Company formation in Cyprus
2023 Company formation in Cyprus: full guide
Incorporating a company in Cyprus is a fairly simple procedure.
Opening a company in Cyprus
In contrast to many other jurisdictions, the Cypriot LTD is formed without the need to pay in share capital. As in the English LTD, the capital may not be paid in, even in a small part. This avoids the need to make the deposit into a bank account, obtain bank certification, and then proceed to register the company. The opening of the company in Cyprus requires the presence of an authorized intermediary, who collects the necessary documentation and proceeds to the incorporation of the company by registering it at the Commercial Registry. Company formation in Cyprus requires at least one natural person to hold the office of director and partner. The company can therefore also be single-member.
As in many European jurisdictions, opening a VAT number is a separate requirement from the incorporation of the company. Subsequent to the proper registration of the company of apply for the opening of the VIES number to the competent VAT office in Cyprus. Usually the officials request the type of activity carried out as well as supporting documentation, such as contracts or invoices, to make sure that the request for VAT position is real and substantiated. However, our firm takes care of any paperwork involved in applying for and obtaining a VAT number that is useful to be able to work properly.
Corporate taxation in Cyprus and Malta
It may be interesting to compare two taxation models, such as the Cypriot and the Maltese, in order to analyze their differences, as well as their merits and shortcomings. Business income taxation in Cyprus charges a 12.5 percent rate on profits. Thus, the taxation model is standard: on revenues after deducting costs, a profit is derived that is taxed at 12.5%. There is no withholding on the distribution of dividends, so these are taxed in full in the hands of the shareholder. The Maltese model, on the other hand, provides for the REFUND system, i.e., a refund of taxation when profits are distributed.
This leads to a taxation in the hands of the company of 5 percent. Caution though! The Maltese taxation model, the REFUND precisely, provides for a refund that then, necessarily, needs to be taxed in the hands of the shareholder. This, in some cases, can cause all or part of the tax advantage of the Maltese system to be lost, and thus increase the tax rate actually discounted. It is therefore necessary to analyze the case in point, i.e., the partner's taxation regime, in order to assess whether, as is often the case, the discounted rate on the Maltese LTD income is higher than the 5 percent assumed by the REFUND system.