How to open an offshore company in Cyprus. Is Cyprus still an offshore zone? Taxation of offshore business in Cyprus

Since ancient times, Cyprus has been distinguished from other states by its loyal tax policy, which is why it attracts special attention from entrepreneurs who want to save money. Is Cyprus an offshore zone? In essence, yes, but the nuance is that recently, or more precisely, since 2012, it joined the European Union, and therefore was forced to revise the current legislation, including in the field of taxation. However, the islands that a few years earlier were the most attractive for offshore entrepreneurs still have liberal tax policies.

Advantages of the region

Cyprus is not just an island in the Mediterranean Sea, but also entire states with the capital Nicosia. Its currency is the euro and its population predominantly speaks Greek and Turkish, although English predominates in business. To be more precise, this territory of the state is conditionally divided into two parts, one of which is inhabited by Greeks, and the second by Turks. But as for legislation, the state government was not very worried about this, so all the laws belonged to Britain and were subsequently translated.

Please note that, from an economic point of view, the state can hardly be considered developed, because there are no mineral resources on the island, which largely determine the well-being of the state, so the government promotes the active growth of small and medium-sized businesses, especially in the fields of tourism and finance.

However, let’s return to the question of why the Cyprus offshore is so attractive to foreign businessmen:

Cyprus has for a long time occupied a leading position in the offshore zone; today, despite the fact that the policy has changed somewhat, it is trying to maintain a positive image of a “tax haven”.
The reliability of the financial system of the state of Cyprus is not in doubt among businessmen.
In order to maintain interest in himself, he signed an agreement with more than 40 countries and, in particular, with Russia, on the abolition of double taxation.
Here is the most simplified business registration system.
Information about bank accounts in banks in Cyprus is strictly classified and confidential.

These are the main advantages, but there are also additional advantages that attract the attention of offshore entrepreneurs, in particular, the policy here is designed in such a way that a business registered in Cyprus can carry out settlement transactions throughout the entire European Union thanks to a special tax number. There is also no inheritance tax or payment of dividends.

And yet, in order to answer the question as accurately as possible: is Cyprus an offshore zone or not, it is worth understanding the theory a little. More precisely, we need to answer the question of what an offshore is and why it is in massive demand among entrepreneurs from countries with developed economies. In fact, businessmen in large developed countries, due to the prevailing internal policies, bear a high tax burden, which is why they try to register their enterprise in a state that has a loyal tax policy. Offshore zones are those areas where several conditions are met at once: low or no tax rate, maximum confidentiality, minimum reporting.

That is, in other words, by moving their business offshore, entrepreneurs can significantly save on paying taxes and fees. True, such zones have their own conditions and nuances, for the reason that, generally, enterprises that are registered in an offshore zone, but in fact conduct their business activities in the territory of their native state, are not subject to taxes. Absolutely all parties benefit from such a scheme, the entrepreneur saves on paying taxes without significantly risking anything, and offshore states receive profits in the form of fixed fees or other payments.

Is Cyprus offshore?

Whether Cyprus is offshore or not, a clear analysis of the state’s internal policy will help you figure it out. The first thing that must be noted is the fact that there is no complete tax exemption here. Here, by the way, there are quite a lot of different types of taxes for entrepreneurs, a tax at a rate of 12.5% is the established corporate tax, and in addition to it there are other taxes: VAT, income tax, defense tax, capital gains tax and others.

Among other things, as mentioned above, Cyprus has signed an agreement with more than 40 countries on the abolition of double taxation, which is not at all typical for offshore zones. There is another equally important nuance, which is that since Cyprus has joined the European Union, it is forced to obey certain regulations and directives, in accordance with which it must adhere to general tax policies, use the principles of banking regulation, and take measures in the fight against criminal money laundering.

Please note that the main feature is that it carries out the international exchange of tax information, that is, if offshore zones guarantee entrepreneurs complete confidentiality about tax accounts, then currently in Cyprus information is provided upon request.

Finally, one cannot help but say that Cyprus is not at all characterized by such a feature as the lack of reporting, because here, by force of law, entrepreneurs are required to keep accounting records and submit financial statements. For offshore zones, on the contrary, this feature is not typical. After all, the main criterion for entrepreneurs moving their business to offshore zones is the lack of reporting.

From all of the above, we can come to the conclusion that Cyprus, judging by the main criteria, can hardly be classified as an offshore zone. There are three reasons for this: there are no tax benefits and exemptions from paying taxes, information about non-resident accounts is disclosed upon request, and there is no exemption from reporting.

Cyprus for Russia

Surely the residents of our country will be more interested in this question, whether Cyprus is an offshore for Russia, we will try to answer it as accurately as possible. If we delve a little deeper into history, Cyprus was removed from the offshore zone back in 2013, after it became a member of the European Union. The main reasons for this are changes in legislation, according to which the state is obliged to provide information about Russian enterprises registered on its territory.

Among other things, based on the order of the Federal Tax Service of the Russian Federation, Russian enterprises are exempt from taxation of CFC profits, but are required to submit financial statements of the CFC, as well as an audit report. From all of the above, it follows that there is absolutely no point in registering enterprises in Cyprus for Russian entrepreneurs for the purpose of sheltering from taxation for the reason that tax authorities, upon request, can obtain registration data of the enterprise, as well as reports on their profitability.

Please note that Cyprus is excluded from the offshore lists of the Russian Federation for the reason that it is not officially recognized by Russian departments such as the Ministry of Finance, the Central Bank of the Russian Federation and the Federal Tax Service.

Why is Cyprus still called an offshore zone?

Indeed, for many years, starting from the 70s of the last century, Cyprus was considered an offshore zone, until it became part of the European Union. In addition, thanks to a number of reforms, enterprises are no longer divided into two classes: local and international. At the same time, the taxation policy was changed, that is, a single tariff was established for any enterprise, regardless of the form of ownership and nationality of the owner.

Having become a member of the European Union, Cyprus has undergone many inspections in order to identify violations of EU requirements. According to these requirements, the tax policy of Cyprus had to comply as much as possible with international standards and maintain corporate income tax rates within the average value. By the way, if we talk about tax rates today, corporate tax was increased first from 4.25 to 10%, and from 2013 to 12.5%.

Despite the fact that at the moment Cyprus has ceased to be officially considered an offshore zone, such an interpretation for the state can still be found in some sources. The fact is that some people confuse two completely different concepts, considering offshore companies all enterprises located abroad, regardless of whether they actually belong to offshore business or not.

On January 1, 2013, Cyprus was officially excluded by Russia from the “black list” of offshore companies. From that day on, a heated debate began on the topic of Cyprus - “offshore” or not “offshore”.

Just as there is no consensus on the spelling of the word “offshore,” there is no consensus on what is included in the very concept of offshore.

The spelling is easier - here are two versions that still live in parallel. Since the word “offshore” itself came to us from the English language, which contains a double f, then at first in the Russian language it was the “offshore” version that was considered correct. But over time, like all borrowed words, “offshore” underwent adaptation in the Russian-speaking environment and one “f” disappeared. At the moment, both one and the second versions are found in official sources, because the first option has not yet been canceled, but the second is no longer considered an error. So in this case the choice is yours.

The definition of the concept of offshore is somewhat more complicated. There is absolute confusion here. In common use, the word “offshore” often refers to both an offshore zone and an offshore company, offshore bank, and offshore business in general. Legal experts themselves have not fully decided what is considered an offshore and what is not. It seems that everyone who has ever tried to define offshore did it in their own way, and sometimes the differences in these definitions are quite significant and radically change the approach to the very concept of offshore.

We will not proceed from the rough definition of an offshore as a tax haven or tax-free zone and will turn to Wikipedia. There you can find that the concept offshore comes from the English offshore and translated it means “offshore”. A more elegant definition is also given here - it is a financial center that attracts foreign capital by providing special tax and other benefits to foreign companies registered in the country where the center is located. However, even here, immediately following the definition, there is a caveat that there is no consensus among experts on what is considered an offshore. Without paying attention to it, so as not to get completely confused, we will start from the definition of what was found here and move on to classification.

One of the main and most popular classifications divides offshore zones into three groups according to the following criteria:

geographical position
tax system
confidentiality
financial reporting requirements

Based on them, three main types of offshore zones can be distinguished.

Classic offshore companies.

Even the word offshore itself is a reflection of the fact that a classic offshore is an island. And, as a rule, these are small islands of the Caribbean, Pacific and Indian Oceans. They differ in the complete absence of taxes, instead of which there are fixed annual payments for the renewal of registered companies. Undemanding to accounting. The degree of confidentiality is high and it only increases when using the nomini service. The procedure for registering companies is simple, and the legislation of such countries, as a rule, is being improved in the direction of increasing the degree of confidentiality and protecting investments.
Examples of classic offshores are Nevis, Seychelles, Panama, Belize, British Virgin Islands.
Low tax zones or offshore zones of increased respectability. Financial reporting is mandatory here; in general, government control is stricter compared to classic offshore companies. A register of directors and shareholders is maintained here, which is publicly available, and the problem of confidentiality is solved by using a nominee service.
Example - Ireland, Gibraltar, Isle of Man.
The third group includes zones that cannot be fully considered offshore, but which provide certain tax benefits to non-resident companies registered in them that do not derive income from their territory. In these countries, everything is open, taxes and fees must be paid, and registers of directors and shareholders are maintained. Examples of countries that provide partial tax advantages are the UK, the USA, the Kaliningrad region of the Russian Federation and, finally, Cyprus.

As you can see, in this classification Cyprus occupies a very worthy place and has a respected neighborhood. But why then is there an opinion among people about Cyprus as a classic offshore, i.e. offshore at the level of a tax paradise, or, even worse, a black hole?

The roots of this attitude towards Cypriot jurisdiction go back to the dashing 90s. The tax regime that existed in Cyprus until 2003 made it possible for the “crimson jackets” that arose in the post-Soviet space to lead an almost tax-free existence. Offshore banks did not ask many questions like “from” and “to”, and Cypriot companies were often used contrary to international business ethics. The result of all this disgrace was the blacklisting of Cyprus.

A lot has changed since Cyprus joined the European Union.

Since 2003, all companies in Cyprus are registered under the existing uniform company law. The registration of international companies of the IBC type has ceased, and for the purpose of tax planning, they mainly began to register companies in which liability is limited to shares (Company Limited by Shares). The tax division between local and offshore companies was eliminated, and a new tax code came into force, under which the corporate tax rate becomes the same for everyone. At the time of adoption it was 10%; subsequently, from 2013 it was increased to 12.5%. It is still valid today.

In general, the Cypriot tax system is based on two principles - residence and territoriality. Non-residents of Cyprus, both companies and individuals, whose place of residence or management is outside the territory of Cyprus are subject to taxation in Cyprus only in respect of income received from local, Cypriot sources. Residents of Cyprus are subject to taxes on all types of income received both within and outside Cyprus.

According to the current law, all incorporated companies are required to register for tax purposes to obtain an individual tax number within 60 days. The financial report is submitted once a year, regardless of whether the company is resident or non-resident. Based on the results of financial reporting, a tax return is drawn up and corporate tax is paid, which we have already mentioned.

Despite the fact that the tax reform was carried out in accordance with all the requirements of the European Union, the government of Cyprus still decided to maintain the attractiveness of the island as a financial center and the tax legislation of Cyprus is one of the most attractive for investors in Europe. This is due to the fact that tax rates here are among the lowest. This, coupled with the “100% offshore” idea of Cyprus that is already stuck in the minds, misleads many. However, what was said above about tax reforms in accordance with EU directives, the presence of an open register of directors and shareholders, and, most importantly, the mandatory filing of financial statements completely neutralizes any assertions that Cyprus is a classic offshore.

But even all the information presented cannot give a clear answer to the question of whether Cyprus is an offshore or not. In principle, there cannot be a definite answer here. If we proceed from the roughest classification based on the presence of taxation, then in this case Cyprus is not an offshore. If we proceed from a more elegant option, then Cyprus is an offshore zone, but one of those that cannot be fully called an offshore zone, rather a zone with preferential taxation. Taking into account the fact that both classifications are conditional, then you, as in the case of spelling, will have to choose the final answer yourself. One thing is obvious: Cyprus is no longer a classic offshore and the status of Cypriot jurisdiction is at a much higher level and has long been trusted by knowledgeable people.

Growing your own business requires investors to be resourceful and adapt quickly. In such conditions, many global businessmen prefer to open their own business in Cyprus. This island has been one of the largest offshores for many years and has managed to accumulate an impressive client base. The latter included Russian entrepreneurs.

With accession to the EU, the country ceased to be one of the world's tax havens, but did not lose its key advantages for international companies:

Possibility of cooperation with any European counterparties. By opening a business in a European jurisdiction, you will be able to transport goods duty-free throughout the EU. Plus, given the introduction of sanctions in Russia, cooperation with a Cypriot company will be much more attractive and profitable for foreign customers and partners.
The island has the most favorable VAT rates (19%) and corporate tax (12.5%) in the EU.
All income received by Cypriot enterprises from the purchase/sale of securities, interest, dividend income and royalties are taxed at a zero rate.
Profits from transactions with real estate located outside Cyprus are also not subject to taxation.
Receipts from any foreign branches, subsidiaries, etc. are taxed at a zero rate.
Cyprus has already concluded more than five dozen treaties on the avoidance of double taxation, including with African states, which opens up new investment markets for venture business. It is worth noting that traditional “financial” jurisdictions are gradually oversaturated with capital investments - incomes are not so high, and competition is significant. African markets are much less competitive.
Outsourcing is well developed in Cyprus. This applies to auditing, accounting and other financial services, telecommunications and equipment maintenance. Thus, you do not have to keep additional employees on staff, but, if necessary, hire third-party specialists, which will significantly reduce costs.

As can be seen from the above, Cyprus remains an attractive business jurisdiction, even despite experiencing a three-year recession. Of course, the country still has a long way to go to recover to pre-crisis levels, but positive GDP growth, a reduction in non-performing loans and a constant influx of tourists clearly indicate the beginning of the country's economic recovery.

Reasons to choose Cyprus

Traditionally, Cyprus is included in the list of the world's largest business centers. The island can offer a full range of services for both small businesses and large holdings. As for the reasons to open a company here, the most important of them are described below:

You can create a new company on the island within 5-7 days.
To register your own business, you do not have to visit Cyprus in person. With the active implementation of online systems, the entire process of establishing a company can be completed remotely.
The wide distribution of online services, the development of the banking sector and the presence of consulting and other organizations specializing in working exclusively with Russian businesses will allow you to keep your finger on the pulse of the company and manage all current affairs from anywhere in the world. So, in order to develop a business, you do not have to live in Cyprus permanently.
Together with the company, you can open both a corporate and personal bank account. It is important to note that Cypriot banks are gradually emerging from the recession that has overwhelmed them. In addition to servicing existing accounts, island lenders are actively attracting new clients, which include our compatriots. Having an account in a Cyprus bank will allow you to use your funds anywhere in the world, and the Internet banking service will make it possible to carry out almost any operation remotely.
You can start your own business on the island even as a foreign citizen.
There are no clear regulations in the country regarding the minimum amount of authorized capital. It is determined individually and depends on the size and specifics of the work of each specific enterprise. So, you can indicate only 1000 euros in the authorized capital, and at the registration stage you do not need to pay this amount.
All necessary certificates and registration certificates can be provided in English.
Obtaining a VAT number will take you only 48 hours. Its presence will allow you to cooperate with European counterparties on much more favorable terms and increase the level of trust in your company.
Island legislation allows for the involvement of nominee shareholders and directors, which ensures significant investor confidentiality.
Possibility of redomiciliation of a company from another jurisdiction. If you intend to transfer the company to the international level, then you can transfer a ready-made enterprise to Cyprus.
Cyprus is not on the OECD blacklist, so your business will operate in a reputable jurisdiction on completely legal grounds.
This country has one of the most favorable tax policies in Europe. Thus, owners of island companies can count on zero tax on income from transactions with securities, re-registration of real estate, income from subsidiaries and foreign branches, etc. The local government has done everything possible to ensure that international businessmen strive not only to do business, but also to live on island. In addition to business prospects and an impressive range of entertainment, Cyprus is ideal for long-term residence of Russian expats. There are Russian shops, schools and a large national diaspora here, so the process of adapting to a new culture and rhythm of life will not be so painful.
The island has fairly low costs, especially compared to other European countries, for the maintenance of enterprises.
You can always close the company with minimal bureaucratic procedures.
All closed companies can be restored to the commercial register within 20 years.

Own island business and second EU passport

Cyprus Economic Citizenship Program Changed! Now you don’t need to invest 5 million euros and take part in a collective scheme - the investment amount has been reduced to 2 million individually!

By investing in a Cypriot company, you can get not only an international business, but also a second passport from an EU member state. Obtaining such a document became possible due to the active development by local authorities of the economic citizenship program. It provides an opportunity for wealthy foreign investors to obtain full Cypriot citizenship in exchange for investments in real businesses and a number of other assets: bank deposits, government bonds or real estate.

You do not have to limit yourself to just one option - if necessary, you can combine investments in the areas described above until you reach a minimum of 5 million euros.

But this amount is far from final. Subject to participation in a collective investment program, the minimum amount of investment can be reduced to 2.5 million. Collective investments imply the creation of a group of investors (minimum 5 people), which will replenish the Cypriot economy by at least 12.5 million.

In this case, you do not have to look for the remaining partners yourself. You can contact companies that specialize in investing in second citizenship. There they will help you not only find reliable partners, but also develop an optimal investment portfolio and deal with all the paperwork.

Having a European passport will make working with foreign partners much easier. It is no secret that today not all companies and firms seek to cooperate with Russian businessmen. With Europeans the situation is completely different. Plus, you will be able to use local courts, hospitals, apply for pensions and other social security, and your children will be able to study at leading EU universities.

The right to obtain such a passport will apply not only to you, but also to your family members, including your wife, children and parents. And this does not mean that you will be obliged to live in Cyprus permanently. A second passport will allow you to travel to 133 countries of the world visa-free and even live in any European country. Thus, opening a company in Cyprus can be the first step towards obtaining an EU passport.

For more detailed information regarding opening a company in Cyprus, please contact us by email [email protected]

13.09.2017

Cyprus is one of the most popular jurisdictions in international tax planning, including among Russian businesses: in rare cases, a group of companies or an international holding does not have at least one company registered in Cyprus in its structure. Cyprus itself has repeatedly been among the leading countries in terms of investment in Russia.

Indeed, a friendly business environment, a favorable tax regime, combined with the benefits of EU membership and a wide network of double tax treaties, make Cyprus an attractive place to register companies, open bank accounts and conduct real business.

However, the websites of hundreds of intermediary companies still offer to register or buy an “offshore in Cyprus”. Moreover, many, including respectable, Russian business and political publications and online resources still call Cyprus an “offshore”, and with the negative connotation that has long been characteristic of this word. In this regard, we propose to figure out once and for all whether Cyprus is an “offshore” (“offshore zone”, “tax haven”, etc.) or not.

First of all, what is offshore?

“Offshore” usually refers to either the offshore zone itself (i.e. a specific country or territory) or a legal entity registered in such a jurisdiction.

Among main features of offshore companies, the following should be highlighted:

tax-free (or ultra-preferential tax) regime,
the most confidential nature of corporate and financial information and
minimum administration and reporting requirements.

So, the first sign of an offshore is a special regime for companies registered in a given jurisdiction, but at the same time not having the right to operate on its territory. It is expressed in full exemption from local taxes(the exception is a small fixed annual fee for company renewal) or maximum preferential taxation, as well as (although not always) the presence of a special status of “international business companies” (International Business Companies, IBC).

The second sign of offshore companies is the traditional confidentiality of corporate registers, confidentiality of data on beneficiaries And lack of international information exchange. However, this feature begins to gradually (and for some countries, rapidly) lose its relevance. It cannot be ruled out that in the coming years there will be virtually no countries left in the world that ensure absolute confidentiality of corporate and financial information.

The third sign of offshore is no obligation to submit financial statements to government agencies. However, today, even in classic offshore jurisdictions, companies are required at a minimum to maintain and store their financial records (accounting records, primary documents), which makes it possible to establish the content of the company’s transactions and determine its financial position. In addition, in modern conditions, the preparation of financial statements, even for a classic offshore company, becomes relevant due to the need for Russian tax residents to comply with the legislation on controlled foreign companies (CFCs).

Is Cyprus offshore?

Now let’s correlate the above-mentioned signs of offshore companies with what Cyprus is today.

Firstly, Cyprus is not a tax-free zone– it establishes a corporate income tax at a rate of 12.5%, and there are a number of other taxes (capital gains tax, VAT, special contribution for defense, individual income tax on a progressive scale, etc.). Despite preferential tax conditions for companies (e.g. in relation to dividends received, withholding tax), these in themselves do not make Cyprus offshore.

Cyprus has a significant number double taxation agreements(more than 50), which is almost never typical for offshore companies.

Finally, in the area of general tax policy, banking regulation, anti-money laundering, Cyprus, as a member of the EU, is subject to regulations and directives of the European Union, which in principle excludes its “offshore” status.

Secondly, in Cyprus, unlike offshore zones, information about directors, secretaries and shareholders companies is publicly available. Only information about the beneficial owners remains confidential (under normal circumstances).

Cyprus is actually implementing international exchange of tax information“upon request” (both on the basis of bilateral agreements on the avoidance of double taxation or on the exchange of tax information, and on the basis of the multilateral Convention on Mutual Administrative Assistance in Tax Matters of 1988/2010), including in relations with the competent authorities of Russia.

Moreover, Cyprus is a member automatic exchange information on financial accounts according to the OECD CRS standard, and is among the “first priority” of countries starting the exchange in September 2017. Currently, according to the OECD portal, automatic exchange is “activated” between Cyprus and 52 countries (after 2018, Russia may also be included in this number).

Thirdly, all Cypriot companies, without exception, by force of law are required to maintain accounting records and submit audited financial statements, which is not typical for any classic offshore.

Thus, modern Cyprus does not satisfy any of the key characteristics of offshores and, therefore, is not an offshore.

Is Cyprus considered an offshore in Russia?

From the point of view of current Russian legislation, Cyprus is not offshore zone.

The basic list of offshore companies is contained in Order of the Ministry of Finance of Russia dated November 13, 2007 No. 108n. Republic of Cyprus was excluded from this list from January 1, 2013. This list affects, in particular, the possibility of applying a zero tax rate on dividends in Russia, the recognition of transactions as “controlled” and the possibility of exemption from tax on CFC profits for active holding and subholding companies).

Moreover, Cyprus was originally absent in the list of countries that do not exchange information with Russia (approved by Order of the Federal Tax Service of Russia dated September 30, 2016 No. ММВ-7-17/527@). This list affects the possibility of applying certain exemptions from taxation of CFC profits, as well as the need for the mandatory preparation of an audit report on the financial statements of the CFC.

Previously (in 2010) Cyprus was excluded and from the list of offshore zones approved by the Directive of the Bank of Russia dated August 7, 2003 No. 1317-U. This list determines the procedure for Russian banks to establish correspondent relations with non-resident banks.

Thus, Cyprus is not included in any Russian list of offshore zones, that is, neither the Ministry of Finance, nor the Federal Tax Service, nor the Central Bank of the Russian Federation officially recognize Cyprus as an “offshore zone”.

Why is Cyprus still often called an “offshore”?

The offshore zone in Cyprus actually existed earlier - since the 70s of the 20th century. However, it was abolished in 2003 as part of tax reforms that preceded Cyprus' accession to the European Union in 2004.

The reform unified the status of companies by abolishing the division of companies into local and international commercial (i.e. offshore) and linking taxation in Cyprus solely to the residence of companies (determined on the basis of the “direction and control” criterion). Corporate tax was increased from 4.25% to 10% (from 2013 to 12.5%). The current rules regarding dividends received and withholding tax on payments of income to non-residents were introduced.

At the same time, large-scale measures were taken to bring Cypriot legislation into compliance with the requirements of the EU, OECD and FATF. Already at the beginning of 2009, Cyprus was included in the “white” part of the famous “OECD list” (published regularly from 2009 to 2012) as “a jurisdiction that has largely implemented internationally agreed tax standards.”

However, even despite all of the above, Cyprus “by inertia” continues to maintain a certain “offshore image” in Russian and foreign media and non-professional sources, where “offshore” is a general term for any companies or assets located abroad (and not necessarily in tax-free countries ). Such a generalization is, of course, incorrect. In the same sense, offshores are often understood in the context of “de-offshorization” in Russia, which, as is known, applies not only to offshore companies themselves, but also to any controlled foreign companies, including Cypriot ones.

The existence of states in whose territory offshore companies are allowed to operate provides business structures with a unique opportunity to save money. However, domestic legislation treats such companies with increased attention.

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Countries that form offshore zones can be divided into three groups:

those in which foreign companies are exempt from paying taxes;
low tax states;
countries with preferential taxation.

Cyprus is one of the European countries with low taxation for non-resident companies.

Characteristics of the state

Cyprus is the third largest island in the Mediterranean Sea. The capital is Nicosia. Main currencies: Cypriot pound, euro. The country is a member of the EU. Maintains ties with the UN and the British Commonwealth. Official languages on the island: Greek and Turkish. The second is used only in its northern part.

English is widely used in business.

The political system is democratic. Cyprus is headed by a President who is elected for a 5-year term. The executive branch is represented by the Council of Ministers. The island's parliament belongs to the legislative branch of government and is also elected for 5 years. The legal system is precedent-based. Many laws that relate to doing business are based on British law. Most regulations have been translated into English.

The Cypriot authorities encourage free enterprise. This is one of the economic foundations of the state. Cyprus has become an excellent business center thanks to its well-established infrastructure. The island has many ports and roads are in good condition. Cyprus is a significant tourist destination. Money received from the tourism industry is one of the main sources of income for the state budget.

Advantages of the zone

Purchasing and registering a company in Cyprus has the following advantages:

Cypriot jurisdiction has an almost perfect reputation; today there are no countries left from which Cyprus would be blacklisted as an offshore zone;
the country has been a member of the EU for several years;
on the territory of Cyprus there are agreements that allow you to avoid duplicate taxation with more than 40 countries of the world (including the Russian Federation);
The registration procedure is simple;
Among the European countries, Cyprus has implemented a rather attractive tax system, tax rates are low;
a large list of expenses that can be classified as cost;
dividends are not taxed (applies to both internal income from activities and external ones);
there is no duty on the sale of securities and for capital gains;
non-residents can obtain a VAT number, which allows them to trade with European countries;
the Cyprus offshore zone is a great place to work with loans and intellectual property;
for heirs of non-residents there is no tax on property accepted by law;
a nominal service is used, which ensures high confidentiality;
for a group of companies, the losses of one entity can be offset against the profits of another;
low corporate income tax;
as a free trade zone, Cyprus is at the crossroads of three continents;
the service system is well developed, but at the same time it never ceases to improve;
excellent infrastructure and telecommunications system.

Taxation

The tax regime for residents and non-residents is different. A mixed fee collection system has been established for residents. Under this scheme, the Cypriot offshore will be forced to pay income tax (defense needs), but only to the budget of one country (Cyprus).

The income tax rate for resident companies is 12.5%.

There is also a list of income from which collection is not made. Most of them are related to investment activities.

Cyprus has special tax regimes for the following activities:

insurance;
related to shipping, ship ownership and shipbuilding;
related to the implementation of intellectual property rights;
related to the activities of public figures, actors, athletes.

On a royalty basis, Cypriot businesses can be used to minimize losses. Under this scheme, an enterprise in the Russian Federation, under a license agreement, will receive the rights to use intangible assets from a Cypriot resident company.

According to the terms of the rights agreement, royalties will be transferred to the address of the Cyprus company.

Contribution to the defense fund is assessed on a separate part of the income received. However, many types of dividends and interest on profits are exempt from payment of this contribution. There is no income tax on the island, except in cases of sale of real estate located on its territory. VAT is charged on all goods supplied, services provided and products from the EU.

There are 3 types of rates for this tax:

standard – 19%;
reduced rate – 5% and 9%;
zero rate.

By default, the standard rate is applied. On the island, all registered companies pay an annual fee in the amount of 350 euros. For tax purposes, a company can have an office in Cyprus and carry out its activities in the Russian Federation.

Loyalty to non-residents

The Government of Cyprus has approved a loyalty program for non-resident companies. On the territory of the island it is allowed to engage in a number of specific works, provided that the owner will receive profit from them not on its territory. The level of loyalty can be determined by comparing taxes on the activities of residents and non-residents.

For example, resident companies pay corporate tax of 42.5% of net profit.

Payment is made in local currency. Businesses registered here are not subject to exchange control rules. The corporate tax rate for them is significantly reduced and amounts to only 10% of net profit. Income from dividends from shares of offshore companies is not subject to taxation.

The Cypriot authorities oblige non-residents to pay a fee of 350 euros per year.

Late payment may result in the company being removed from the register. As for benefits, most of them apply to resident companies.

Confidentiality

One of the advantages for an offshore company in Cyprus is that the island’s government guarantees the confidentiality of all banking and financial transactions. In this case, confidentiality is more than just bank secrecy. On the island it is permissible to use a nominal service, due to which the level of information security is very high.

Regarding requests from the Russian tax authorities, the Cypriot authorities must provide certain information about the company's activities only if the request is received in the proper form and indicating the purpose.

Main risks

By creating or acquiring an offshore company in Cyprus, the owner risks:

confidentiality - the register of business shareholders is open and in order to hide information about the real owner it is necessary to use a nominee service;
by the company – accounting and tax reporting must be submitted; taxes are paid on time, otherwise the company will simply be excluded from the register and penalties will be imposed;
Cyprus legislation changes quite often, which is why you can make a mistake with bets on certain types of activities.

A significant drawback of the Cypriot jurisdiction is the annual inspections.

A fine will be imposed for failure to conduct an audit on time.

How to start a company in Cyprus?

There are three main ways to acquire a company in this state:

purchase of an existing enterprise;
receiving by inheritance;
creation of a new company.

An alternative method of purchase includes the acquisition of a controlling stake in any operating joint-stock company on the island. The main shareholder is by default the owner of the company. Although the actual leadership may be carried out by a completely different person.

On the island, you can register open and closed limited liability companies, as well as offshore companies, which are of greatest interest to people who want to avoid losses when carrying out international transactions.

The names for the company being created must be unique.

Within 7 days, the name is checked for repeatability with English and Greek names before it can be perceived as offshore - Cyprus.

Watch also the video about the advantages of Cyprus for registering an investment fund

Buy

If a potential owner or investor does not want to start the registration procedure, he can purchase a ready-made company in Cyprus. The reason for the purchase may also be the licenses, quality certificates received by the company put up for sale, and, ultimately, the acquired reputation.

Ready-made offshore companies in Cyprus can be purchased in one day from an intermediary company and begin work immediately, but in this case you cannot choose the name yourself.

When purchasing such a company, you do not need to pay for the registration procedure; the company has a set date of creation.

Approximate purchase cost is approx. 2800-5800 euros, apart from the fact that it is just a documented company that was not actually present on the market. She has no reputation, awards, certificates or established connections.

Register from scratch

You can register an offshore company from scratch yourself or through intermediaries.

The cost of such a whim ranges from 2800-3500 euros excluding taxes and fees.

You can register a company without intermediaries. In this case, the interested party bears all costs. For the most part, they will be related to the payment of taxes required upon registration and the creation of the authorized capital of the enterprise.

Registration scheme

The offshore company registration scheme is as follows:

the potential owner must decide on the form of the organization and its authorized capital;
officials are selected: director, secretary;
the owner must have documents for a registered office in Cyprus;
collection of documentation;
Submitting a package of documents to the local registration service.

The authorized capital for a joint stock company must be expressed in euros. Indicative practical amount - 1000 euros, which are nominal. This means that they can be indicated in the documents, but there is no need to pay. The minimum number of shareholders is 1 person. The issue of securities, their type is chosen at the personal discretion of the owner. An enterprise must have at least one director.

To maintain preferential status, it is important that the majority of directors are residents of Cyprus.

The company must have a secretary. He is selected by management. The secretary can be a legal entity. face. A prerequisite is a resident of Cyprus. As for the office, the address of the law office that provides secretarial services to the company is usually taken.

Collection of documents

For submission to the registrar, documentation regarding:

legal address of the company;
using a nominee service and opening a bank account;
a standard set of corporate documents with papers on the appointment of management, secretary and shareholders.

All the above information will be displayed in the Companies Registry. This is information that can be disclosed and presented to the requesting party.

Law enforcement agencies often request information about a candidate for a high position. Find out, .

The hiring of a general director takes place according to a separate scheme. Instructions in

Individual entrepreneurs have limited powers to check the tax inspectorate. More useful information

Deadlines

It takes 5-7 days to check the uniqueness of the company name. The registrar checks names in Greek and English. The name should not have a match in the first 4 letters. You cannot select names that contain certain words, as well as coordinates of countries, localities and other things that may mislead officials.

The complete registration process takes 3-4 weeks.

Registration documents of the new form

Registration documents of the new form are applied in case of renewal of company registration. They are submitted once a year along with the renewal fee.

A flat tax of 350 euros is also paid even if the company does not carry out any activities.

The power of attorney is updated, as well as documents regarding persons holding the positions of directors and secretary. The data regarding the shareholders of the enterprise must be checked for changes.

How much does it cost to maintain an offshore company in Cyprus?

In this case, we must not forget that we are talking only about the content - the standard procedures necessary to ensure that the company is not excluded from the register.