Tax Planning

Why Use Cyprus?

Strategic Location: Europe’s Middle Eastern Outpost

Cyprus’s strategic location at the crossroads of three continents has been a major factor in shaping its history throughout the centuries and its development into not only a major eastern Mediterranean trading post but also a reputable international business and services centre.

European Union Member State

Accession to the EU was a natural choice for Cyprus, dictated by its culture, civilization, history, its European outlook and adherence to the ideals of democracy. Since its accession to the EU on 1st of May 2004, Cyprus has undergone through significant economic and structural reforms that have transformed its economic landscape.

Lowest EU corporate tax rate

The Cyprus tax policy positions Cyprus as an ideal jurisdiction for Holding Companies. In summary, a Cyprus Holding Company offers the following tax advantages:

• lowest corporate tax rate in the European Union at 10%

• one of the lowest top statutory personal income tax rate at 30%

• extensive double tax treaties network with over 40 countries, enabling lower withholding tax rates on dividend or other income received from the subsidiaries abroad

• no withholding tax on dividend income received from subsidiary companies abroad under certain conditions

• no withholding tax on dividends received from EU subsidiaries

• no withholding tax on capital gains and income on the disposal of neither the shares of the subsidiary’s share capital nor the shares of the Cyprus holding company

• no tax on capital gains or income on the liquidation of the Cyprus holding company

• no withholding tax on distribution of profits

• outward dividends by the Cyprus Holding Company to its non-resident shareholders are exempt from any withholding taxes

• profits earned from a permanent establishment abroad are fully exempt from Cypriot tax, subject to certain conditions

• a diversified group of Cyprus companies belonging to a Cyprus holding company can set off Group relief for the utilisation of tax losses

• no minimum holding period

Macroeconomic Stability

High growth rate Cyprus’s real GDP growth rate is well above the average growth rate of EU 25, EU15 as well as that of Eurozone.

Efficient legal, accounting and banking services

Advanced telecommunications network and infrastructure

FDI track record

Cyprus is one of the most attractive locations for foreign investments, ranking among the front-runners of the world indicating both high FDI performance.

FORMATION OF A CYPRUS PRIVATE LIMITED COMPANY

INCORPORATION

Incorporation normally takes five to ten working days from the time that the necessary documentation is presented to the Cyprus’ Registrar of Companies. Shelf / Ready made Companies are available for immediate start of a business or tax plan.

AUTHORISED SHARE CAPITAL

There are no legal requirements as to the minimum and maximum authorized share capital of a Cypriot limited company. Nevertheless it is recommended that the authorized share capital is at least € 10,000 divided into 10,000 shares of € 1:- each. Not all of these shares have to be subscribed for, but it is recommended that at least 1,000 shares are issued upon incorporation. The share capital of a company can be increased and decreased at any time, while unissued shares can be easily issued.

SHARES AND SHAREHOLDERS

Under Cypriot law even a single member company may be registered, in which the sole shareholder shall own 100% of the shares.

NOMINEE SHAREHOLDERS

These are permitted and Democritos Aristidou & Co can provide nominee shareholders who will hold the shares on behalf of the beneficial owner(s).

NAMING YOUR COMPANY

You must choose a company name unless you purchase and use a shelf / ready made company which of course you may then change its name.

REGISTERED OFFICE OF THE COMPANY

A Registered office is required in Cyprus. The registered office must be a real address, but it doesn’t have to be the place where a Company operates. Democritos Aristidou & Co can provide registered office and correspondences / communication facilities.

DIRECTORS

The minimum number of directors is one. Directors may be of any nationality and do not have to be resident in Cyprus. Companies wishing to take advantage of Cyprus’ Double Tax Treaties would need to ensure that the company was managed and controlled from Cyprus. Nominee Directors are permitted and Democritos Aristidou & Co can provide nominee Directors.

COMPANY SECRETARY

Every company must have a company secretary, whose role is very essential. The Secretary may be a natural or a legal person. The Secretary’s task is to ensure that a wide range of paperwork and organization is carried out properly, to keep the Company’s register up to date and to keep minutes of all meetings. Furthermore the Secretary signs all forms, applications and other documents to be filed in the Registrar of Companies. Hence it is widely and highly recommended that these secretarial services are offered by Law Firms. Democritos Aristidou & Co can provide for a company secretary.

ACCOUNTS AND YEAR END

All companies have a year end of 31st December. Audited accounts must be presented to the members within 12 months from the year end and filed with the Registrar annually for the previous year.

TAXATION

Cyprus Companies pay income tax at a rate of 10% the lowest in European Union. Companies are obliged to pay the minimum 70% of net profit as dividend to the Shareholders two years after the financial year end. The effective rate of Cyprus tax on dividend to companies’ shareholders or a participating holding or overseas individuals (non Cyprus residents) is zero percent. No geographical limitation on the exercise of a company’s activities. Its income may be derived from any source including a Cypriot based source.

DOCUMENTS AND INFORMATION NEEDED

In order to start the procedure for the incorporation of a Company a list of 2 to 3 names should be provided for the application for the Company’s name. All names must include the word “Limited” at the end and a name which is identical or similar to a name of a Company already registered, cannot be chosen. The choice of original and authentic names is suggested.

The next step is drafting the Memorandum and Articles of Association. For this a description of the objects, activities and purposes of the company is required.

Moreover all relevant information, regarding the directors, secretary, shareholders, registered office, must be provided. You will be asked to provide us full contact details (name, date of birth, profession, passport number, nationality, address) for each director/shareholder/secretary, together with copies of passports and proof of residential address.

For the opening of a bank account the shareholders and/or the beneficial shareholders of the company should provide the Bank with duly certified copies of passport, proof of residential address and a Bank Reference Letter.

MAINTENANCE AND MANAGEMENT OF A COMPANY

Democritos Aristidou & CO can provide, directly or through associated companies full domiciliation and management of the company services:

• Registered Office Address

• Company Secretary

• Directors

• Nominee Shareholders

• Legal Advisors / Trustees

• Registering a Company to the Tax and VAT authorities

• Attending to bank account opening compliance procedures

• Operation of bank accounts acting as signatory

• Accounting

• Preparing financial report statements

• Feasibility studies

• Communication services

SUMMARY OF FEES SCHEDULE INCORPORATION AND ANNUAL COSTS CYPRUS COMPANIES

Set up costs, formation fees and expenses, opening of a Bank Account, registering with the Tax and VAT authorities, including legal fees, Registrar of Companies fees, printing, and translation into the English language, full set of company documentantion, Company rubber stamp and seal.

Euros 3,500:- (including VAT)

ANNUAL FEES / COSTS

• Registered Office

€300:-

• Secretary

€400:-

• Each Nominee Shareholder

€400:-

• Each local Director

€450:-

Please note that the above annual costs will be subject to VAT, currently at a rate of 15%

Furthermore please note that the annual Legal Advisor fee depends on the bulk of work the Company undertakes.