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The company work undertaken by our Office includes:
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company tax planning
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formation and acquisition of companies in Cyprus and abroad.
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corporate reorganisation and reconstruction.
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shareholder agreements and corporate governance.
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takeovers, mergers and acquisitions.
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management buy-outs and earn-outs.
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corporate management
[A] Cyprus, being a full member of the European Union, adopting as from 1.1.2008 the euro as its official currency and having Double Tax Treaties with more than 30 countries all over the world, with its international Business environment functioning for more than 30 years in a favourable tax regime for companies, offers a very interesting opportunity for company tax planning, benefiting from the high standard of professional services by lawyers, auditors, bankers, managers, fund managers and other professionals.
The European Connection offers inter alia, freedom of movement of people and capital in its wide sense, especially in relation to E.U. Directives, redomiciliation of companies (in and out of Cyprus), the setting up a ‘’Societas Europaea (SE) Company’’ e.t.c.
The combination of a holding company in Cyprus with subsidiaries or branches abroad and the beneficial provisions of Double Tax Treaties, coupled with the use of trusts, in a legal environment which follows in many respects English company law, and the principles of Common Law and the Doctrines of Equity, can be most beneficial for tax planning.
Ordinary companies which have their management and control in Cyprus (resident in Cyprus) are liable to a 10% corporation tax on their taxable income. This means on their ‘’net’’ profit after deducting from their income expenses incurred wholly and exclusively for acquiring their income. But beyond that there are certain further specific deductions allowed by law and, in case of losses (instead of profits) the companies are allowed to deduct their losses in the years to follow.
The main exceptions from corporation tax are the following:
- Income from dividends, the disposal of securities and 50% of income from interest (which is not earned in the usual carrying on of the business of the Company) do not attract corporation tax.
- Income from a permanent establishment outside Cyprus, except where the permanent establishment is engaged by more than 50% in activities resulting in investment income AND the foreign tax of the establishment is substantially lower than that of Cyprus.
- Although there is a 15% withholding tax on dividends distributed to Cyprus resident shareholders, there is no such tax for non-resident shareholders.
- Although there is ‘’deemed’’ (obligatory taxable) distribution of dividends on 70% of certain profits, no such obligation exists for non-resident shareholders
- There is no tax on dividends paid by a Cyprus resident company to another resident Cyprus company
- There is a special tax regime for certain companies e.g. shipowning companies (no tax for profits deriving from the operation of Cyprus registered ships bareboat chartered in or out of Cyprus) and no with holding tax of any kind is payable on any dividends paid by Cyprus shipowning companies out of the above profits. There is a special tax regime for Cyprus shipmanagement companies extended up to 2020, which are not subject to corporation tax law but instead they pay low tonnage tax based on the non Cyprus registered ships managed by them.
The above is not an exhaustive list and there are, of course, liberal deductions for depreciations, listed (protected) buildings, fixed entertainment allowances, contributions to certain Associations, e.t.c.
Furthermore, by invoking the relevant provisions of an applicable Double Tax Treaty, further allowances or deduction to the above categories may be gained in relation to income tax.
[B] PARTICULARS FOR THE REGISTRATION OF A PRIVATE INTERNATIONAL BUSINESS COMPANY LIMITED BY SHARES IN CYPRUS
By far the private company with limited liability by shares is mostly used as a legal entity for carrying on business in Cyprus and this, is the form which an International Business Company takes.
1. NAME
- The first step for the registration of any company in Cyprus is to obtain approval for the proposed name of the company by the Registrar of Companies.
- The Registrar of Companies is unlikely to approve a name if: it is too similar to that of an existing company; it is considered misleading, too general or pompous; it suggests a royal, national or international connection or it includes certain words such as Co-operative, Insurance, Bank, Financial Services, unless justified by the company's objects. These rules are relaxed if the name of the "mother" company is used for the Cyprus subsidiary with the mother company's approval.
- It is recommended that more than one name is submitted for approval so as to facilitate approval of a name promptly.
2. SHARE CAPITAL
- The Company's share capital is now expressed in Cyprus pounds and is usually divided into shares of any value, again expressed in Cyprus pounds but as from 1st January 2008 it will be in Euro but, of course, it may be expressed in Sterling Dollars or other currency.
- Authorized or Nominal Capital is the total capital which the company is allowed to issue to shareholders.
- Paid up Capital is that part of the Authorized Capital which has been issued to, and paid up by, the shareholders.
- Both the Authorized and Paid up Capital of the company may be increased at any time as provided by the company's Articles of Association.
3. SHAREHOLDERS
- The company must have at least one registered shareholder, who may be a natural or legal person. For every shareholder and ultimate beneficial owner it is imperative that the following particulars are supplied: full name, any previous names, date of birth, nationality, identity card number, passport number, full business and residential address, profession, brief description of business activities, certified copy of his passport and a bank reference.
- A foreign corporation may be a shareholder of a Cyprus company, and in such a case its basic incorporation documents should be submitted.
4. DIRECTORS
- The company must have at least one director but it is recommended that two directors are appointed. For every director it is imperative that the following particulars are supplied: full name, any previous name, if he is a director in any Company registered in Cyprus (and if yes, the name of the Company or Companies), nationality, full postal and residential address, profession, brief description of business activities and certified copy of his passport. If the director is a company, its country of registration, registration number and registered office address should be supplied.
- Directors may be Cypriots or non Cypriots. However it should be noted that the residency status of a director of a Cypriot company is a key factor in determining whether the company is a resident of Cyprus or not for income tax purposes.
- Facilities for appointing local directors are offered by our firm.
5. SECRETARY OF THE COMPANY
- The company must have a Secretary in accordance with the provisions of the Companies Law, Cap 113.
- The Secretary acts under the control and instructions of the directors, keeps the company’s statutory registers and performs certain administrative functions.
- For practical reasons it is usual to appoint as secretary a member of, or a company controlled by, the firm establishing the company. We provide this service.
6. REGISTERED OFFICE
- Each company must have a Registered Office in Cyprus in accordance with the provisions of the Companies Law, Cap 113. The registered office is the address where writs, notices and other official documents can be served on the Company.
- We can provide this service at the premises of our Law Offices.
7. COMPANY'S MEMORANDUM AND ARTICLES OF ASSOCIATION
These form the constitutional charter of the company and are drafted by a local advocate. They are divided into two parts:
- The Memorandum of Association, which primarily includes the objects and powers of the company particularly as regards its dealings with the outside world, its limited liability status and its authorized capital.
- The Articles of Association which comprise the regulations under which the company operates as a legal entity and regulates the rights of the shareholders.
The Memorandum and Articles of Association, along with other prescribed documents, must be submitted to the Registrar of Companies, for the registration of the Company (which takes about 3-4 weeks).
Our Office has prepared model Memoranda and Articles of Association based on the provisions of Cyprus law, which can be adjusted (if necessary) to meet specific requirements.
A general description of the proposed business activities of the company must be conveyed to us when we receive instructions for registration of the company.
8. BANK ACCOUNTS
- The company may open a bank account, in most of the main currencies, anywhere in the world. It is, however, advisable to have always a small account in Cyprus Pounds, in Cyprus, for local expenses.
- The signatories of such accounts need not necessarily be directors of the company, but appropriate resolutions must be taken by the company (following the format of the particular bank), to instruct its bankers accordingly.
- In opening a bank account here in Cyprus, the bank requires certain particulars, which are necessary in relation to avoiding “money laundering”.
9. AUDITORS
- Each company must have its auditors who audit the accounts of the company and file the Official Financial Returns. Most International Firms of Auditors/Accountants are present in, or represented in Cyprus and they usually charge the normal international fees, based on the time consumed.
- Accounts can be kept elsewhere but must be filed in Cyprus with the Authorities, by local authorized auditors.
10. LEGAL ADVISER
It is not mandatory to have a legal adviser for the company, but companies usually appoint one, on a retainer fee, mainly to secure his services in case of need or advice on minor matters, but it does not cover court work, research or drawing up of documents or other similar work.
11. CONTINUING REPORTING REQUIREMENTS
The basic reporting requirements which should be adhered to by a company of limited liability registered in Cyprus are the following:
- Annual Audited Financial Accounts which should be filed by accountants practicing in Cyprus and copies should be filed with the Department of Inland Revenue. The first audited accounts may cover the period of the first eighteen months of the company’s life.
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