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Opening a Branch vs. a Subsidiary in Cyprus

Opening a Branch vs. a Subsidiary in Cyprus

Updated on Friday 17th November 2017

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Many companies want to enter the Cypriot economic market due to Cyprus’ statute of an offshore tax-heaven. The legislation that enables a company to open a branch office or a subsidiary in Cyprus is based on the Companies Law. 

The main differences between a branch and subsidiary in Cyprus are presented below. If you want to open a branch or subsidiary you can contact our law firm in Cyprus

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The branch office in Cyprus

If you want to start a business in Cyprus by opening a branch office the registration process is the same as the procedure for the incorporation of a new Cypriot company. Within the first month the parent company must submit an application form with the Registrar of Companies in the Ministry of Trade, Industry and Tourism.

 

The Cypriot branch office must carry the same name as the parent company and acts as an extension of the head office. The parent company will be fully liable for all activities the branch undertakes, activities that must be the same with the parent company’s businesses.

The Cypriot branch of a foreign company must name a resident representative in charge of maintaining relations with the tax authorities.

From tax point of view, the branch office in Cyprus will be treated as part of the parent company and not as a separate entity, thus being subject to the Cypriot taxation system.

The subsidiary in Cyprus

The Cypriot subsidiary falls under the government of the Cyprus Companies Act. Foreign companies are drawn towards Cyprus due to its low taxes and the double taxation treaties which allow companies to benefit from small or no withholding taxes. Subsidiaries are regarded as separate entities and have limited liability.

A Cypriot subsidiary is required to register with the Inland Revenue Office in order to receive a tax identification number (T.I.N.) and with the Registrar of Companies.

The Companies Act requires subsidiaries to file an audit report and its financial accounts annually.

Differences between the branch office and the subsidiary in Cyprus

In terms of opening a branch office or registering a subsidiary the process is the same and will take about 20 days. Also both types of companies must file annual reports with the tax authorities, the process for the branch office being more complicated because it must present documents from the parent company as well.

 

When registering a Cypriot subsidiary a company can choose between a private limited liability company and a public limited liability company. For the branch office the whole liability will fall onto the parent company, while the subsidiary will be liable for its assets and share capital only.

 

What is the most popular business entity in Cyprus?

 
Generally, the most common form of business entity used to establish a presence in Cyprus is the subsidiary. By opening a subsidiary, the foreign company takes advantage of certain benefits, such as:
 
Tax benefits, since Cyprus has some of the lowest corporate taxes in the European Union;
Certain tax exemptions, for instance related to:
      o foreign exchange profits or losses, for businesses in the forex sector;
      o interest income, in certain situations. Our lawyers in Cyprus can offer more details on what these situations are;
      o income from business reorganizations;
Tax relief for foreign tax paid.
 
Furthermore, many times a foreign shareholder can benefit from:
 
An advantageous tax treatment related to the distributed profits at tax residency level;
Many double-taxation treaties concluded by Cyprus.
 
Besides the tax benefits, subsidiaries which comply with certain requirements can also employ a number of foreign citizens in the country. 
 
As a result, a foreign company can make sure that the management of a subsidiary is effectuated by individuals who are familiar with the activities of the foreign business.
 
Our experienced Cypriot lawyers can provide assistance in setting up a branch or a subsidiary in Cyprus, as well as any type of legal advice in the country. 

Our lawyers in Cyprus can help you with the registration process of a company. Please contact us for more detailed information

 

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