Home > Company formation Cyprus
Company formation Cyprus – Is Cyprus a Good Choice?
Company formation Cyprus offers one of the most attractive tax structures in Europe. A member of the European Union since 2004, Cyprus’ regulatory regime is in full compliance with the requirements of the EU and OECD. Cyprus has one of the lowest EU corporate tax rates at 12.5%. The island’s advantageous tax rate coupled with an extensive list of double tax treaties places it high on the list of preferred jurisdictions for international tax planners.
Key features of the Cyprus Tax system includes; OECD approved / EU compliant tax system, wide network of favorable tax treaties with almost 60 countries, IP Box regime: effective tax rate of 2.5% on profits from the use and sale of qualifying intangible assets (restrictions may apply), no wealth taxes and only minimal stamp and local taxes, most international transactions free of VAT and much more.
Basis of Taxation
All companies that are tax residents of Cyprus are taxed on their income accrued or derived from all sources in Cyprus and abroad. A non-Cyprus tax resident company is taxed on income accrued or derived from a business activity which is carried out through a permanent establishment in Cyprus and on certain income arising from sources in Cyprus. A company is resident of Cyprus if it is managed and controlled in Cyprus.
Furthermore, the legal structure in Cyprus was based on its previous association with Britain. So its legal structure was formed on the familiar English Common Law. This familiar legal basis in addition to Cyprus’s improving economy has paved the way for many financial benefits for international business people choosing to incorporate here.
Cyprus also earned a high standing as one of the best regions in which to incorporate for tax planning purposes. Many limited company owners report that Cyprus’s jurisdictional incorporation standards provide ideal protection for businesses. The past ten years has seen Cyprus as an increasingly favorable place to take advantage of international tax benefits.
The key advantages of Cyprus are
- Legal taxation within the EU and double tax agreement with over 50 countries
- High tax savings thanks to low corporation tax (2.5% or 12.5%)
- Anonymity by trustees
The biggest mistakes when starting a business abroad
Many agencies and law firms do not advise comprehensively or wrongly. Learn what to look for.
Gravity of the situation
Often, these law firms think foreign companies are half-silk, tax evasion is favored and mailbox companies are the leaders rather than the exception. This is true, however, only in some start-up agencies that do not have the necessary expertise. Self-proclaimed law firms that do not employ tax accountants or lawyers usually set up companies that are unlikely to operate legally. We set up and look after companies that can withstand tax audits and that are legally operated.
Is physical presence required in the country where you wish to set up your company?
You can set up a company worldwide, as long as the respective country allows you as a foreigner to acquire shares in local companies or to act as a managing director. If this is not the case trustees can be used. For example, Cyprus allows every EU citizen to own and run a business. Nevertheless, trustees can be used for the purpose of identity protection. However, it is important that the management takes place locally, in the country in which the company is to be taxable. In addition, a permanent establishment must be set up. Without these, a major tax offices around the world do not recognize the company and in the worst case would require additional payment of corporate and business taxes plus late payment surcharges. We rent you a real office and set up a permanent establishment that meets all requirements beyond doubt.
Problematic Law firms: Privacy is not regarded.
Some law firms bind customers with toggle contracts and exert pressure when the customer wants to close his company. If you are a client of a law firm that has established a legally flawed company, they can be blackmailed. Because in the case of a fiscal problem, law firms without a license are not bound by a duty of secrecy.
Migrating to a different law firm
We receive many inquiries from customers who already own a foreign company and are looking for a new law firm. The process of changing law firm is made often difficult on purpose. Therefore, we have developed a principle of trust. If you are not satisfied with us and want to change, you can do that at any time. The necessary documents (resignation letter), you receive from us standardized after founding. You are therefore protected against unexpected costs and you are free at any time to visit another law firm. So far we have not lost any customer to another law firm.
Privacy / Firm Location
Your accounting documents are kept safe with us. In addition, all electronic data is stored encrypted and accessible only by us, which are bound to a professional secrecy. All accounting records are also stored locally only. Neither authorities nor hackers are able to access this data.
There are quite a few locations in the world that do not charge taxes on companies or individuals, or only estimate a very low flat rate tax. But this can rarely be used without corresponding change of residence. If you are a resident of any major country, the relevant double taxation agreement is decisive. Providers who promise otherwise lead them to tax evasion, which in the case of discovery usually punishes severely. We advise against setting up companies in countries that have already been blacklisted by the OECD. The foundation is usually very cheap, but the tax consequences in your origin country can be devastating. Since the introduction of the automatic exchange of information between almost all major countries, an anonymous private account no longer exists.
We comply with the following code:
- Legally secure foundations
- No unexpected(hidden) costs
- No false promises
- Finding the right solution by focusing on your requirements
With this strategy, we have been on the market since 2013 and have not disappointed any customer so far. And we prioritize it in keeping that way. We strive to ensure that every client is satisfied and does not take risks with the solutions we provide for them, but only exploits legal opportunities. Starting a company that involves doing real business is more costly than a letterbox company, but it is the only way to save on taxes without risking legal action.
What makes a Cyprus company attractive to foreigners?
Beginning shortly after the fall of the Berlin Wall, the government of Cyprus established its country as a tax haven, specifically targeting Russian oligarchs, as well as Eastern European civilians and companies. The country’s low flat corporate tax rate, strict privacy laws and geographic desirability due to its proximity to Europe and Russia helped to increase the popularity of the tax haven over the following three decades. As a result, the banking industry boomed in Cyprus, growing to become nine times larger than the country’s economy by 2009
A Cyprus company has the following advantages:
- Liability risks are highly limited
- Your effective tax burden goes down
- Accounting and financial statements will be done favorably
- Assets are protected against access by third parties
- Legal tax structuring within the EU (not offshore)
- Acceptance in Europe-wide commerce (e.g., as an Amazon seller account)
Tax structure comparison
Here are some examples of the tax differences between a highly taxed jurisdiction versus major tax havens.
|Belgian Limited (SPRL/BVBA)||Cyprus Limited (Ltd.)||Romanian Limited (SRL)|
|Profit||8,.000 EUR||80,000 EUR||80,000 EUR|
|Corporate tax||33% including. surcharge tax rate 3% Totally 36,000 EUR(36%)||10,000 EUR (12,5%)||2,400 EUR(3%) Can be effectively reduced to 800 EUR (1%)|
|Profit after taxes||64,000 EUR||70,000 EUR||99,000 EUR|
|Key advantages||Strong economy, highly reputed country||High anonymity, reduced liability risks, fast growing economy, possible tax reduction||Lowest corporate tax in EU, ideal for micro-enterprise, low cost and highly skilled labor force|
|Tax burden||36,000 EUR||10,000 EUR||800 EUR|
Company formation Cyprus - That's how it works
Establishing a company in Cyprus is easy and the founder does not have to travel to Cyprus. For the foundation only a certified ID or passport copy and a power bill is needed. Depending on the choice of bank and also a short CV or a bank reference.