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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.

 

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To avoid mistakes as you set up your new company, it is essential to seek advice. We would be happy to provide you with the best advice on how to set up your company abroad. We are offering you a short, intial, free and non-binding consultation via email. It will go a long to way to help you setup your company the right way.

International Taxes
Tatjana Lintner

Key account manager at W-V Law Firm LLP

+44 2080783389 069 2475630-68 [email protected] Mo - Fr 09.00 till 17.00 CET
International Taxes
International Taxes
Tatjana Lintner

Key account manager bei W-V Law Firm LLP

International Taxes
+44 2080783389 069 2475630-68 [email protected] Mo - Fr 09.00 till 17.00 CET

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 company abroad

Not all topics related to founding a company abroad are always free of prejudices and false information that have prevailed over the years. We give you an overview of the most important questions about founding a company abroad.

International Taxes
Founding a company abroad as a citizen of another country is legal?
Founding a company abroad as a citizen of another country is legal?

Yes, in most countries foreigners can be sole shareholder of a local entity.

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Do you have to live in the country where you start a company?
Do you have to live in the country where you start a company?

No you can set up a company anywhere in the world, as long as the country in question allows you, as a foreigner, to acquire shares in local companies. If this is not the case, trustees can be used. Freedom of establishment applies within the European Union. However, it is important that the management takes place locally, in the country in which the company is registered. In addition, a permanent establishment must be set up. Without this, a German tax office will not recognize the company and, in the worst case, would demand back payment of corporate and trade taxes plus late payment penalties. We rent you a real office and set up a permanent establishment that meets all requirements without a doubt. In addition, we have real managing directors who run companies in the home country and are resident there.

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Problematic law firms: closure is made more difficult
Problematic law firms: closure is made more difficult

Some law firms tie clients with gag contracts and apply pressure when the client wants to close their business. If you are a client of a law firm that has set up a legally unsound company for you, you make yourself vulnerable to blackmail. Because in the event of a tax problem, law firms without a license are not bound by a duty of confidentiality.

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Changing offices is made more difficult
Changing offices is made more difficult

We receive many inquiries from customers who already own a foreign company and are looking for a new law firm. Switching to us is then often made more difficult. So horrendous final bills are made, which have to be paid before a change is possible. Therefore we have developed a trust principle. If you are not satisfied with us and want to switch, you can do so at any time. You will receive the necessary documents (resignation letter) from us in a standardized form after the foundation. This protects you from unexpected costs and you are free to go to another law firm at any time. So far we have not lost a client to another law firm.

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Privacy Policy/Office Location
Privacy Policy/Office Location

Your accounting documents are safe with us. In addition, all electronic data is only stored in encrypted form and apart from us, who are bound by professional secrecy, no one has access. All accounting documents are also only stored locally. Neither authorities nor hackers can access this data.

International Taxes
No taxes?
No taxes?

There are certainly locations in the world that do not charge any taxes to companies and private individuals or only charge a very low flat-rate tax. However, this can rarely be used without a corresponding change of residence. If you are resident in Germany, the relevant double taxation agreement is decisive. Providers who promise otherwise will tempt you into tax evasion, which is usually severely punished if discovered. We advise you not to set up companies in countries that have already been blacklisted by the OECD. The foundation is usually very cheap, but the tax consequences in Germany can be devastating. Since the introduction of the automatic exchange of information between almost all major countries, an anonymous account or company 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

 

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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.