liable for its Cyprus branch;
• Branch shall be registered in the Registrar of Companies;
• Reporting should be submitted annually in Greek.

Main Features of a Limited Liability Company:

• General partnership; Two to twenty partners;
• Kommandit partnership; At least one partner with unlimited liability;
• Registration in the Registrar of Companies is required;
• No auditing of reports is required, but account books should be properly maintained.

Please note that this information may be changed from time to time and shall be re-checked by experts of the relevant jurisdiction. To obtain updated information and information on the cost of registration, please contact our representatives.