Setting Up a Limited Company in Cyprus

Cyprus has emerged as a prime destination for business establishment within the European Union, offering a unique blend of tax efficiency, EU compliance, and strategic geographical advantage. The process of setting up a company in Cyprus is designed to be straightforward and business-friendly, reflecting the country’s commitment to attracting international investment.

This guide will walk you through the key steps of forming a company in Cyprus, from choosing a company name to meeting annual compliance requirements. Whether you’re looking to incorporate a new company or purchase a shelf company for immediate operations, Cyprus offers flexible options to suit various business needs. The ease of setup, combined with the country’s attractive tax regime and sophisticated legal framework, makes Cyprus an ideal choice for entrepreneurs and businesses of all sizes looking to establish a presence in a reputable EU jurisdiction.

Company name

Before registering a company in Cyprus, an application for approval of the company name must be submitted to the Registrar of Companies and Official Receiver. This can be done directly by applicants or through a lawyer or service provider. The name should not contain prohibited words such as “Cooperative,” “Municipal,” or “Privileged,” or any offensive language, and should not be too similar to other registered names. The name must end with the word “limited” or its abbreviation and may include Greek or Latin characters. The Registrar has the power to reject any name deemed undesirable.

As a matter of good practice, legal advisors in Cyprus typically keep a list of pre-approved “shelf names,” which are names already approved by the Registrar. These names are offered to clients who require a quick registration process and are indifferent to the actual name of the company.

Registered Office and Management Structure

A Limited Liability Company in Cyprus is required to have a registered office and address in Cyprus, which must be stated to the Companies Registrar.

Directors & Secretary For a Limited Liability Company in Cyprus, it is mandatory to have a director and secretary who reside in Cyprus. However, corporate entities are permitted to hold these positions. In the case of a company having only one member, the director and secretary positions can be held by the same individual. The details of the director and secretary are registered with the Companies Registrar and are publicly available.

Shareholders & Beneficial owners

A single shareholder is the minimum requirement for a Cyprus Limited Liability Company, with a maximum of 50 shareholders allowed. There are no restrictions on the nationality or residency of the shareholders, and both corporate entities and natural persons can be appointed as shareholders. It is also possible for the same person to serve as both the director and shareholder of the company.

The details of shareholders are registered with the Companies Registrar and are publicly available, while the details of beneficial owners are not registered on the public record and are not accessible to the public

Capital Assets & Structure

The capital structure of companies incorporated in Cyprus offers significant flexibility to business owners. When establishing a company, the authorized capital can be determined by the owners and denominated in any currency of their choice. While it’s common to suggest an authorized capital of €1,000, this is not a mandatory requirement. The authorized share capital represents the maximum amount of capital that the company is permitted to raise from its shareholders through the issuance of shares.

In terms of share types, Cyprus Limited Liability Companies are restricted to issuing only registered shares. The minimum number of shares that must be issued is one, providing flexibility for sole proprietorships or closely held companies. It’s worth noting that bearer shares are not permitted under Cyprus law, ensuring transparency in company ownership.

One of the most attractive features of the Cyprus company structure is the absence of a minimum paid-up capital requirement at incorporation. This means that shareholders are not obligated to pay up capital within a specific timeframe. This provision offers significant financial flexibility, particularly beneficial during the critical early stages of a business when cash flow can be tight. It allows companies to allocate their financial resources where they’re most needed, rather than tying them up in paid-up capital.

This flexible approach to capital structure and share issuance aligns with Cyprus’s broader strategy of creating a business-friendly environment. It allows companies to tailor their capital structure to their specific needs and growth plans, making Cyprus an attractive jurisdiction for a wide range of business types and sizes.

Annual Compliance and Government Fees

Companies registered in Cyprus are subject to two primary annual reporting obligations. Firstly, every Cyprus company must submit audited or certified financial statements to the local tax authority annually, regardless of whether the company is active or tax resident in Cyprus. This requirement ensures transparency and compliance with financial regulations. Secondly, companies must file an Annual Return with the Registrar of Companies. The initial submission is due 18 months after the date of registration, with subsequent submissions required annually. It’s worth noting that while these two major reports are annual, companies also have quarterly obligations related to VAT and social insurance contributions, which require more frequent filings throughout the year.

In addition to these reporting requirements, Cyprus companies must pay an annual fee to the Registrar of Companies to maintain their good standing. This annual fee amounts to €350 and is due by June 30th each year. For companies that are part of a group, the total amount is capped at €20,000. Prompt payment of this fee is crucial, as late payments incur penalties. If payment is made between July 1st and August 31st, a €35 penalty is applied. This penalty increases to €140 for payments made between September 1st and November 30th. Continued non-compliance may ultimately result in the company being struck off the register. While these fees and potential penalties add to the cost of maintaining a company in Cyprus, they contribute to the overall integrity and reliability of the Cyprus business environment.

Administrative Requirements and Employer Responsibilities

Companies in Cyprus are required to register with the Tax Department and Social Insurance Services to obtain a tax identification number, a VAT registration number, and to pay contributions to various funds for their employees. Employers must pay contributions to the Social Insurance, Annual Holidays with Pay, Redundancy, Human Resource Development, and Social Cohesion funds for each employee who earns at least €200 per week or €700 per month. Contributions, including the employees’ share, must be paid monthly in arrears within one month from the end of each contribution month.

The registration of employers can be done electronically through the Point of Single Contact (PSC) Cyprus portal, or by submitting the application form to a District Social Insurance Office or Citizens Service Centre. The application form should be accompanied by a copy of the employer’s identity card or passport or aliens registration certificate, as well as the relevant certificates of incorporation, directors and secretary (for limited companies), or partnership registration (for partnerships). Additionally, a Declaration of Employers Registration form must be completed for the recruitment of employees.

Legal Services for Business Setup and Management in Cyprus

As a licensed lawyer specializing in corporate law, I offer comprehensive legal support for businesses looking to establish and operate in Cyprus. My services are designed to provide end-to-end solutions, from company formation to ongoing compliance and management.

My approach focuses on offering tailored, personalized services that go beyond mere legal advice. I aim to become a trusted partner in your business journey, ensuring that all legal aspects are handled efficiently and effectively. This includes complete nominee services, comprehensive financial management, administration services, expert consulting, and even Financial Managed SaaS solutions.

For a detailed overview of my services and how I can facilitate your business establishment and growth in Cyprus, please visit my article: Streamline Your Business Setup in Cyprus. Here, you’ll find information on the full spectrum of services I offer, designed to set your business up for success from day one.

Further Reading on Company Law & Corporate Governance

For those interested in delving deeper into company law and corporate governance issues, I invite you to explore my other articles. These pieces cover a wide range of topics, from theoretical discussions to practical analyses:

• Cyprus Companies: Where Tax Efficiency Meets EU Compliance: Cyprus, strategically located between Europe, the Middle East, Africa, and Asia, offers a unique combination of EU membership and an attractive tax regime. With a competitive 12.5% corporate tax rate and extensive benefits including dividend and interest income exemptions, Cyprus provides a reputable business environment compliant with EU and OECD standards. Special provisions for intellectual property, holding companies, and corporate reorganizations, along with an extensive double tax treaty network, make Cyprus an ideal destination for businesses seeking tax optimization within the EU framework.
• Balancing Corporate Governance: Agency vs Stakeholder Theory: This article examines the interplay between agency theory and stakeholder theory in UK corporate governance. It explores how both theories advocate for limiting shareholder power but differ in their approaches. Agency theory focuses on the shareholder-executive dynamic and the importance of general meetings, while stakeholder theory emphasizes a broader system of checks and balances. The piece highlights the complexities of aligning shareholder interests with societal needs, discussing the role of corporate structures, the nature of ownership, and the evolving business landscape in shaping effective and responsible corporate governance practices.
• Exploring the Role Separation of Chairman and CEO in the UK: An examination of the debate surrounding dual leadership roles in corporate governance, discussing the benefits and costs associated with separating the positions of Chairman and CEO.
• The Role & Efficiency of Non-Executive Directors in the UK: An analysis of the critical role that Non-Executive Directors play in ensuring effective corporate governance and oversight in UK companies.
• The Texture of International Taxation: An exploration of the complexities and challenges in international tax law, particularly as they relate to multinational corporations.
• The Metaphysical Dimension of the Corporate Entity: A philosophical examination of the concept of corporate veil and its implications for business and law.
• The Ineffectiveness of the Foss Rule: A critical analysis of the Foss v Harbottle rule in company law, discussing its limitations and potential for injustice in certain corporate governance scenarios.
• Gerald Rarnet: A Business Parody: A cautionary tale about the importance of public relations and the potential consequences of ill-considered public statements by company leaders.
• Greek Small and Medium-sized Enterprises: Victim or Perpetrator?: A critical analysis of Greek SMEs, exploring both external challenges and internal shortcomings. While acknowledging harsh economic policies, the article argues that many Greek entrepreneurs contribute to their problems through poor business practices. It calls for more responsible management, better financial practices, and a shift in entrepreneurial culture to achieve sustainable growth in the Greek business landscape.