The Republic of Cyprus attracts the attention of businessmen from all over the world. The island state has something to offer and something to interest everyone who is already in business or is just about to become an entrepreneur. The government of the country actively encourages foreign investors, creates comfortable conditions for activity, and Cyprus's membership in the EU opens up good prospects in search of partners in Europe. Russians wishing to open their own business in Cyprus should get to know the local specifics better.
Business in Cyprus: the main advantages
For a long time, businessmen who did not want to attract attention to themselves and their business in their homeland aspired to Cyprus and took capital abroad, creating offshore companies. In this regard, Cyprus was an almost ideal option - preferential taxation for foreign companies (4.25%), complete confidentiality of information on bank accounts, no need for financial reporting.
Many businessmen (including those from the Russian Federation) rushed here in the late 1990s in order to buy an offshore company in Cyprus at an inexpensive price, which was not illegal from a legal point of view (but not from a moral point of view).
Today's Republic of Cyprus is no longer an offshore state, although the opposite point of view can be found on the Internet. It should be remembered that since 2004, after the state joined the EU, the laws of the country were amended accordingly, after which Cyprus ceased to comply with the signs of an offshore. Since 2021, this island is no longer included in the lists of offshore companies.
Compliance / non-compliance of Cyprus with offshore characteristics:
| The main signs of an offshore | Compliance / non-compliance (+/-) |
|---|---|
| No / preferential taxation of income of foreign companies compared to local ones | Same tax for foreign and local businesses at 12.5% |
| Complete financial anonymity and confidentiality | 50 treaties for the avoidance of double taxation and the exchange of information on taxes and accounts |
| Lack of financial reporting | International Financial Reporting Standards are in force. Submission of a report certified by a qualified auditor will be required |
| Currency control and regulation | Control is exercised by the State Bank of Cyprus |
| Carrying out activities outside the offshore territory | There is no such requirement. |
Thus, Cyprus cannot be classified as offshore by any of the main features.
Interesting to know. The term “offshore” (from the English offshore) became widespread in the 1950s in the United States after the case when one of the companies “left” government tax control on the other “shore”, that is, to another country with more favorable tax pressure ...
Nevertheless, despite the fact that the registration of offshore companies in Cyprus has become impossible, Cyprus has not lost its attractiveness for businessmen. Another important factor should also be taken into account - the political one. It is connected with the fact that since 1974 the island has been divided into two zones:
- southern - the state of Greek Cypriots - the Republic of Cyprus, recognized throughout the world, included in the EU;
- northern - Turkish Republic of Northern Cyprus (since 1983) Turkish Cypriots, not recognized by anyone except Turkey.
Before starting a business in Northern Cyprus, you should calculate all the pros and cons of an unrecognized state. Today, the cons are much more tangible than the pros.
Entrepreneurship in the Republic of Cyprus has the following advantages:
- preferential tax rates;
- business safety;
- entering the international arena - cooperation with more than 100 countries;
- stimulating the government to obtain permanent residence for investment;
- lack of corruption and bureaucratic red tape;
- high standard of living in the country.
Promising business ideas in Cyprus
There are no problems, what to do in Cyprus for a foreign investor, as such. Foreigners have the opportunity to engage in almost any legal activity here, with the exception of urban planning, higher education, postal services, and electricity. The favorable geographical location of Cyprus, its natural resources and attractions: the warm waters of the Mediterranean Sea, the abundance of the sun, beautiful beaches, historical monuments are of decisive importance for the choice of the business area.
More than 3 million tourists visit the island annually. From this point of view, investing in:
- tourist infrastructure - hotels, hostels, guest villas;
- entertainment and recreation area - golf clubs, tennis courts, diving and mountain tourism sections, night clubs, children's playrooms;
- service sector - language courses, transport services, beauty salons, translation bureaus, shops;
- the sphere of public catering - cafes, restaurants, taverns, bars, mobile fast food points.
It should be noted that there is a fairly high level of competition in these areas from local residents, which can be overcome on your own thanks to original tourism start-ups and high quality service.
Recently, the position of the technology business has been strengthening on the island, there is an influx of IT specialists, game developers, including from the Russian Federation, Belarus, and Ukraine.
Russian companies in Cyprus are engaged in gas production and construction, shipping, real estate sales, exchange trading, and legal services.
The "Russian" capital of the island is Limassol, the most comfortable and modern city on the Cypriot coast. The city is often called the Cypriot Silicon Valley - many IT firms are located here. In addition to representative offices of Russian companies, there is a Russian-language radio station, 2 Russian kindergartens and 3 schools, a network of Russian shops and restaurants.
Organizational and legal forms of business available to foreigners
Resident aliens in Cyprus have the same rights to establish firms as Cypriot citizens. Non-resident foreigners, according to the Companies Law, are limited in this right.
An open business visa will allow them to choose from the following options:
- Private joint stock limited company. This business organization has the following characteristics:
- availability of the charter and constituent documents;
- responsibility of the participants for the activities of the company in the amount of their contributions;
- presence from 1 to 50 participants;
- obligatory office in Cyprus;
- the presence of a director (one or more) and a secretary;
- compulsory accounting, annual audit with a report on activities and taxes.
- Public company. Main features:
- initial capital - at least 25,629 euros;
- minimum 7 members;
- at least two directors;
- the issue of registered shares and equity participation are allowed.
- Joint venture (partnership) with full or limited liability.
- Branch of a foreign company. Cypriot banks and Cypriot residents often ignore them, preferring local firms. Features:
- common name with the main company;
- non-resident status;
- separate leader.
How to open a new business in Cyprus
Those who decide to open a company in Cyprus should take into account several nuances:
- some activities may require permits / licenses from authorized bodies. So, for the opening of a cafe - local authorities, the Ministry of Health, a hotel - the Cyprus Tourism Organization, a school - the Ministry of Education. The process of obtaining a license takes on average 5 to 7 working days;
- to speed up the process, it is advisable to employ at least 3-5 local residents in your company.
Business registration in Cyprus includes a number of operations: the necessary approvals and collection of a package of papers, registration of a company in Cyprus with the opening of an account in a local bank, registration.
Having decided on the direction of business, you need to reserve a unique name for the new company. It should not include some words (King, International, etc.). For limited liability companies - the presence of the abbreviation LTD is mandatory. After choosing a name, prior consent must be obtained by contacting the Cyprus Registrar of Companies to pay a fee of 30 euros.
Preparation of documents
When establishing a new company, it is required to prepare a minimum package of papers for the Cypriot registrar:
- constituent documents - company charter, memorandum of association. There is no standard template. They must reflect the authorized capital, the type of planned activity, directorate, secretary, shareholders, legal address (own or rented premises), etc .;
- licenses for the type of activity (if necessary);
- Copies of directors' identity papers.
The documents must be in Greek and certified by the signature of a lawyer entered in the special register. The client receives an English translation of the document, certified by the registrar.
When registering online you will need:
- scans of constituent documents;
- list of directors, secretaries - form HE3;
- company address - form HE2;
- lawyer's declaration;
How to register a company
The registration of a company is carried out according to the usual procedure or through the website of the Department of Registration and Liquidation of Companies. When submitting documents, you must pay a commission - 105 euros, tax per year (0.6% of the declared capital), 60 euros for paperwork. The average registration period is 15-20 days. Upon payment of the urgent tariff (100 euros) - from 3 to 6 days.
After registration, the founders receive officially certified supporting documents:
- copy of the charter;
- registration certificate;
Documents that no private company in Cyprus can do without, can be obtained after paying a fee of 220 euros:
- a set of certified copies of constituent documents with an apostille;
- directors certificate;
- address certificate;
- certificate on the composition of shareholders.
If you wish, you can order an additional number of certified copies - 20 euros for the certificate and 60 euros for the charter. The owner can make a seal according to the approved sample.
The cost of registering a company in Cyprus on average ranges from 1,200 to 1,500 euros, when using the services of intermediaries and lawyers - up to 3,000 euros and more. A registration fee of 350 euros must be paid annually (by June 30).
A shareholders meeting must be held within 18 months after the documents are issued.
Opening a bank account
After receiving the set of documents, you can go to one of the banks in Cyprus to open an account. Bank of Cyprus, HELLENIC, Piraeus Bank are among the banks in which servicing companies in Cyprus is most profitable.
The bank will need to fill out application forms and present the constituent documents of the company, a copy of the director's passport, certificates.
Instructions on filling out forms and a list of papers can be obtained directly from the bank. The bank provides the bank details on the day of submission of all papers. The account can be used in full in 7-14 business days, depending on the bank.
Registration of a company as a taxpayer
Companies with the right of a legal entity must apply to the Tax Department for registration (registration online is possible with an electronic signature). The procedure is free and takes 1-2 days. For accounting, you must fill out the IRD-162 form,
and also provide company documents:
- copies of the registration certificate and certificates;
- a copy of the charter.
Based on the results of the application, the company receives a TIN - a taxpayer identification number.
Here you can also register a company as a VAT payer for free. This is true for companies whose revenues have exceeded 15 600 euros in the last year. The list of papers is the same, except for the form - in this case, you will need the VAT-101 form.
Cyprus legislation obliges all employers to register with the Ministry of Labor and Social Insurance.
Is it worth buying a ready-made business in Cyprus
Cypriot legislation does not prohibit foreigners from acquiring operating companies in the country for honestly earned money, and the market is rich in offers for every taste. Buying a ready-made business in Cyprus for Russian entrepreneurs is often easier and more profitable than trying to create everything from scratch. Its profitability and prospects are easier to assess, especially since you can purchase a business with or without real estate, you do not need to pay purchase tax.
The buying procedure is simple:
- find suitable options;
- check a Cyprus company - conduct an audit and start negotiations with the owner;
- conclude a sales contract.
At the same time, there is a great chance to buy a pig in a poke - the family business that brought income to the Cypriot will not necessarily be as profitable for a foreigner. But in this way you can be guaranteed to acquire the status of a resident of Cyprus.
Investments as a way to obtain Cypriot citizenship
Investments in the Cypriot economy are most often used not so much as a means of making a profit, but as an opportunity to acquire the status of a Cyprus resident. Investments in the Cyprus economy are returnable.
To apply for permanent residence (category F residence permit), a foreign citizen needs:
- buy real estate on the island for at least 300 thousand euros;
- have income outside Cyprus;
- keep funds (30 thousand euros) for three years in a Cypriot bank.
The registration process is 2 months.
Permanent residence status is valid for life and allows you to live on the island permanently without the right to work for hire or come here every few years. After 7 years of permanent residence, the investor and his family can acquire the citizenship of Cyprus.
To obtain citizenship of the Republic of Cyprus, you must:
- invest in the Cypriot economy (residential real estate) an amount of 2 million euros or more;
- invest in residential and commercial real estate in the amount of 2.5 million euros, subject to the ownership of residential real estate valued at 500 thousand euros.
Within 5 days after submitting the application, the investor receives a resident card. The terms for obtaining citizenship by the investor and his spouse are 6-9 months, the parents of the investor - a year. After agreeing to grant citizenship, the resident must come to Cyprus, take the oath and receive a document. The Republic of Cyprus has limited the number of investment visas to 700 applications.
Taxation in Cyprus
Foreigners' interest in doing business in Cyprus is fueled by the favorable tax regime. Thus, the taxation of companies in Cyprus is characterized by low rates - only 12.5%.
Tax is levied on all profits of resident companies and income of non-resident companies received in Cyprus. The proceeds from the sale of securities are not taxed.
VAT is usually 19%, and the products of companies operating for export are exempt from VAT. From 01.01. In 2021, such a tax will begin to be levied on all purchases of real estate, respectively, prices for leasing objects will increase by 19%.
There are also benefits, thanks to which taxes for businesses could be reduced by 5-9% (for example, in the IT sphere).
Closing a company
Companies in Cyprus can be liquidated by a court decision or voluntarily, at the own request of the shareholders. The court can initiate liquidation in case of bankruptcy of the company, violation of the law, in case of failure to submit annual reports.
In the first case, the liquidation procedure can take up to a year (especially if the company was active), the court can appoint a liquidator, conduct an audit. The cost of liquidating such a company can be an amount of 3,500 euros and more.
Voluntary liquidation of Cyprus companies will be easier and less painful in the absence of disagreements between shareholders, assets and liabilities.The company must publish an announcement in the "Government Gazette" within two weeks after the decision is made, notify the Bank of Cyprus, after which the company will be officially struck off the register. The cost of the service is 780 euros.
Instead of a conclusion
The practice of starting a new business or buying an existing company in Cyprus is popular with foreigners, especially those who wish to obtain an EU passport. Anyone can create a company in Cyprus and register it, and the absence of bureaucratic delays, corruption and other phenomena familiar to Russians will be a pleasant bonus.
In 2021, the most popular organizational and legal form of doing business continues to be a private joint stock company with limited liability. Despite the fact that Cyprus is no longer an offshore zone, favorable conditions remain for the introduction of new business ideas and doing business: the lowest tax rates in the EU, preferential conditions for obtaining permanent residence and citizenship of the Republic of Cyprus by investment.
