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INTRODUCTION
A limited liability company is formed in Cyprus under the
Companies Law Cap 113 which is based on the English Companies Act 1948
DEFINITION
An offshore company is a legal entity which
may be used for planning and avoidance of taxes, raising the profitability of a business,
ownership and management of a business with full freedom of currency movement, and in full
anonymity for the owner. As with any serious enterprise, professional support in offshore
business is a fundamental factor in making the right decisions and achieving the best
results.
An offshore company is a company registered
in a jurisdiction with low or no taxation, the owners of which are foreigners and whose
business activities lie outside the country of registration. From a legal point of view
these companies do not differ in any way from resident companies, belonging to local
persons.
Such a company is subject to the laws and
regulations of the jurisdiction in which it is registered, and no other.
The word "offshore" is not a
legal one, but in fact is used by professionals to describe enterprises, the owners of
which are non-residents, the profits of which are derived from transactions arising
outside the territory of its jurisdiction, and which are subject to favorable tax
treatment.
This offshore legal entity, is well known
to all tax conscious businessmen and investors who wish to ease in a lawful and
respectable way the burdens of heavy taxation imposed by their respective local
authorities.
Cyprus offers the possibility of
registering such an offshore entity. The Cyprus government, in order to attract foreign
participation in establishing such companies, offers several incentives and has adopted a
particularly easy procedure of registration.
ADVANTAGES OF OFFSHORE
COMPANIES
A great degree of respectability amongst
companies registered in other tax incentive or tax haven countries. (Cyprus is not black
listed in any country of the World).
Cyprus is not considered to be a tax
haven or laissez faire country but a tax incentive country.
No withholding of tax on dividends
No capital gains tax
Freely transferable accounts of any
currency may be kept either in Cyprus or anywhere abroad without any exchange control
restrictions.
No exchange control restrictions once the
approval for the registration of the company is granted by the Central Bank of Cyprus
All expenses incurred for the earning of
income as well as annual allowance on fixed assets are allowed as deductions.
Company’s foreign employees working in
Cyprus are liable to personal income tax at a rate from 0 to 20% and if working outside
Cyprus but receiving their salary through Cyprus at a rate from 0 to 2%.
The foreign employees are exempt from
social insurance contributions
The net profits of the company are
subject to a corporate tax at the flat rate of 4.25% and if such profits are derived from
dividends received from another Cyprus offshore company, then no further tax is payable
other than the flat rate of 4.25% paid only by the distributing company. This rate is paid
irrespective of whether they are managed and controlled from Cyprus or elsewhere.
Shareholders are not liable to an
additional tax on dividends over and above the amount of corporate tax paid by the company
Exemption from stamp duty on any
contracts entered into by offshore entities
No estate duty on the inheritance of the
shares provided the deceased was not domiciled in Cyprus
Duty free facilities are extended to
offshore companies maintaining an office in Cyprus and to their expatriate personnel in
respect of motor vehicles, office equipment and household effects (except furniture and
air-conditioning equipment)
Cyprus has a wide network of double tax
treaties with many countries including Russia and other ex Eastern Block countries.
Specifically with reference to Russia, the tax treaty provides for zero withholding tax on
dividends paid from Russia to a Cyprus company as well as on gains generated by Cyprus
companies from the disposal of securities in Russia.
The identity of the owners can be kept
secret, and nominee shareholders may be used.
An offshore entity is not subject to any
capital gains tax except on gains arising from the disposal or immovable property held in
Cyprus.
The existence of double tax treaties
combined with the low tax paid by offshore entities offer tremendous possibilities for
international tax planning through Cyprus in view of the fact that:
Any tax paid in a country with which
Cyprus has a treaty is deducted from the Cyprus tax payable on the same income
Cyprus does not impose any withholding
tax on dividends, interest and royalties paid by Cyprus offshore companies
Offshore entities are exempt from VAT on
their trading activities. Furthermore they do not pay VAT on telecommunication services
and on goods eligible to be purchased duty free.
No withholding tax is payable on
dividends, interest and royalty payments
Full tax exemption of income derived by
way of interest on foreign capital imported into Cyprus and deposited with banks operating
in Cyprus
Offshore entities are full exempt from
local social insurance schemes in respect of their foreign employees
Housing and office accommodation are
easily available at reasonable prices
The professional and management services
offered in Cyprus are of a very high standard
Foreign employees of offshore entities
and their family members can secure work and residence permits
Offshore companies and their expatriate
employees are allowed to purchase immovable property in Cyprus for their own use or their
residence.
PRE-INCORPORATION
ENQUIRIES
Are ready-made companies available?
YES
Time required to obtain name approval
from government from custom-made company?
YES
Time required to incorporate custom-made
company after receipt of name approval?
2-3 WORKING DAYS
Time required to receive documentation
after incorporation by the government?
IMMEDIATELY UPON INCORPORATION
Are consents required prior to
incorporation?
NO
Are licenses required?
CENTRAL BANK OF CYPRUS LICENCE FOR NON-RECIDENTS TO BE THE ULTIMATE BENEFICIAL
OWNERS OF CYPRUS OFFSHORE COMPANIES
Is there disclosure of beneficiary owner
to the regulatory authorities?
ONLY THE CENTRAL BANK OF CYPRUS
Confidentiality:
What is the juridiction's reputation?
EXCELLENT REPUTATION
Is it provided by law?
BY LAW THE CENTRAL BANK IS NOT PERMITTED TO GIVE INFORMATION ABOUT THE IDENTITY OF
THE BENEFICIARIES OF CYPRUS OFFSHORE COMPANIES
Central Bank requirements
BANK REFERENCE, NAME AND ADDRESS OF THE ULTIMATE BENEFICIAL OWNER
Example of bank reference
SPECIMEN OF BANK REFERENCE
QUOTE (1)
" THE EXISTING ACCOUNTS AT OUR BANK
SHOW A LIVELY COURSE OF BUSINESS AND ARE ORDERLY KEPT. WE DO NOT THINK THAT THE
OVERMENTIONED COMPANY WILL ENTER INTO LIABILITIES WHICH IT IS NOT ABLE TO MEET.
WE CAN RECOMMEND A BUSINESS CONNECTION WITH
(NAME OF SHAREHOLDER)".
QUOTE (2):
" THE ABOVE MENTIONED COMPANY IS A
CUSTOMER OF OUR BANK. IT HAS A GOOD FINANCIAL STANDING WITH THE BANK, KEEPS TO ITS
COMMITTMENTS AND CONDUCTS ITS BUSINESS WITH THE BANK IN A SATISFACTORY MANNER. WE BELIEVE
THAT THIS COMPANY SHOULD NOT ENTER INTO ANY COMMITTMENTS IT WILL NOT BE ABLE TO FULFILL.
THIS LETTER HOWEVER IS ISSUED WITH NO RESPONSIBILITY ON THE PART OF THE BANK OR ITS
EMPLOYEES ".
QUOTE (3):
"BY THE PRESENT, WE ACKNOWLEDGE
THAT (NAME OF SHAREHOLDER) HAS AN ACCOUNT WITH OUR BANK. THE BENEFICIAL OWNERS OF THE
ASSETS OF THIS COMPANY ARE WELL KNOWN TO US AND WE HAVE NO REASON TODAY TO BELIEVE THAT
THEY WOULD ENTER INTO OBLIGATIONS THAT THEY COULD NOT FULFILL. THIS INFORMATION IS GIVEN
TO YOU IN THE STRICTEST CONFIDENCE, WITHOUT ANY COMMITMENT OR OBLIGATION ON THE PART OF
THE BANK OR ANY OF ITS OFFICERS".
Choosing a name:
WORDS LIKE "CAPITAL", "BANK", "SECURITIES",
"COMMODITIES", "INTERNATIONAL", "GROUP", "ROYAL"
etc CANNOT BE USED AS PART OF NAMES OF CYPRUS OFFSHORE COMPANIES
Names requiring consent or a license?
THE FOLLOWING WORDS CAN BE INSERTED AS PART OF THE COPANY’S NAME PROVIDED THE
REQUIRED PERMIT IS ISSUED FROM THE CENTRAL BANK OF CYPRUS: "BANK",
"TRUST", "INSURANCE", "ASSURANCE", REASSURANCE"
Permitted suffix
THE WORD "LIMITED" OR "LTD" MUST APPEAR AT THE END OF THE
NAME.
Company seal required?
NO
Resident agent required?
YES
Registered Office?
YES
Documents maintained at registered
office?
YES
Public inspection of documents
ONLY THE REGISTRAR OF CYPRUS COMPANIES IS OPEN TO PUBLIC INSPECTION
Can the company trade within the
jurisdiction of incorporation?
NO
Registered shares or bearer shares
ONLY REGISTERED SHARES ARE ALLOWED IN CYPRUS
Subscribers/Incorporators?
FOR EASIER AND FASTER REGISTRATION IT IS ADVISABLE THAT THE COMPANY IS REGISTERED
BY USING SUBSCRIBERS WHO WILL UPON INCORPORATION OF THE COMPANY AND UPON APPLICATION TO
THE CENTRAL BANK OF CYPRUS FOR PERMIT, WILL TRANSFER THE SHARES TO THE REAL OWNER
Minnimum/maximum number of shareholders
MINIMUM NUMBER OF SHAREHOLDERS IS 2 AND THE MAXIMUM NUMBER IS 50
Location of general meeting of
shareholders/members?
AT THE REGISTERED OFFICE
Can proxies be appointed?
YES
Classes of shares permitted
YES
Maximum authorized share capital for
minimum duty?
CYPRUS POUNDS 1000.00
Minimum issued capital?
CYPRUS POUND 1000.00
Minimum number of directors required?
ONE, PROVIDED HE OR SHE IS NOT ALSO THE SECRETARY OF THE COMPANY
Transfer of registered shares?
THIS IS POSSIBLE PROVIDED THE PRIOR PERMIT OF THE CENTRAL BANK IS GIVEN
Maximum number of directors permitted?
UNLIMITED
Appointment of first director: When?
APPOINTMENT OF THE FIRST DIRECTOR IS DONE AT THE FIRST MEETING OF THE BOARD OF
DIRECTORS
Any residential, nationality requirements
or professional qualifications required for directors?
NONE
Can company act through a power of
attorney?
YES
Are corporate directors permitted?
YES
Where must the board of directors meeting
be held?
AT THE REGISTERED OFFICE SO THAT MANAGEMENT AND CONTROL OF THE COMPANY IS AT THE
PLACE OF REGISTRATION
Company secretary required?
YES
Corporate secretary allowed?
YES
Any specific qualifications required for
the company secretary?
NO
Requirements for annual audited accounts?
YES
Residential & professional
qualification for auditor?
YES
Annual Audited accounts to be filed at
public registry or only with tax authorities?
MUST BE FILED AT THE REGISTRAR OF CYPRUS COMPANIES, THE CENTRAL BANK OF CYPRUS,
AND THE INCOME TAX AUTHORITIES
Powers of attorney?
MAY BE GRANTED BY THE BOARD OF DIRECTORS OF THE COMPANY
Names of major banks operating in the
juridiction
BANK OF CYPRUS, HELLENIC BANK, CYPRUS POPULAR BANK, ALPHA BANK, ARAB BANK
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INFORMATION
NEEDED FOR REGISTRATION
Information needed for registration of an offshore company
is detailed below:
- the names, addresses, occupations and nationality of at
least two persons or legal entities who are to be the shareholders or the beneficial
owners of the shares of the company, irrespective of whether anonymity is required to be
kept and nominees shall be used. Since the Memornandum and Articles of Association of the
company must be signed by the subscribers, and in order to save time, the first
subscribers of the company are usually nominee companies of a law office who, upon the
registration of the company, transfer their respective shares to the real shareholders.
(In case of anonymity, the nominees sign the blank instrument of transfer of shares
together with a trust deed, and the share certificates which they pass over to the
beneficiaries who keep these to safeguard their interests).
- The name of the proposed company to be registered. It is
advisable that several alternative names are given in order to save time and unnecessary
correspondence. In cases where the name of the company is not an important element law
firms have available a list of approved names ready for immediate use.
- The main objects of the company.
- The proposed authorised and issued share capital and the
participation of each shareholder or beneficial owner in the company.
- The name, address, occupation, and nationality of at least
one person to be appointed as a director, and the same particulars for the secretary. It
is advisable that the directors and secretary are resident in Cyprus in order for the
management and control of the company must be in Cyprus.
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FORMATION PROCEDURE
According to Cyprus Law an application for
the formation and registration of a company must be carried out through a Cyprus law
office.
The formation procedure of a company is, in
general lines, as follows:
approval of the name of the company
application to the Central Bank for
Exchange Control approval
preparation and printing of the
Memorandum and Articles of Association of the company in Greek and English languages
filing with the registrar of companies
the Memorandum and Articles of Association of the company in Greek language together with
the forms HE 1, HE 2, HE 3, copy of the approval of the Central Bank and the receipt for
the payment of the registration duty.
As soon as registration of the company is
effected the registrar of companies furnishes the secretary with the Certificate of
Registration in Greek and copy in English, together with certified copies of the list of
directors and secretary, shareholders, registered address, Memorandum and Articles of
Association, and a Certificate of Good Standing of the company. As soon as the Certificate
of the Registration of the company is issued the company can arrange for the first meeting
of the directors for statutory matters such as appointment of auditors, appointment of
legal adviser, opening Bank accounts, approval of the seal of the company and of the
Memorandum and Articles of Association, appointment of the secretary etc.
The whole application, formation and
registration procedure can be completed within seven to ten days
There are certain registration fees which
must be paid upon the application for the registration of any company.
The Central Bank of Cyprus need Bank
references for the proposed beneficial shareholders of the company. The reference would
come from a Bank in the proposed shareholder’s country of residence.
The names, addresses, occupations and
nationality of the proposed beneficial shareholders as well as the proportion in which
they will hold the shares of the company are required.
The names, addresses, occupations and
nationality of the proposed directors and secretary of the company are required.
The proposed address of the registered
office of the company.
Our firm can provide the nominee
shareholders, directors, secretary and registered office, if so requested.
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EXCHANGE CONTROL
The Central Bank of Cyprus is the only
authorized institution exercising exchange control, under the Exchange Control Law. The
approval of the Central Bank is required for any non-resident to become a shareholder, or
for the transfer of any shares in an offshore company. Such approval is always given by
the Central Bank either for offshore or shipping companies in bona fide cases. However
Bank references as to the credit worthiness, financial character, respectability and
business integrity of the beneficial owners of the shares are required.
The Central Bank of Cyprus in granting the
Exchange control approval imposes the certain conditions, some of which are:
the shares of the company must belong
directly or indirectly, exclusively to aliens.
The objects of the company shall be
confined outside Cyprus
The company will be considered as a
non-resident company
The company must derive income from
abroad either from immovable property, royalties, commissions, investments of capital in
bonds, shares, debentures or loans or income deriving from any business.
The company will not obtain any finance
from local sources
The company must submit regularly copies
of its balance sheet and profit & loss account
The minimum authorized and paid up
capital must be at least CYP 1000.00
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FULL SOLUTIONS FOR
YOUR BUSINESS NEEDS
Registration and
Establishment
nominee structures
company secretary
nominee shareholders
registered office
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Administration
Services
opening Bank accounts
credit card applications
assistance in opening and negotiation of
letters of credit, Bank quarantees, and other Bank instruments
assistance with shipment and
transshipment arrangements
reinvoicing
bookkeeping
audit
preparation
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Legal Services
legalisation of company documents
drafting of contracts
consultations on working schemes and other legal
advice
work and residence permits
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Secretarial
Services
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PARTNERSHIP AND
BUSINESS NAMES
Chapter 116
Partnership and Business Name Law Chapter 116 also provides
for two general types of partnerships:
- General Partnership
- Limited partnership
Offshore partnerships enjoy all the advantages extended to
offshore companies.
General Partnership
In the general partnership every partner is liable jointly
and severally with all the other partners for an unlimited amount for the debts and
obligations of the partnership.
Limited Partnership
The limited partnership is a partnership in which at least
one of the partners must have unlimited liability for the debts and obligations of the
partnership, whereas the remaining partners may have limited liability. Limited liability
companies may also be partner in a limited partnership, as the partner with unlimited
liability, thereby limiting the liability of the general partner.
Registration
The procedure of registration of a partnership is as
follows:
- securing the partnership name
- preparing the partnership contract
- filing with the Registrar of companies a special form in
which certain information is given as to the names, addresses, description of the
partners, the unlimited or limited liability of each partner, the duration of the
partnership, the person authorised to sign and bind the company etc
- filing copy of the exchange control approval for the
non-resident partners
- payment of the registration fees
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Branches
Sections 347 of Cap 113 provides for the registration in
Cyprus of foreign companies under the legal form of a branch.
Any foreign company may register in Cyprus
a branch under Section 347 of the Companies Law Chapter 113. The procedure followed is
identical to that of the United Kingdom.
To register a branch the following
documents, duly translated into Greek are needed:
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SPECIFIC TYPES
OF COMPANIES:
CAPTIVE INSURANCE COMPANIES
- a captive insurance company is wholly owned or controlled
subsidiary company formed by a non-insurance parent for the purpose of participating in
the risks of the parent enterprise or its group. The risks assured can be those that can
be insured in the normal way or those for which insurance coverage is difficult to obtain
or highly costly.
Captive insurance companies are regulated by the provisions
of the Insurance Companies Law and may be registered in Cyprus as offshore companies under
certain provisions and requirements imposed by the Central Bank.
- in addition to the usual conditions imposed by the Central
Bank to all offshore companies the Captive Insurance Companies must also comply with the
Insurance Companies Law and in particular with the following:
- the minimum paid up share capital must be
CYP 10,000.00
- full compliance with the provisions of the Insurance Law as
to the filing of the accounts and other relevant documents
- proof of no financing from local sources
- adequate cover to the satisfaction of the Superintendent of
Insurance regarding claims from third parties, that these claims shall rank in priority to
the claims of any other company in the group.
- all local expenses incurred must be covered by funds to be
imported from abroad. The captive insurance company shall advise the Central Bank annually
of all funds imported into Cyprus from abroad.
- besides the usual benefits and advantages available to
offshore companies, Captive insurance companies may gain the benefit of obtaining
insurance at lesser net cost and have a flexibility which can be related to all aspects of
the sponsor’s risk management program.
Other reasons for setting up a captive are:
- a corporation may believe that the commercial market is
charging too much for a certain line of coverage when compared to the loss experience.
Establishing a captive to underwrite this business could substantially reduce costs.
- Just as in a homeowners policy, corporations are carrying
large and larger deductables on their policies. The loses within these deductibles,
however do not go away and have to be provided for. A captive is an ideal way to do this.
- Some lines of coverage, such as workers’ compensation, are
mandated as are the premium levels. A corporation with good loss experience in these lines
may with to write them in a captive.
- Substantial investment income can be generated in a captive
by holding onto the premiums sums until the losses are settled. In lines such as medical
malpractice some losses can take 15-20 years to settle which means considerable interest
can be generated on the premiums.
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OFFSHORE BANKING
UNITS (OBUS)
Offshore Banking Companies or branches may be registered in
Cyprus under certain provisions and requirements imposed by the Minister of Finance who is
the licencing authority and who acts on the recommendation and consent of the Central Bank
of Cyprus under the provisions of the Banking Business (Temporary Restrictions) Law
Chapter 124. The policy of the licencing authorities is that only international
enterprises or their subsidiaries, established in countries where there is good banking
supervision are eligible for a licence to operate in Cyprus as an OBU.
In granting the license the Minister of Finance imposes the
following conditions which the parent company must accept in writing before the
commencement of the business:
- the OBU parent shall provide the Central Bank appropriate
letters of comfort
- the Cyprus OBU shall operate as a fully staffed office and
not as a brass plate operation
- the Cyprus OBU shall operate on an offshore basis and all
dealings shall be with non-residents and shall be denominated in currencies other than the
Cyprus Pound.
- The Cyprus OBU must supply the Central Bank with any
information regarding its activities, obligations and disclosure of information
- The Central Bank shall have the supervision and inspection
of the Cyprus OBU and for this supervisory function the Cyprus OBU shall pay to the
Central Bank an annual fee of USD 15000.00
- The Cyprus OBU shall supply the Central Bank if so requested
with any information necessary in order to satisfy them about the OBU’s ability to meet
its obligations and its adherence in general to sound banking standards
- The Cyprus OBU shall not carry on any onshore banking
business
- All local expenses incurred shall be covered by funds
imported from abroad
- Generally there are no conditions regarding the minimum
liquidity ratio, minimum reserves at the Central Bank, maximum interest rates etc.
Address:
Greg Tower, 7 Florinis Street
P.O.Box 27511
2430 Nicosia, CYPRUS
Tel.: 00357 22 675 575
Fax: 00357 22 675 576
E-mail:info@goodgate.com |
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