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What are the benefits of incorporating a Cyprus company?

The tax system of Cyprus is one of the most beneficial tax systems in the EU. This makes a Cyprus company an advantageous vehicle for International Tax Planning and use. Here are some of the benefits of the Cyprus tax system:

  • Taxation is based on Residency status;
  • 12,5% corporate tax on trading profits;
  • Notional Interest Deduction available (up to 80% of taxable income);
  • Incoming dividends exempt from taxation (subject to relaxed conditions);
  • No withholding tax on outgoing payments (dividends-interest-royalties);
  • No taxation on profits derived from sale of securities (provided no Cyprus situated immovable property);
  • Introduction of the non-domicile principle for individuals (no tax on dividends/interest);
  • Interest expense on 100% corporate acquisitions permitted;
  • Beneficial IP Regime in line with OECD's "nexus" principle;
  • Capital gains from the sale of immovable property situated outside Cyprus are tax exempt;
  • Tax free Re-Organisations (cross border permitted);
  • Foreign PE profits exempt;
  • Applicability of all EU Tax directives;
  • Advance Tax ruling practice exists;
  • Extensive and constantly expanding attractive Double Tax Treaty network;

Moreover, Cyprus is a party to a considerable number of Double Taxation Treaties with various countries for the avoidance of double taxation of income earned in any of the two contracting states.

Cyprus is also a full member of the EU since 2004 and it benefits from all EU treaties, regulations and directives. Cyprus has successfully harmonized its legislation fully with the EU standards and introduced a thorough anti money laundering legislative framework which is in full compliance with EU and USA standards. Additionally, Cyprus is listed on the OECD ‘white list’ of global jurisdictions that are in full compliance with the internationally agreed tax standards.

Incorporation of a company – summary of procedures

A company is a legal person created by a certain legal procedure, called Incorporation/Registration. In principle, a Cyprus private company can start its business activities as soon as it is registered with the Cyprus Registrar of Companies (“RoC”).

Summary of the procedures of a company’s incorporation

  • Filing of an application to get approval for the company’s name by the RoC. It takes approximately 3-5 working days to obtain approval/rejection over a name.

Once the name approval is obtained, the company has six (6) months to file the application for the incorporation of the company and for this period the approved name is reserved.


  • Filing of the Memorandum and Articles of Association (“M&AA”) of the company along with the required forms whereby notification is made to the RoC about the details of the first director(s) and secretary(ies) and the registered office of the company.

In case of private companies in Cyprus the minimum number of directors is one (1) and the company secretary cannot be the same person as the sole director except where there is only one shareholder.

Also, there is an option to create a file of translations with the RoC in order to obtain certified copies of the M&AA in a language other than Greek.

  • Upon examination and approval of the incorporation application, the RoC proceeds with the company’s incorporation, assigning it with a registration number and issues the Certificate of Incorporation (which constitutes undisputable evidence that all steps have been adhered in accordance with the law). Upon request, RoC can issue a set of Certificates i.e. Certificate of (a) Registered Office; (b) Directors and Secretary; (c) Shareholders, (d) Certified copy of the M&AA and (e) Certified copy of the Certificate of Incorporation. The timeframe within which a Cyprus company may be incorporated varies and takes approximately 10 working days as of the date of the filing of the required documentation with the RoC, depending on the period of time whereby the filings will be made (i.e. whether a public holiday intervenes within such period or August summer vacations etc.)

Please note that the ‘Know Your Client’ (“KYC”) procedure precedes the abovementioned steps.

Duties and liabilities of directors under Cyprus Law

Duties of directors
Since directors have the power to make important decisions, several duties are imposed on them so as to ensure that the company’s interests are well-protected.

Those duties are divided into the following categories:

I. Fiduciary Duties
II. Duty to exercise skill and care
III. Statutory duties
The directors’ duties are owed to the company as a whole and not to individual shareholders or third parties.
I. Fiduciary Duties

A director owes a duty to the company to act in good faith and in the best interests of the company. This duty is called “fiduciary duty” and it is the highest standard of care.

Directors shall exercise their powers only for the purposes allowed by law and in accordance with the company’s constitutional documents such as the memorandum and articles of association.

Furthermore, directors must not put themselves in a position where there is a conflict between their personal interests and the company’s. Therefore, directors must not misuse company’s property, information, opportunities and other confidential details for their own or anyone else’s benefit, unless allowed to by the company’s articles of association or in cases where such use has been disclosed to the company in general meeting and the company has consented to it. If a director, in breach of his fiduciary duties made a personal profit out of a business transaction, then he will be liable to pay that profit to the company.

II. Duty to exercise Skill and Care
This duty requires the directors to exercise skill and care of “a reasonably diligent person”. That is, to have both (a) the general knowledge, skill and experience that may reasonably be expected of persons carrying out the same functions and (b) the general knowledge, skill and experience of that particular director.

III. Statutory duties

Directors have various statutory duties imposed by the Cyprus Companies Law, Cap.113 (the “Law”) and other legislation, such as the Income Tax, VAT, Customs & Excise legislation, Health and Safety and Environmental legislation.
Liabilities of directors

In principle, there is no difference as far as a liability is concerned between executive, non- executive and/or nominee directors, as the Law refers only to directors in general.

I. Breach of fiduciary duties (under common law) and the duty of skill and care
Breach of the aforesaid duties will render the director personally liable to the company. In such cases the company may be awarded damages and/or injunctive relief.

II. Breach of statutory duties
Breach of a statutory duty may result in criminal, civil or administrative liability or in all of them.

It is worth noting that in order to deter directors escaping from the consequences of their wrongdoing/actions, it has been a common practice to include into various statutes the following wording by which directors and other officers of a limited liability company are subject to criminal liability:

“...where an offence….committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of any director, manager, secretary or other similar officer of the body corporate or any person who was purporting to act in such capacity, he as well as the body corporate shall be guilty of that offence and shall be liable to be proceeded against and punished accordingly…”
In addition, a director can also be prosecuted as a person who aids or abets the company in committing an offence.

What are the statutory obligations a Cyprus Company must comply with?

a) Annual Company Levy
According to the Cyprus Companies Law, Cap.113 (the “Law”), all companies registered in Cyprus are required to pay an annual levy of €350 to the Registrar of Companies. This levy is payable by the 30th of June every year. Failure to comply with such obligation will result in penalties and may even result in the strike-off of the company.

b) Annual General Meeting
A Cyprus company must hold an Annual General Meeting (“AGM”) once a year. The first AGM can be held within eighteen (18) months of the date of incorporation. Thereafter, the AGM must be held on an annual basis and must not exceed fifteen (15) months as of the date of the previous AGM. The agenda usually includes a review of the audited financial statements, approval of dividend payments, appointment of the board directors and auditors.

c) Statutory Records
A company registered in Cyprus is required to keep and maintain its Statutory Records at its Registered Office either as hard copies or electronically. The statutory records are very important not only because they are required by the Law but also to comply with EU anti-money laundering legislation. These records include a Register of Directors, a Register of Secretaries, a Register of Shareholders, and a Register of Charges.

d) Accounting Records
It is a legal requirement for a Cyprus company to maintain books and records and prepare financial statements in accordance with the International Financial Reporting Standards (IFRS). Furthermore, the accounting records must be kept at the registered office of the company for six (6) years from the end of the year to which they relate and be available for inspection from the Tax Department.

e) Financial Statements
A Cyprus company is legally required to have its Financial Statements audited by a duly licensed and practicing external Auditor in Cyprus. However, subject to certain conditions, private limited companies may opt to submit their financial statements for review instead of audit.

f) Annual Returns
A Cyprus company is required by law to prepare and file with the Registrar of Companies an Annual Return once every calendar year. The Annual Return contains the company's statutory information as at the date of its compilation and should be filed with the audited financial statements of the previous year which have been approved at the AGM of the company.

g) Tax Returns
In accordance with Cyprus tax laws, every company should submit a Tax Return (IR4) on an annual basis. The Tax Return is prepared based on the Audited Financial Statements of the company and includes its balance sheet and profit and loss account in Euro and its tax computation. Administrative penalties are imposed for late submission of declarations or late submission of supporting documentation requested by the Commissioner of Taxation.

h) Register of Ultimate Beneficial Owners (“UBOs”)
Pursuant to the Prevention and Suppression of Money Laundering Activities Laws of 2007-2022 (the “Law”), companies and other legal entities incorporated in the Republic of Cyprus are obliged to identify and record on the Cyprus UBO Registry (“the Registry”) all the necessary information required by the Law and the relevant regulations.
The Registry is currently operating on an interim basis, the so-called ‘interim solution’. Throughout this period, if there has been any change with relation to the information submitted to the Registry, companies and their officers are obliged to update the Registry accordingly.

Also, once the final solution is implemented, every December companies and their officers will have to confirm the accuracy of the information kept by the Registry.