When digital nomads think about incorporating, they will often look into setting up a company in Cyprus. In this article, we’ll have a look at the benefits, attention points and we’ll go over the process.
Please note that we are talking about the Southern / Greek part of Cyprus here and not about North Cyprus.
Benefits of Setting Up a Company in Cyprus
- Limiting liability: by setting up a company you will limit your liability to the assets of the company and protect your private assets.
- Favorable corporate tax rate: the corporate tax rate in Cyprus is just 12,5%. One of the lowest corporate tax rates in Europe.
- Low dividend tax: if you live in Cyprus the tax on dividends is only 2,65%. There is even no withholding tax on dividend payments to shareholders living abroad.
- Internationally recognized: Cypriot companies are widely used in international trade and have a good reputation.
- No minimum capital: you don’t need deep pockets for setting up a company in Cyprus as there are no minimum capital requirements.
- Full ownership: some countries have restrictions on foreign ownership of companies. However, you can fully own your Cypriot company without the need to involve another shareholder.
Downsides of Setting Up a Company in Cyprus
- Reporting requirements: you need to hold proper accounts and file these with the authorities. Furthermore, you’ll also need to file various tax returns.
- Lack of anonymity: information about directors and shareholders is publicly accessible.
- Setup and operating costs: the costs for setting up a company in Cyprus can be a bit higher than in other countries.
Steps to Register a Company in Cyprus
When registering a company in Cyprus, you need to take a few steps. I’ll list them here for you with some additional explanation so you have a good understanding what to expect in each stage of the process.
Name Approval
The first thing to do when setting up a company in Cyprus is to decide on a name for the company.
The company name cannot be similar to a name of an already existing company in order to avoid confusion.
You’ll have to apply for the name with the Registrar of Companies. The process usually takes one to three working days.
Preparation Documents
Once you got your name, you can start preparing some other documents regarding the incorporation.
The first document regarding the incorporation of a company is the memorandum of association. This document contains among others the company name, registered address, share capital and the shareholders.
Probably the most important document is the articles of association. These set out the rules according to which the company is managed by the shareholders and directors.
Furthermore, you’ll also have to appoint a director and secretary for the company. You can appoint one and the same person for both roles.
Please note that only officially registered lawyers can prepare and file these documents.
How long it takes to prepare these documents depends on the complexity of your setup and the lawyer’s availability.
However, in practice, you mostly start preparing these documents in parallel with the first step and you just complete the name of the company after receiving the approval from the Registrar of Companies.
Company Registration
After preparation of the necessary documents, your lawyer will file them with the Registrar of Companies.
After completion, you’ll receive a certificate of incorporation marking the official existence of the company.
This step will mostly take around seven to ten working days.
Post-registration Administration
Now your company is legally incorporated but you still need to take care of some things in order to be fully operational.
Your company will need a tax number in order to file the necessary documents with the tax authorities. In addition, you’ll have to register for VAT.
Another thing you’ll need is a corporate bank account. This will enable you to make and receive payments.
Recurrent Compliance
Once you are up and running, you still need to take care of compliance on a recurring basis.
You’ll have to keep proper financial accounts which you also need to file on a yearly basis.
Furthermore, you need to file VAT and income tax returns and take care of payroll and social filings for employees and directors.
In order to make sure that all filings are done in time it will be important to work closely together with your local accountant.
Cyprus Company Formation Cost Breakdown
If you want to set up a company in Cyprus, you need to account for some costs. I’ll give you a breakdown of the costs you can expect for incorporating a company.
- Company formation: €1.500
- Registered address – annually: €400
- Company tax registration: €150
- VAT registration: €150
- Opening corporate bank account: €750
- Corporate tax return (TD4 forms) – annually: €200
- Corporate tax provisional tax returns (TD6 forms) – twice per year: €150
- Employers return (TD7 forms) – anually: €150
- Payroll services – monthly: €30 per employee
- Dividend declaration (TD603 forms) – per dividend payout: €150
Accounting starts at around €1.200 per year but heavily depends on the amount of invoices that need to be processed.
If you also want to move your personal tax residency to Cyprus you need to be aware of the following costs:
- Assistance with residency permit (EU-citizens): €550
- Personal tax registration: €150
- Personal tax return (TD1 forms) – anually: €150
- Tax residency certificate: €500
- Non-domicile certificate: €650
- Registration for social security: €200
- Management of social security payments – anually: €350
Moving your personal tax residency to Cyprus can be an interesting option for many nomads. One of the reason is that you can become a tax resident of Cyprus by only spending 60 days in the country.
Please note that all the above prices are just estimates and these are subject to change.
However, by working together with diligent local professionals I’m able to give you a package price for the full setup at a fraction of the cost. Package prices for a company formation start at €1.750.
FAQ on Setting Up a Company in Cyprus
Hereafter we’ll answer some of the frequently asked questions regarding setting up a company in Cyprus.
Can a Foreigner Open a Company in Cyprus as Non Resident?
Yes, anyone can open a company in Cyprus as there are no residency restrictions for company formation.
So, as a non-resident you can own 100% of your Cypriot company. However, you need to take into account some attention points.
First of all, you will need to properly identify yourself in order to make sure that the local advisors and authorities know who the actual owner of the company is. Therefore, they’ll ask you a copy of your passport and proof of address.
Second, you need to appoint a local representative. This person will handle the communication with the local authorities on your behalf.
Does Cyprus Levy Withholding Taxes?
Cyprus does not levy any withholding tax on outgoing dividends.
Yet, we need to make two amendments to this general principle.
If your Cypriot company makes a dividend payment to a country on the EU blacklist of tax havens, a withholding tax of 17% will apply.
So, if you live in one of the countries on the blacklist, a withholding tax applies after all. Luckily, the list of non-cooperative jurisdictions has been shrinking over the past years.
Furthermore, you need to pay social contributions on dividends if you as the shareholder live in Cyprus. These are contributions for the General Healthcare System (GHS). The rate for dividends is 2,65%.
If your company pays out interest or royalties you also need to be aware of withholding taxes. In most cases, Cyprus won’t levy any withholding tax on these payments either but some exemptions apply.
Is Cyprus a Good Place to Start a Business?
Cyprus is definitely a good place to start a business. Here are some reasons why setting up a company in Cyprus is interesting:
- Favorable tax regime: as discussed, the corporate income tax in Cyprus is rather low. And if you take out a dividend there are almost no taxes due. This enables you to limit your tax burden. On top of this, Cyprus has many double tax treaties with other countries that can manage any issues regarding double taxation.
- Strategic location: although Cyprus is a rather small island, it’s well positioned between Europe, North Africa and the Middle East.
- Business friendly environment: Cyprus tries to attract a lot of foreign investments by creating a business friendly environment. As they do a lot of international business, local advisors are also used to dealing with foreigners and assisting them with setting up companies in Cyprus.
Do You Want to Save as Much Taxes as Possible?
As you could read, setting up a company in Cyprus comes with many advantages. However, it’s not a silver bullet. For some digital nomads, other options will work better.
Therefore, I recommend you to reach out in order to make sure you don’t miss out on the ideal setup that will save you taxes and be most convenient for you.
