Company Relocation To Cyprus How to relocate and set-up the company

The beautiful island of Cyprus with its stunning land and seascapes, wonderful climate, high quality of life, education and healthcare as well as its strategic position on the crossroads of Europe, Asia, Africa and the Middle East and its attractive and beneficial tax arrangements, is a popular and highly-sought after country in which to relocate a business. Cyprus ranks in the Top 60 countries in which to carry out business activities, according to the 2020 World Bank Group ‘Doing Business’ Report.

As a member of the European Union, Cyprus works within a highly regulated framework, giving confidence that the country upholds human rights and protects the environment, two concerns of any responsible business when considering relocation.

There are two principal options when considering the mechanism of relocating to Cyprus; either setting up a business or transferring an existing business to the country. In addition there is a third option for EU nationals – that of transforming their existing company in their own country, to a European company in Cyprus – this is known as a “cross-border conversion.”

Benefits of registering a company in Cyprus

The company will be recognised as an EU company, giving it a high status across the world and opening the door to easy international business with no restrictions;

Strategic location close to Europe, Asia, Africa and the Middle East, opening up huge market potential;

Access to an educated, multi-lingual, tech-savvy workforce from Cyprus, the EU and internationally;

Labour and operational costs for the business may be reduced by relocating to Cyprus;

Revised immigration policy for non-EU technology professionals;

Real estate costs are relatively low in Cyprus, with competitive rents on company premises and reasonable prices for purchase of commercial property;

Low costs for registration and company setup;

Cost-effective and high quality business support services;

A Business Facilitation Unit, which has been set up to provide fast and efficient services to companies wishing to relocate to or establish a presence in Cyprus;

The company (and the business owner and employees if they relocate to Cyprus) can take advantage of the exciting developments and lucrative investments happening in the country;

The business owner can reduce their tax exposure either as an individual or through the business, with low income tax and multiple reductions and exemptions available, and no inheritance tax, capital gains tax on sale of titles, shares etc;

Cyprus has one of the lowest rates of business taxation in the EU, offering a rate of 12.5% Corporate Tax net on profits;

0% tax on dividends for foreign citizens, either corporate shareholders or individuals, for dividends receivable and dividends paid;

No tax on sale of shares, making it ideal for holding companies;

Favourable IP regime, as little as 2.5%;

The country offers B2B transactions both within and outside the EU, with 0% VAT based on EU directives;

Double taxation relief, regardless of whether or not the country of origin has a double taxation treaty with Cyprus; however the country does have double tax treaties with over 60 countries worldwide;

The availability of remote business setup with no obligation to travel to Cyprus to register the business;

Regulatory framework aligned with EU;

Legal system aligned with UK Common Law;

The business owner is able to relocate themselves and their family to Cyprus if desired, and can register as a tax resident in Cyprus, minimising the tax they pay on the income from their business. They will experience a high standard of living in a beautiful and safe environment.

Business And Facilitation Unit

The Business and Facilitation Unit mechanism or policy aims to make it easier for companies who wish to establish a presence or relocate to Cyprus. It provides fast and efficient services such as social insurance and VAT registration, company incorporation and obtaining the necessary residence and employment permits for their employees.

Under this scheme, companies can employ staff more speedily and family members can be granted Cyprus residency.

Timescale for registering a company in Cyprus

Once all documents have been received, the registration is usually completed in around 10 working

Starting A Business In Cyprus

Any business that is started in Cyprus has to be registered with the country’s Registrar of Companies.

The most popular type of company to be formed is the private limited liability company which gives protection to the owners in the case of company breakdown or failure. Limited liability companies in Cyprus have to conform to the conditions laid down in the country’s Cyprus Companies Law.

Private limited companies in Cyprus must have a nominal share price of €1 and the companies must have a share capital value of a minimum of €1,000.

Rules for EU nationals are given further below.

If the company belongs to a third-country national (TCN) and the company has share capital with a minimum value of €200,000 it can benefit from the Business Facilitation Unit scheme. If it has a lower share value, the general rules apply.

TCN owned companies should register with the Registrar of Companies and also the Registry and Migration Department Registry of Companies of Foreign Interests.

Private Limited Liability Companies Registered in Cyprus

Private limited liability companies can have one sole director, who is also permitted to be the sole shareholder. The company must have a company secretary.

Fees to register a private limited liability company are as follows:

Registrar of Companies fee = €165

Fast-track fee = €100

Further fees may apply for registering the whole document package.

How To Register The Company

It should be noted that the registration procedure must be notarised by a lawyer.

The process of registering a company in Cyprus comprises a number of steps, as follows:

Choose a unique trading name, which must be approved by the Registrar. It is advised to choose at least three names, in case the chosen name is already taken or not approved by the Registrar;
Following approval of the name the Memorandum and Articles of Association (M & A) are drafted and filed with the Registrar. The M & A should include information concerning the shareholders, the company directors and secretary, the share capital and structure of shares, income tax and financial statements. The M & A should be properly notarised. Further information on the M & A can be found here.
Open an account in a Cyprus bank and deposit the sum of the share capital;
Appoint the directors and secretary of the company;
Submit all documentation to the Registrar of Companies. A full list of required documentation can be found at the Registrar’s official website.
Register the company for tax, VAT, social insurance and pensions. Following this, Inland Revenue will supply a unique tax identification number.
A business licence will be issued to the company, after which they are free to start working. Also issued to the company will be a Greek-language certified memorandum and articles of incorporation, which can be translated into English by a lawyer; official company documents in either English or Greek (comprising the Certificate of Incorporation, Shareholders’ Certificate; Certificate of Directors and Secretary, and Certificate of the registered company address); and a business stamp.

Tax Registration

To register a company for tax, Form T.D. 2001 (application for obtaining a tax number) and a T.D. 1101 (application for VAT registration) must be submitted. They can be submitted by hand at any tax department district office.

VAT is payable only after a minimum level of profit is reached. (For details check here)

For a list of documents needed to submit to the Inland Revenue, you could see here.

Setting Up A Branch Of A Foreign Business In Cyprus

A branch of a foreign business in Cyprus is considered to be a permanent establishment of a company not registered in Cyprus. It must have the same name and offer the same services as in the home country.

To set up a branch of their business in Cyprus the parent company must:

Obtain approval for the name from the Registrar of Companies;
Submit an original M & A of the parent company to the Registrar;
Submit a report about the parent company to the Registrar (see below);
Submit information about the representative agent of the parent company in Cyprus. The representative agent is the person authorised to represent the company in transactions with third parties;
Complete Forms AE 1, 2 and 3.

Parent Company Report To The Registrar

Under Section 347(1) of the Cyprus Companies Law, the report submitted to the Registrar must contain details of the following:

Name and form;
Addresses of the parent company and foreign branch and the address of the present company seat if this is different from the registered office;
Registration number of the company, from the Registrar of the original place where the company is registered;
The issued share capital of the parent company;
Any information about liquidation or bankruptcy of the parent company, if applicable;
If the parent company is registered in a non-EU state, the report must contain information about the applicable law in that country.

Further Details To Be Submitted To Registrar

Names and addresses of the Director(s) and Secretary of the parent company;
Names and addresses of persons authorised to receive any documentation regarding the parent company in Cyprus.

There are a number of specific rules applicable to the parent company when establishing their branch in Cyprus:

The entire process of setting up and registering the branch in Cyprus must be done through the Registrar’s e-filing system;
A registration fee of €380 for opening a branch of a foreign company in Cyprus must be paid;
The parent company must establish that it has the right to buy and own property in the Republic of Cyprus;
The parent company is considered by law to be responsible for the actions of the branch in Cyprus.

Read full details here.

Transferring A Business From Another EU-Member State to Cyprus

The rules are slightly different for EU nationals wishing to transfer their company to Cyprus. They can take one of the following options:

Set up an entirely new business;
Set up a European Company (Societas Europaea, or SE);
Convert their existing business into a Cypriot business through cross-border conversion.

SEs And Cross-Border Conversions

SE

A Societas Europaea or SE, as defined by the europa.eu website, is “a type of public limited liability company that allows you to run your business in different European countries using a single set of rules.” It can only be set up within the borders of the European Union. The SE was created with the input of EU member states and was the culmination of 30 years of discussion. It officially came into operation in the EU on 8 October 2004.

The SE legislation consists of two documents – Council Regulation on the Statute for a European Company, EC/2157/2001 and the Council Directive relating to the involvement of employees (Council Directive 2001/86/EC of 8 October 2001).

The SE helps to facilitate cross-border mergers and re-incorporations, allowing businesspeople to choose the legal system they consider most favourable.

Setting Up A European Country SE

For setting up a European Company (SE), a number of conditions have to be met:

The registered office and head office (the place where the business is carried out) have to be in the same country;
The company has to have a “presence” in other EU countries, for example subsidiaries and holdings;
There needs to be a minimum subscribed capital of €120,000;
The company needs to have an agreed process with its employees that allows employees to be consulted and informed about company matters (this is an express EU requirement for SEs).

In order to transform itself into an SE, a private limited company must form a European holding company or a European subsidiary in another EU member state. An example might be a private limited company in France forming a subsidiary in Cyprus, and thus turning itself into an SE.

The abbreviation “SE” must be added before or after the company name at the time of registration.

The Official Journal of the European Union will then publish the details of the SE.

More information can be found at the Registrar of Companies: https://www.companies.gov.cy/en/business-entities/…

Benefits Of Registering An SE

There are a number of advantages of registering an SE in Cyprus including:

It is a trans-national legal form which is recognised and respected by all European Union states;
It is legally valid across the EU and is operational across the Union, for example in the case of buying and selling property;
The SE can operate as a single entity across the EU without having to establish separate branches.

Cross-border conversions

Cyprus began to permit cross-border conversions of companies in 2006 under its Companies Law, Cap. 113, Articles 354 A-Θ (I, in English numbering).

A cross-border conversion takes place when a company registered in one country transfers itself and is registered in another. The company remains on the registry of its country of origin, despite now being registered in another state.

Cross-border conversions are permitted under the right of freedom of establishment (one of the fundamental freedoms of the EU).

Companies wishing to undertake a cross-border conversion in Cyprus must do the following:

Pass an extraordinary resolution (in practice this generally means the decision to transfer the business is agreed upon by a 75% majority of members);
Apply to the Cyprus Register of Companies;
Submit a list of documents including:

A copy of the extraordinary resolution;
A copy of the company’s M & A;
A certificate of good standing and financial strength, issued from a public authority in the country of origin;
A report from a director of the company, giving details of the company;
Official proof that the company does not face criminal convictions or administration in the country of origin.

When a company has converted under cross-border conversion rules, it is from then on under the authority of the Cyprus Registrar of Companies and treated as if it had been set up under companies law like any other company in Cyprus.

A new law, coming into force by 31 January 2023, has been created with the aim of filling gaps in existing law and creating a more uniform system in order to create security for companies wishing to relocate under this system, as well as ensuring greater legal protection for stakeholders.

Relocating Employees to Cyprus

It should be noted that when a company relocates its employees to Cyprus, different rules apply for EU nationals and nationals of a third country.

In either case, whatever the form of business, or country of origin, when relocating employees to carry on business in the Republic, the company must register with social insurance and the general health system (GHS).

Documentation regarding social insurance can be found here.

Employees Who Are EU nationals Living And Working In Cyprus

Any EU national is allowed to live and work in Cyprus without restrictions.

However:

If they are members of a regulated profession (for example doctors, lawyers or accountants), they must contact the relevant Cyprus professional body who will advise how they can obtain a professional licence or have their existing licence recognised in Cyprus.

An EU national who relocates to begin employment in Cyprus is required to apply to the Ministry of the Interior for a registration certificate. This must be applied for within four months from the date of entry into Cyprus. The application is made using Form MEU1 and must be accompanied by a list of documents including:

A valid passport or identity card, both copy and original;
An employment confirmation from the employer;
A Cyprus social insurance confirmation.

The full list and updated checklist is available here.

Useful information on the rights of EU workers across the EU is available from “Moving & working in Europe” from the European Commission.

Employees From Third Countries, Living And Working In Cyprus

Under a new policy that Cyprus has implemented for the employment of third-country nationals (TCNs), foreign companies that establish independent offices in Cyprus can apply under the Business Facilitation Unit.

Such employees who have worked legally in Cyprus for 7 years can apply for full Cyprus citizenship. However, under the BFU as of January 2022, employees of foreign interest companies are able to apply for citizenship after 5 years (4 with proof of good knowledge of Greek).

Third-country national employees can buy real estate (house, apartment, or land) but need permission from the government.

Relocation of companies with the employment of Third Country Highly Skilled Nationals (TCNs)

Any company registered in Cyprus which has a majority shareholding owned by a TCNs, or Ultimate Beneficial Owners (UBOs) or which is a listed company, is categorised as an Entity Of Foreign Interests (FIE) and as such, is allowed to employ highly skilled individuals from other countries (Third Country Highly Skilled Nationals or TCNs).

Companies Eligible For Permit To Employ TCNs

Foreign companies wishing to relocate to and register in Cyprus and which have appropriate independent offices in the country, can obtain and permit to employ TCNs if they operate in the following industries:

Cypriot shipping companies
Cypriot high-tech/innovative companies *
Cypriot pharmaceutical companies
Cypriot biogenetics and biotechnology companies

Up to 70% of the company’s employees can be TCNs, over a period of five years. After this time, if it is not practical for 30% of employees to be Cypriot nationals, this condition will be considered on a case by case basis.

*(providing they are already established in the market, they have a high level of experimental R & D intensity; and they develop products falling into the categories of: products relating to aviation and space industries; computers; electronic and telecommunication products; pharmaceuticals; biomedical; research and development equipment; electrical machinery; chemicals and non-electrical machinery.

Criteria for Companies Employing TCNs

The company must have a majority shareholding (at least 50%) owned by third-country nationals (TCNs);
If the majority of shares are not owned by TCNs, the company may still employ TCNs if the foreign participation represents an amount of a minimum €200,000;
In both of the above cases there is a requirement for the Ultimate Beneficial Owner (UBO) to invest or deposit a minimum amount of €200,000 for the purpose of their business activity in Cyprus. If there is more than one UBO, this amount can be invested either by one individual or collectively;
Public companies registered on any recognised stock exchange;
Companies of international activities (formerly off-shore) which operated before the change in regime and whose data is held by the Central Bank;
Companies involved in the industries listed above;
For companies in the above three criteria, the investment of €200,000 also applies and there is a requirement for it to be proven by appropriate certification, eg bank statement at the time the investment is made, or proof of the investment (purchase of the office space and/or office equipment).

Eligibility Criteria for TCNs to be employed in Cyprus

The timeframe for obtaining the employment permit is around 1 month and the applicant must fulfil the following criteria:

They must be earning a salary of at least €2,500 per month;
They must have a university degree or equivalent, or at least two years’ experience in a similar position;
Their employment contract in Cyprus must be for at least two years.

Benefits of Employment in Cyprus

TCN Employees of Cypriot registered companies can enjoy many benefits from living and working in the country, making it easy for employers relocating in the country to recruit from a pool of talented employees. Benefits to the employee include:

Temporary work and residence permits which are valid for three years and can be renewed;
Eligibility to apply for Long-term Residence status (Category E work permit);
Family of the employee can relocate under family reunification rules;
If the employee has a work permit and place of residence their spouse has free, immediate access to the labour market and can find work;
When the employee returns to their permanent residence, any social insurance contributions they have paid in Cyprus can be transferred back into their country of origin;
There is a tax exemption of 50% for new taxpayers/employees with remuneration of over €55,000 (valid for 17 years).
The right to apply for naturalisation. Any TCN can apply for naturalisation after seven years of being a legal resident of Cyprus. Additionally, TCNs can apply for naturalisation after five years of residence and work in Cyprus, or four years if they hold a recognised Certificate of Success demonstrating a very good knowledge of the Greek language. Spouses can apply for naturalisation after three years of marriage to a Cypriot national.

Taxes for companies relocating to Cyprus

As discussed earlier in this article, there are many tax advantages for companies relocating to Cyprus and for the entrepreneurs and business owners on a personal level. These include:

The business owner can reduce their tax exposure either as an individual or through the business with low income tax and multiple reductions and exemptions available, and no inheritance tax, capital gains tax on sale of titles, shares etc;
Cyprus has one of the lowest rates of business taxation in the EU, offering a rate of 12.5% Corporate Tax net on profits;
0% tax on dividends for foreign citizens, either corporate shareholders or individuals, for dividends receivable and dividends paid;
No withholding tax on dividends paid to non-resident shareholders;
No withholding tax on interest paid from Cyprus;
No tax on dividend income received from another Cyprus tax resident company;
No tax on dividend income received from abroad, unless the foreign country allows the dividend paid as a tax deduction/ expense;
Exemption from tax on disposal of securities (e.g. shares, bonds, debentures). Having no tax on sale of shares makes it ideal for holding companies;
Profits of a Permanent Establishment are exempt from tax under certain criteria;
Favourable IP regime, as little as 2.5%;
The country offers B2B transactions both within and outside the EU, with 0% VAT based on EU directives;
Double taxation relief, regardless of whether or not the country of origin has a double taxation treaty with Cyprus; however the country does have double tax treaties with over 60 countries worldwide;
No withholding tax on royalties paid from Cyprus in respect of intellectual property exploited outside Cyprus;
No inheritance tax;
No taxes on entry, reorganisations and exit;
Unilateral credit relief for foreign taxes;
The country uses the “substance concept” in tax law, which is a device used to ensure that transactions have a substantial purpose aside from tax reduction. This benefits businesses operating in Cyprus.

Taxation Of Cyprus Company Employees

For the taxation of salaries of company employees, tax is payable on all gains or profits from any employment that takes place in Cyprus or another country. If the employee receives income from employment outside Cyprus, this is not taxed by Cyprus if the person spends at least 90 days in any calendar year outside Cyprus. This is known as the “90-day rule”.

Individuals who are non-tax residents of Cyprus pay tax on gains or profits from any office or employment that takes place in Cyprus only.

Individual tax rates are as follows:

€0 to €19,500 0% (no tax payable)
€19,501 to €28,000 20%
€28,001 to €36,000 25%
€36,001 to €60,000 30%
€60,001+ 35%

In conclusion, there are many reasons to relocate a company to Cyprus and many structures that allow for businesses to be set up, transferred, relocated and new branches opened in the republic. Its generous taxation system, considerate immigration rules and thriving business environment combine to make it one of the most popular countries for companies to move to and grow or set up their businesses, while the country’s high standard of living together with top quality education and healthcare systems, provides an enviable lifestyle for business owners and their employees who relocate there. Cyprus may be small in size but its economic status and reputation place it firmly at the centre of Europe and the world.