For the last few years, Cyprus has received a considerable amount of business people and entrepreneurs ready to establish their own companies. One of the main drivers for this phenomenon is because of the economic benefits and easiness to operate a business in Cyprus.
This section of our guide is mainly focused on why you should start your business here and how you can go about it. Besides, you will learn about the registration process and the different business structures.
The most important points we will cover in this chapter are:
- Why Establishing a Company in Cyprus? Benefits.
- Different Business Structures to Choose from.
- A step-by-step guide to the company registration process.
Why Establishing a Company in Cyprus? Benefits of It
Cyprus stable economy makes businesspeople trust and, therefore, invest in the country. Laws and regulations are business-friendly; this creates a perfect environment for business people and entrepreneurs who want to establish their companies.
Below, we listed the 6 most important benefits of setting up a business on this island.
1. Low Operational Costs
Establishing a company in Cyprus can be easy, fast and cheap. Generally, it takes around 5 days to set up a new business. However, you can also acquire an already existing one in a day.
Additionally, registrations fees are low (in comparison with the EU) and in order to maintain your resident status, you only need to stay in the country for 2 months and not 6.
These favourable conditions create low operational costs and a higher profit margin for your business.
2. Strategic Location
Cyprus strategic geographical locations provide a significant economic advantage in the present days. Its relative short distance from Europe, Africa and the Middle East positioned the island as a gateway to new and exciting business opportunities.
Nowadays, Cyprus has one of the lowest crime rates in Europe, plus a stable government which doesn’t get involved in international conflicts or wars. This position guarantees low economic volatility and set the ground for an ideal business environment.
4. Tax Benefits
As regards taxes, Cyprus has a low tax rate. Besides, its taxation system provides significant benefits for companies and individuals. On the other hand, permanent establishments and sales of securities can claim tax exemption on profits from overseas.
The island possesses a modern, well-maintained and developed infrastructure. It has an efficient network of road that eases transportation and connects with 2 international airports and 2 multipurpose posts. It benefits travelling and shipping to and from Cyprus.
6. Access to Human Resources
Cyprus attracts students and elite professionals from all over the world. They find a well-educated society in which most people speak English fluently. That is to say; a company set up here will have access to highly experienced and trained individuals from varied backgrounds.
Different Business Structures
Once you are sure you want to start a business in Cyprus, you must decide which structure it should have. In Cyprus, you can register 3 kinds of company structure. They will depend on the type of business and the financial laws which are applied in the country.
The 3 main business entity possible:
This might be the most straightforward business option for small businesses with a single owner. Thus, it could also be a good choice when a company’s growth and development are just beginning to increase.
But you should consider that with this business structure, you will not have much protection from personal liability. In other words, your assets may be subject to claims in the case of a default, lawsuit or credit claims.
It can be a general or limited partnership.
- A general partnership involves that each partner is liable for the business debts with private assets.
- A limited partnership means that only one parent is liable for debts with his/her private assets. The other partner is liable up to the value of his/her investment in the company.
Nevertheless, in a partnership, you are free to distribute your profits as you please, regardless of your partner’s contributions.
Limited Liability Companies
Limited liability companies can be divided into 3 categories:
- Private limited companies with a shareholder limit of 50 owners.
- Public limited companies without a maximum limit of shareholders and whose shares are publicly traded.
- Companies limited by guarantee. Even though these limited companies are the most regulated ones, they have the highest capacity to take in the capital. Moreover, shareholders are liable to the amount they invested, and the profits are distributed according to the number of shares.
Step by Step Guide to Register your Company in Cyprus
Setting up a company in Cyprus is quite simple and convenient. The benefits are almost immediate, and the red tape requirements are minimal.
Here are the 7 essential steps you should follow when setting up a business in this country.
Step 1: Choose Your Preferred Business Entity
Firstly, as already described, you need to decide which business structure suits your investment. When evaluating the options, we strongly recommend consulting with professionals in the field and people who have undergone the same experience. It will give you a wider perspective and an inside on what you should expect in any of the 3 structures available.
You might need to remember that your choice will impact on the paperwork you’ll have to do, the business’ regulations and the taxes you will have to pay for.
Step 2: Provide a Name and Check If It’s Available
Before setting up the company, you need to pick up a name that represents your business and check if this name is available to use.
You can do so by checking with Cyprus Company Registrar.
Step 3: Draft the Articles of Association
When the structure and name are decided, you will have to draft the Article of Association. This document must include:
- The name of the company
- The purpose of it
- A list of owners
- The ownership structure and how it is divided between them
- People who own a part of the company and the percentage they own.
- The names and personal details of the company's shareholders, partners, officers, and directors as well as their respective rights and duties.
Step 4: Submit Required Paperwork
According to your business structure, you will have to submit certain documents and forms to the Cypriot trade register (maintained by the Department of the Registrar of Companies and Official Receiver)
The red tape may include:
- Official forms such as HE1, HE2, HE3
- A document confirming the reservation of your company’s name
- The Articles of Association.
- Other documents related to the company and the identity of the directors or partners.
When all the paperwork is approved, your company is officially established.
Step 5: Open a Bank Account
After that, we suggest opening a separate bank account for your business operations. It is advisable to keep your personal and company finances separate.
A bank account in Cyprus can be opened in 10 to 15 days.
Step 6: Register for Taxation
Two more steps to go! At this point, you will have to register your tax purposes. The Tax Department can help you out with this process.
- Obtain a VAT number, if you deal in anything subject to the Value Added Tax.
- Apply for Social Contribution registration at the Ministry of Labour, Welfare and Social Insurance.
- Find out any tax exemptions your company may qualify for and apply for them.
Step 7: Check for Necessary Licenses
When a company is specialised in a determined industry, it is subject to tighter regulations from the government. So, if you are in doubt whether you need a special license or not, check with our consultants to make sure you are on the right track and to avoid fines or penalties.
A Word of Caution
The process to establish a company in Cyprus might seem favourable and straightforward in terms of time and cost. However, you should bear in mind that the regulations are taken seriously and if you fail to comply with the existing requirements, you will suffer legal consequences.
To avoid any inconvenience, double-check each step of the wat and get a legal assessment. To go about this procedure quickly and effectively, contact our specialists and schedule a free, personalised consultation.
In a Nutshell: Cyprus Company Registration Process
The process of establishing a company in Cyprus doesn’t substantially differ from similar processes you may know from other countries. The only exception is that in Cyprus, the registration is faster and the requirements are less complicated.
For example, let’s say you’re looking to set up a limited liability company. To do so, you simply need to file a notarized document called “Memorandum and Articles of Association” along with a few official forms prepared by a lawyer. The only two entities you will have to register your company with is the Department of Registrar of Companies and Official Receiver and the Tax Department. Here’s a short list of things to figure about before the registration:
1. Your company’s name (you need to have the name approved by the Registrar prior to the actual registration)
2. Who the shareholders are and what is the share capital
3. Who the initial board members will be
4. Where the registered office will be (this doesn’t necessarily have to be the address of any actual offices - it’s more of a correspondence address)