INTRODUCTION

A limited liability company is formed in Cyprus under the Companies Law Cap 113  which is based on the English Companies Act 1948.

DEFINITION

An offshore company is a legal entity, which may be used for planning and avoidance of taxes, raising the profitability of a business, ownership and management of a business with full freedom of currency movement, and in full anonymity for the owner.  As with any serious enterprise, professional support in offshore business is a fundamental factor in making the right decisions and achieving the best results.

An offshore company is a company registered in a jurisdiction with low or no taxation, the owners of which are foreigners and whose business activities lie outside the country of registration.  From a legal point of view these companies do not differ in any way from resident companies, belonging to local persons.

Such a company is subject to the laws and regulations of the jurisdiction in which it is registered, and no other.

The word "offshore" is not a legal one, but in fact is used by professionals to describe enterprises, the owners of which are non-residents, the profits of which are derived from transactions arising outside the territory of its jurisdiction, and which are subject to favourable tax treatment.

This offshore legal entity is well known to all tax conscious businessmen and investors who wish to ease in a lawful and respectable way the burdens of heavy taxation imposed by their respective local authorities.

Cyprus offers the possibility of registering such an offshore entity.  The Cyprus government, in order to attract foreign participation in establishing such companies, offers several incentives and has adopted a particularly easy procedure of registration.

ADVANTAGES OF A CYPRUS OFFSHORE COMPANY

More info: Advantages of a Cyprus Offshore Company

·   A great degree of respectability amongst companies registered in other tax incentive or tax haven countries.  (Cyprus is not black listed in any country of the World).

·   Cyprus is not considered to be a tax haven but a tax incentive country.

·   No withholding of tax on dividends.

·   No capital gains tax

·   Freely transferable accounts of any currency may be kept either in Cyprus or anywhere abroad without any exchange control restrictions.

·   No exchange control restrictions once the approval for the registration of the company is granted by the Central Bank of Cyprus.

·   All expenses incurred for the earning of income as well as annual allowance on fixed assets are allowed as deductions.

·   Company's foreign employees working in Cyprus are liable to personal income tax at a rate from 0 to 20% and if working outside Cyprus but receiving their salary through Cyprus at a rate from 0 to 2%.

·   The foreign employees are exempt from social insurance contributions

·   The net profits of the company are subject to a corporate tax at the flat rate of 10% and if such profits are derived from dividends received from another Cyprus offshore company, then no further tax is payable other than the flat rate of 10% paid only by the distributing company.  This rate is paid irrespective of whether they are managed and controlled from Cyprus or elsewhere.

·   Shareholders are not liable to an additional tax on dividends over and above the amount of corporate tax paid by the company.

·   Exemption from stamp duty on any contracts entered into by offshore entities.

·   No estate duty on the inheritance of the shares provided the deceased was not domiciled in Cyprus.

·   Duty free facilities are extended to offshore companies maintaining an office in Cyprus and to their expatriate personnel in respect of motor vehicles, office equipment and household effects (except furniture and air-conditioning equipment).

·   Cyprus has a wide network of double tax treaties with many countries including Russia and other ex Eastern Block countries.  Specifically with reference to Russia, the tax treaty provides for zero withholding tax on dividends paid from Russia to a Cyprus company as well as on gains generated by Cyprus companies from the disposal of securities in Russia.

·   The identity of the owners can be kept secret, and nominee shareholders may be used.

·   An offshore entity is not subject to any capital gains tax except on gains arising from the disposal or immovable property held in Cyprus.

·   The existence of double tax treaties combined with the low tax paid by offshore entities offer tremendous possibilities for international tax planning through Cyprus in view of the fact that:

·   Any tax paid in a country with which Cyprus has a treaty is deducted from the Cyprus tax payable on the same income

·   Cyprus does not impose any withholding tax on dividends, interest and royalties paid by Cyprus offshore companies

·   Offshore entities are exempt from VAT on their trading activities.  Furthermore they do not pay VAT on telecommunication services and on goods eligible to be purchased duty free.

·   No withholding tax is payable on dividends, interest and royalty payments.

·   Full tax exemption of income derived by way of interest on foreign capital imported into Cyprus and deposited with banks operating in Cyprus.

·   Offshore entities are full exempt from local social insurance schemes in respect of their foreign employees

·   Housing and office accommodation are easily available at reasonable prices.

·   The professional and management services offered in Cyprus are of a very high standard.

·   Foreign employees of offshore entities and their family members can secure work and residence permits.

·   Offshore companies and their expatriate employees are allowed to purchase immovable property in Cyprus for their own use or their residence.

PRE-INCORPORATION ENQUIRIES

More info: Cyprus - Incorporation Checklist

1. Are ready-made companies available?

Yes

2. Time required to obtain name approval from government from custom-made company?

3-4 working days

3. Time required to incorporate custom-made company after receipt of name approval?

2-3 working days

4. Time required to receive documentation after incorporation by the government?

Immediately

5. Is there disclosure of beneficial owner to the regulatory authorities?

Only to The Central Bank of Cyprus

6. Confidentiality:

By law The Central Bank of Cyprus is not permitted to give information about the identity of the beneficiaries of Cyprus offshore companies.

7. Central Bank requirements

A bank reference together with the name and address of the beneficial owner.

8. Choosing a name:

Certain words cannot be used for offshore companies "Capital", "Financial", "Securities", "Commodities", "International", "Group", "Royal" etc

9. Names requiring consent or a license?

Permission is required to use : "Bank", "Trust", "Insurance", "Assurance" as part of the company name

10. Permitted suffix

"Limited" or "Ltd" must appear at the end of the company name

11. Company seal required?

No

12. Resident agent required?

Yes

13. Registered Office?

Yes

14. Documents to be maintained at Registered Office?

Yes

15. Public inspection of documents

The Registrar of Cyprus Companies is open to the public

16. Can the company trade within the jurisdiction of incorporation?

No

17. Bearer Shares allowed

No

18. Minimum/maximum number of shareholders

Minimum is 2 and the maximum is 50

19. Location of general meeting of shareholders/members?

At the Registered Office

20. Can proxies be appointed?

Yes

21. Classes of shares permitted

Yes

22. Maximum authorised share capital for minimum duty?

Cyprus Pounds 1000.00

23. Minimum issued capital?

Cyprus Pounds 1000.00

24. Minimum number of directors required?

One, provided he or she is not also the Company Secretary

25. Transfer of registered shares?

Yes with prior permission of The Central Bank of Cyprus

26. Maximum number of directors permitted?

No maximum

27. Any residential, nationality requirements or professional qualifications required for directors?

No

28. Can a company act through a power of attorney?

Yes

29. Are corporate directors permitted?

Yes

30. Where must the board of directors meeting be held?

At the Registered Office

31. Company secretary required?

Yes

32. Requirements for annual audited accounts?

Yes

33. Residential & professional qualification for auditor?

Yes

34. Annual Audited accounts to be filed at public registry or only with tax authorities?

To be filed at The Registrar of Cyprus Companies, The Central Bank of Cyprus and the Income Tax authorities.

35. Powers of attorney?

May be granted by the Board of Directors of the company.

INFORMATION NEEDED FOR REGISTRATION

Information needed for registration of an offshore company is detailed below:

·   the names, addresses, occupations and nationality of at least two persons or legal entities who are to be the shareholders or the beneficial owners of the shares of the company, irrespective of whether anonymity is required to be kept and nominees shall be used.  Since the Memorandum and Articles of Association of the company must be signed by the subscribers, and in order to save time, the first subscribers of the company are usually nominee companies of a law office who, upon the registration of the company, transfer their respective shares to the real shareholders.  (In case of anonymity, the nominees sign the blank instrument of transfer of shares together with a trust deed, and the share certificates which they pass over to the beneficiaries who keep these to safeguard their interests).

·   The name of the proposed company to be registered.  It is advisable that several alternative names are given in order to save time and unnecessary correspondence.  In cases where the name of the company is not an important element we have available a list of approved names ready for immediate use.

·   The main objects of the company.

·   The proposed authorised and issued share capital and the participation of each shareholder or beneficial owner in the company.

·   The name, address, occupation and nationality of at least one person to be appointed as a director, and the same particulars for the secretary.  It is advisable that the directors and secretary are resident in Cyprus in order for the management and control of the company must be in Cyprus.

FORMATION PROCEDURE

According to Cyprus Law and application for the formation and registration of a company must be carried out through a Cyprus Law Office.

The formation procedure of a company is, in general lines as follows:

·   approval of the name of the company

·   application to the Central Bank for Exchange Control approval

·   preparation and printing of the Memorandum and Articles of Association of the company in the Greek and English languages

·   filing with the registrar of companies the memorandum and Articles of Association of the company in the Greek language together with the forms HE1, HE2, HE3, a copy of the approval of the Central Bank and the receipt for the payment of the registration duty.

·   As soon as registration of the company is effected the registrar of companies furnishes the secretary with the Certificate of Registration in Greek and copy in English, together with certified copies of the list of directors and secretary, shareholders, registered address, Memorandum and Articles of Association and a Certificate of Good Standing of the Company.  As soon as the Certificate of the Registration of the Company is issued the company can arrange for the first meeting of the directors for statutory matters such as appointment of auditors, appointment of legal adviser, opening bank accounts, approval of the seal of the company and of the Memorandum and Articles of Association, appointment of the secretary etc.

·   The whole application, formation and registration procedure can be completed within seven to ten days.

·   There are certain registration fees which must be paid upon the application for the registration of any company.

·   The Central Bank of Cyprus need Bank references for the proposed beneficial shareholders of the company.  The reference would come from a Bank in the proposed shareholder's country of residence.

·   The names, addresses, occupations and nationality of the proposed beneficial shareholders as well as the proportion in which they will hold the shares of the company are required.

·   The names, addresses, occupations and nationality of the proposed directors and secretary of the company are required.

·   The proposed address of the registered office of the company.

·   We can provide the nominee shareholders, directors, secretary and registered office, if so requested.

EXCHANGE CONTROL

The Central Bank of Cyprus is the only authorised institution exercising exchange control, under the Exchange Control Law.  The approval of the Central Bank is required for any non-resident to become a shareholder, or for the transfer of any shares in an offshore company.  Such approval is always given b the Central Bank either for offshore or shipping companies in bona fide cases.  However, Bank references as to the credit worthiness, financial character, respectability and business integrity of the beneficial owners of the shares are required.

The Central Bank of Cyprus in granting the Exchange control approval imposes the certain conditions, some of which are:

·   the shares of the company must belong directly or indirectly, exclusively to aliens.

·   The objects of the company shall be confined outside Cyprus

·   The company will be considered as a non-resident company

·   The company must derive income from abroad either from immovable property, royalties, commissions, investments of capital in bonds, shares, debentures or loans or income deriving from any business.

·   The company will not obtain any finance from local sources

·   The  company must submit regularly copies of its balance sheet and profit & loss account.

·   The minimum authorised and paid up capital must be at least CYP 1000.00

WHY CHOOSE CYPRUS

Cyprus trust possibilities are available and may be useful:

·   To an individual who wishes to divert his overseas income to a discretionary trust instead of remitting it to his country of residence.

·   To an individual who wishes to divest himself of personal assets for fiscal or other reasons

·   To an individual who wishes to keep the ownership of his trading company anonymous and confidential.  The shares may be held by a discretionary trust and the company may carry out trading and financial activities without disclosing the beneficial owners of the company.

·   To any foreign trust company or trust in order to avail themselves of the unique Cyprus tax advantages.

Therefore, considering the location of Cyprus, being in the cross-roads of Europe, Asia and Africa coupled with the about advantages, one may conclude that Cyprus is an ideal trust jurisdiction.

Our fee to incorporate a Cyprus limited liability company is £1,775. This includes all government fees and provides a fully configured Cyprus Company with all the necessary services for the first year.

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See Also:

Cyprus - FAQ
Cyprus - Benefits
Cyprus - Prices and Fees
Bank Account for Offshore Companies
Benefits of an Offshore Company

If you would like further information or want to discuss any aspect of incorporating offshore please contact us