Starting a Business in Cyprus
Opening a Business in CyprusUpdated on Thursday 19th November 2020
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Foreign investors coming to Cyprus have multiple options when it comes to starting a business. The country is one of the most appealing business destinations in the European Union thanks to the residence by investment programs created by the Cypriot government. Under these programs, foreign entrepreneurs can set up companies and have comfortable lives in Cyprus against an investment which can guarantee permanent residence or citizenship.
It is quite easy to open a business in Cyprus and with the proper support, overseas businesspersons can have their own companies up and running in the littlest time possible. We invite you to read below on how to open a business here and how our law firm in Cyprus can help you in this process.
How easy is it to set up a business in Cyprus?
Establishing a company is an easy thing to do in Cyprus. The Cypriot govern is helping the foreign investors in its attempt to attract foreign capital especially by using an advantageous tax system and low red tape.
The registration procedure doesn’t take longer than 10 days and the entrepreneurs are encouraged to open one of the types of business regulated by the Company Law: limited liability companies, public limited companies or company limited by guarantee or general and limited partnerships.
Setting up of a company in Cyprus must begin with choosing a proper, unique name that can be checked at the Registrar of Companies. The memorandum of association, notarized and elaborated by a lawyer must be deposited, along with the specific documents at the Companies Section of the Department of Registrar of Companies and Official Receiver. After registration, the Ministry of tax must provide a unique tax number and a VAT. The last step is registering at the Ministry of Labor for Social Contribution.
You can read about the business registration procedure in Cyprus in the infographic below:
Types of companies in Cyprus
Foreign entrepreneurs can register the same types of companies as local investors in Cyprus. Even if the most common business form is the limited liability company, there are also other types of structures which can be set up. These are:
- the sole proprietorship which is commonly used for small and single-owned businesses;
- the partnership which can be general or limited and which is not very often used;
- the unlimited company and the company limited by guarantee which are limited liability companies;
- branch offices, subsidiaries, and representative offices are available for foreign companies.
Our law firm in Cyprus can guide investors in opening any of the types of business forms described above.
Steps in opening a company in Cyprus
According to the Company Law there are several requirements which must be met in order to open a business in Cyprus. Before the actual registration procedure, the foreign investor is invited to select the business form under which he or she will complete the economic activities of the company. Once this important step is completed, here is what one must do in terms of opening a company in Cyprus:
- reserve a trading name for the company (the name must be unique and reflect the activity of the business);
- draft a series of documents among which the Memorandum and Articles of Association of the company;
- open the corporate bank account with a local bank in which the share capital will be deposited;
- appoint the company’s officers – the director and the company secretary (all companies in Cyprus must have secretaries);
- submit the documents related to the company registration procedure with the Cyprus Companies House;
- register the company for taxation, VAT and social insurance and pension purposes;
- obtain the necessary business licenses which will allow the commencement of the economic activities.
Once these steps are completed and the Certificate of Registration of the business is obtained, the company can hire personnel and start its activities.
With the help of our Cypriot lawyers, the opening of a business in this country is quite simple. We can also guide you thorugh EORI registration procedures in Cyprus.
What to consider in order to open a business in Cyprus
When deciding to open a company in Cyprus, a foreign entrepreneur is recommended to follow the steps mentioned above, but also to consider several aspects, such as:
- depending on the type of company chosen, various requirements related to the ownership must be complied with – these requirements are related to the shareholding structure of the business;
- the company, no matter its form, must have a legal address or registered address in Cyprus – virtual offices are available for this purpose;
- the businessman will need a trade name for the company – this can be reserved online;
- the company will need to register for taxation and employment purposes right after registration;
- for certain activities, the businessman will need to apply for special licenses and permits.
Our Cypriot lawyers offer personalized consultations to foreign investors setting up businesses in this country.
Reserving a trade name for a company in Cyprus
The first and most important step to complete in order to open a business in Cyprus is to select and reserve a trading name for the company. In order to make sure the selected name is approved, our lawyers in Cyprus recommend businesspersons to submit at least 3 name proposals, among which the desired one.
You should also consider trademark registration in Cyprus for the business' name.
Preparing the incorporation documents of the Cyprus company
For limited liability companies, the most important documents which need to be submitted are the Memorandum and Articles of Association which must contain information about the shareholders, the company directors and the secretary. They must also comprise information about the share capital and the distribution of shares among the shareholders.
The statutory documents need to be drafted in Greek or English and must also be notarized. Our attorneys in Cyprus can prepare the statutory documents for opening a business.
Tax and VAT registration when opening a business in Cyprus
The tax registration procedure is part of the procedure of opening a business in Cyprus meaning that it will be completed together with the company incorporation process. The tax identification number will be issued together with the Certificate of Registration, however, when it comes to VAT registration, the procedure must be completed separately because it is not mandatory.
VAT registration becomes mandatory when the company reaches the 35,000 euros distance selling threshold. Based on the VAT number, companies with trading activities within the EU can also obtain EORI numbers and thus ease the trading procedures.
Our lawyers in Cyprus can offer more information about the procedures for obtaining VAT and EORI numbers. We can also help with these steps which are quite important when starting a business in Cyprus.
How easy is it to hire personnel in Cyprus?
An important advantage of owning a company in Cyprus is the highly educated workforce, mostly English speaking.
The minimal working age is 15 years old.
The staff can be recruited from the numerous employment agencies. Also, the Cyprus Human Resource Management Association for information and the Cyprus Chamber of Commerce and Industry (KEBE) can provide information regarding hiring personnel.
The contract of employment can be with determined a period or an undetermined period. It must state the location of the company, details regarding the job, the start and end of the activities, details regarding the salary and other benefits. A collective agreement can also be signed and has a duration of two years usually.
An employer can also hire personnel for a part-time job, for a specific period of time or working from home. The working time cannot exceed 48 h a week and at least 11 hours of rest during 24h.
A series of benefits for the employees are granted. The sickness benefits are paid for a period of 156 days. All the unemployed can receive an unemployment benefit for a period of 156 days. The maternity allowance is paid for 18 months.
There are certain conditions that companies from Cyprus should accomplish before hiring foreign staff: the company must be listed at a stock market and the direct shareholders must be registered at the Immigration Control Board and the Civil Registration Board, the capital sources must be transparent, must have an administrative office located in a proper district and the financial stability is proven by annual balance sheets.
A foreign employee must receive a resident permit before hiring. For this, he must submit the following documents at the Immigration dept at the local police: a tax for the permit, a CV, the passport, medical certificate and insurance, criminal record, the labor contract (must contain the duration of the contract and the salary), bank guarantee and two completed specific forms.
All EU citizens must be registered for taxes at the Department of Inland Revenue for receiving a taxpayer identification code.
Any working dispute is regulated by the Industrial Relations Code, except for the strikes, usually mediated by the Labor Ministry.
Business registration fees in Cyprus
One of the most common aspects related to starting a business in Cyprus are related to the fees which must be paid during and after the company registration process. The good news is that these fees are not high, and some procedures are free of charge.
Among the fees to consider when starting a business in Cyprus are:
- the company registration fee;
- the annual maintenance fees for the company;
- the accounting fees.
Foreigners can also request other services which can incur costs. Among these, nominee services are the most employed in Cyprus. We can provide foreign entrepreneurs with nominee shareholder and director services. Company secretary services are also available, as the Company Law requires companies to have secretaries.
Other costs associated with starting a business in Cyprus
The business person must consider the minimum amount of money necessary to start the business operations. Among these, we mention:
- the share capital of the company, which depends on the chosen Cypriot business form;
- the fee for opening the bank account and the fees for obtaining the operating license;
- other costs can also be considered, such as the notary and translation fees of certain documents in the case of foreign citizens opening companies.
Investors must also consider the costs of VAT registration in Cyprus.
The share capital of a Cyprus company
The first cost which is first determined by a businessman who wants to open a business in Cyprus is the share capital which can be imposed by the Company Law for certain types of structures or must be estimated for other business forms. For example, in the case of a private limited liability company there are no minimum share capital requirements, however, the investor will need to estimate the amount of money which needs to be deposited as a share capital for the business. In the case of public companies, the minimum amount of money to be deposited as a share capital is around 26,000 euros.
It should be noted that a small percentage of the share capital must be paid as a registration fee with the Companies House in Cyprus.
Costs associated with preparing the documents for starting a business in Cyprus
An important step which needs to be considered when setting up a company in Cyprus is the preparation of the documents to be filed with the authorities. These will imply certain costs which depend on specific procedures. For example, foreign investors who want to open companies in Cyprus are required to have their personal documents translated and notarized which will imply additional business start-up costs than in the case of local entrepreneurs. Also, the preparation of the company’s Articles of Association will imply the notary fees, among which the drafting and notarization fees. The notary fee depends on the city the company will operate.
You can also watch our video on company registration in Cyprus:
What are the main points of interest for foreign investors in Cyprus?
Cyprus is well known for the advantages offered to the investors, especially in the transportation areas. For example, the profits from the operations of the Cypriot vessels are not taxable. Also, the dividends of the companies that own ship are exempt from tax.
Cyprus has an excellent infrastructure, with 2 international airports, 3 shipping ports (in Lemesos, Larnaca, and Vasilikos) and a modern road network. This facilitates the export and import of the goods.
International and multinational companies and banks are operating in Cyprus attracted by the small operating costs, economic freedom, and the well trained local companies, ready to counsel if necessary.
The pleasant weather, the culture, and the Mediterranean cuisine are attracting tourist all year long.
10 Most Important Business Regulations in Cyprus
For those starting a business in Cyprus getting acquainted with the business culture and etiquette could prove very useful. Here are some facts about the Cypriot business etiquette and culture.
The Cypriot people appreciate face-to-face communication. Even if telephones and e-mails are the most employed means of communication, Cypriot businessmen will always prefer direct communication.
Even if Greek is the official language in Cyprus and Turkish is the official language in Northern Cyprus, English is considered a “business language”. Foreign investors will have no difficulties in understanding their Cypriot partners.
3. Business relations
Cypriot managers appreciate respect, sincerity and personal trust which is why they will also be very hospitable with their foreign counterparts. Unlike other nations, Cypriots consider building personal relations with their business partners very important.
4. Arranging a meeting
Arranging a first business meeting in Cyprus should be done be telephone or e-mail in order to establish the time and place.
5. Business cards
Cypriot company representatives are keen on exchanging business cards with foreign partners. However, as a sign of appreciation your business card should be written in both English and Greek.
6. Addressing a Cypriot partner
When addressing a Cypriot partner you should use the tile Mr. or Mrs. followed by their last name. Once the business relation becomes more personal you Cypriot partner will invite you to use personal names.
7. Business dress code
Cypriots dress like most Europeans. Cypriot company managers will wear a formal suit when going into business meetings.
8. Business meeting protocols
Business meetings should be arranged in advance and followed by a confirmation call or e-mail few days before. Punctuality is of key importance when doing business in Cyprus which why you should make sure you arrive on time.
9. Business meeting meals
Business meetings in Cyprus usually imply a meal after it is finished. Refusing such meal would be very impolite.
10. Business meeting tips
Professionalism is at the core of every business meeting. However, you should know that pointing a finger in a business meeting with a Cypriot partner could be considered offensive.
What are the advantages of a holding company in Cyprus?
Cyprus is situated in the Mediterranean Sea, at the crossroads of Europe, Asia, and Africa. Joining EU in 2004 bring major advantages to the foreign investors, such as allowing the foreign ownership of a company, increasing demand for property, signing different treaties in order to protect the interests of the entrepreneurs.
Also, double tax treaties were signed with more than 40 countries, in order to avoid the double taxation of the incomes of the foreign companies.
Since 2008, Cyprus has joined the Economic and Monetary Union and as a result, the exchange rate risks were eliminated and the monetary transparency took its place.
The corporate tax is the lowest in Europe, only 10% and this is encouraging more and more businessmen to open companies in Cyprus. Also, the following are not taxable: dividends, dividend income, profits from overseas permanent establishment. No withholding taxes are applied to interest and royalties paid from Cyprus and dividends.
5 small business ideas in Cyprus
Small businesses are usually recommended to investors who want to open a business in Cyprus as a sole trader, which represents the simplest legal way to conduct a commercial activity. There are several fields which are of maximum importance for the Cypriot economy and our team of lawyers in Cyprus can provide advice on how to choose a domain suitable to the investor’s interests.
1. Company providing rental services in Cyprus
Those who are interested in starting a business in Cyprus should know that the local economy developed very fast in the first months of 2016 as a main effect of the booming results of the tourism industry. The rental property industry in Cyprus is a business which can yield positive financial results, especially because the industry can refer to any type of rental services (commercial and non-commercial). The monthly rental prices for residential real estate vary between EUR 430 and EUR 1200. Our Cypriot lawyers can help you start this type of business.
2. Consultancy company in the field of education in Cyprus
Cyprus represents a top educational destination for international students, as the local universities provide English-taught classes. A company set up in the field of consultancy can help students with various aspects referring to the admission and registration in a local university, or for accommodation purposes.
3. Travel company in Cyprus
It is advisable to register a small company providing travelling services to local and foreign visitors, as this industry is one of the most important for the local economy. The island received in 2015 a total number of tourists set up at 2,7 million and the projections for 2016 are expecting a further grow; our team of Cypriot lawyers can offer more details on how to obtain a business license for this field.
4. Web design company in Cyprus
The internet has become one of the most resourceful tools to start a business. Nowadays, an important part of the small and large commercial companies are represented in the online environment through a website and web design specialists can take advantage of this trend by providing their services to other natural persons and legal entities which might be interested in setting up a website for various purposes.
5. Auto mechanic business in Cyprus
Persons who have an extensive experience in the field of automotive can start a small business by providing various types of services for car owners in Cyprus. An important aspect in this sense is that Cyprus represents one of the top economies in terms of car ownership compared to the size of the population.
Why start a company in Cyprus?
Cyprus is one of the most important trading hubs in Europe and the European Union thanks to its geographical location, however it also has other attributes to attract foreign investors. Those who want to open a business in Cyprus should also know that:
- Cyprus has one of the lowest corporate tax rates in the European Union of 12.5%;
- in terms of foreign direct investments (FDI), Cyprus had an inflow of 3,285 million USD in 2018;
- Cyprus’ total FDI stock in 2018 was 224 million USD (representing 915.7% of its Gross Domestic Product);
- Cyprus ranks 57 in the 2019 World Bank’s Doing Business Report in terms of ease of doing business.
One of the main aspects when investing on foreign market is the taxation system applicable in that respective jurisdiction. In this sense, Cyprus provides an attractive tax regime, with several tax exemptions.
The following are exempted from taxation in Cyprus:
- dividend income;
- international transactions (however, there are certain limitations);
- profits deriving from overseas permanent establishments;
- profits deriving from sale of securities.
Please contact our law firm in Cyprus for assistance in starting a business in this country. If you are interested in starting a business in another country and also need immigration services, for example in Australia or New Zealand, you should know that we have an extensive network of law firms specialized in immigration matters and we can put you in contact with our local partners.