Incorporation of a company in Cyprus
What are the types of companies in Cyprus?In Cyprus it is possible to incorporate 4 types of companies:
- Private Limited Company (Ltd)
- Public Limited Company (Plc)
- Limited Liability Partnership (LLP)
- Unlimited Company
A Public Limited Company or Plc, instead, is the equivalent of an Italian S.p.A. and is preferred by larger enterprises. Its incorporation requires a minimum capital of €50,000, while with regard to management, again, it is sufficient to appoint just one director (who does not need to be resident in Cyprus). Members of a Plc can be both individuals and legal entities.
A Limited Liability Partnership or LLP is a particular type of company that does not have any equivalent in Italy and whose incorporation takes place through the drafting of a document in a private form. The incorporation of an LLP in Cyprus also requires at least 2 partners.
Unlike the two company types above, a Limited Liability Partnership envisages taxation for transparency, i.e. a direct taxation of the partners rather than of the company. If, then, the partners of an LLP are not resident for tax purposes in Cyprus, they shall be subjected to taxation of their income on the basis of the tax legislation in their own countries of residence, without having to pay any taxes to the Cypriot tax authorities.
Finally, an Unlimited Company is a company type for which each shareholder is liable without any limitations whatsoever with their own personal assets. Also an Unlimited Company is subject to the taxation for transparency regime.
How long does it take to incorporate a company in Cyprus?
Compared to Italy or other jurisdictions, the length of time required to incorporate a company in Cyprus is considerably shorter and is between 24 and 48 hours.
Is a minimum share capital required to incorporate a company in Cyprus?
With regard to the Ltd and LLP company types no minimum share capital is required, and the initial capital may even be €1.
Otherwise, a Plc requires a minimum share capital of €50,000.
Is it necessary to travel to Cyprus to proceed to the incorporation?
Absolutely not. All phases in the incorporation of a company, including requesting a VAT number and opening a bank account, may be followed from Italy, with our support. Furthermore, the presence of a notary public, whether in Italy or in Cyprus, is not required either.
Is it necessary to be resident in Cyprus to open a business?
No, directors and members may also parties not resident in Cyprus.
Is it possible to protect the identity of the members of a company in Cyprus?
Of course. To do this there are 2 possibilities: establishing a trust or appointing a nominee shareholder.
By trust it is hereby intended an operation whereby a client transfers on a permanent basis ownership of their shares to a trustee, who is required to manage them in accordance with the interests of one or more beneficiaries. If the beneficiary is the client establishing the trust itself, then reference is to be made to a self-declared trust.
Opting for a trustee appointment means, instead, to remain legally the owner of one’s own shares, while appointing at the same time a nominee shareholder or a trustee company as holder of the shares on behalf of the client. The appointment might be revoked at any time.
Is it possible to protect the identity of a director?
Yes, this is possible through the appointment of a trustee director, whom our firm can select. The client might choose to revoke the appointment at any time.
Is it necessary to appoint a sole auditor or a board of auditors?
Cypriot law does not envisage either, although it requires the appointment of an auditor upon passing certain thresholds.
What documents are required to incorporate a company in Cyprus?
Both members and directors shall provide:
- a copy of a currently valid identity document;
- a residence certificate or another document that serves to prove one’s own personal address (telephone subscription, bank statement, etc).
- personal data, such as forename, surname, date and place of birth and residential address;
- the name of the company;
- a brief description of the activity to be undertaken;
- the initial capital;
- the number of shares and the distribution thereof among members.
Yes, on the basis of the client’s own needs, it is possible to open a bank account even from outside of Cyprus.
What is the annual return of a Cypriot company?
By annual return it is hereby intended an updated list of members which the directors shall annually file with the Cypriot companies’ register. If there is a transfer of shares, a member may request to file an updated annual return, even before the deadline for the mandatory filing has passed. The annual return should not be confused with the annual financial statements.
What happens in the event of failure to file the annual return or of the financial statements?
Repeated failure to file might result in the cancellation of the company from the Cypriot companies’ register. To have the cancellation revoked it is necessary to comply, even after the passing of the deadline, with the filing obligation for the financial statements and the annual return, and then activate the restoration process by which the shares shall be re-assigned to the shareholders.
Is it possible to confer to a Cypriot company ownership of a real estate asset located in Italy?
Yes, it is possible to confer real estate assets located in Italy to a Cypriot company. The valuation of the asset does not require the intervention of an expert, but can be made by the company director. A notary public shall record the transfer in the Italian land registers.
Is it possible to establish a branch of a Cypriot company in Italy?
Yes, the establishment of a branch in Italy is allowed. To this end it shall be necessary to hold a resolution fitted with an apostille certificate in Cyprus to establish a branch in Italy and file it with a notary public in Italy, together with the company’s articles of association and the articles of incorporation. It shall then be necessary to appoint a representative of the branch regularly registered with the Italian companies’ register. The annual financial statements shall be drawn up on the basis of Cypriot tax laws, but shall be also filed with the Italian companies’ register.
Our firm is able to assist our clients during all phases of establishment of your branch.
Can a Cypriot company only operate in Italy?
Yes, that is possible. The company incorporated in Cyprus shall be governed by Cypriot laws, while fiscally its shall be subjected to Italian laws.
Shall the directors and members of a company in Cyprus be required to pay social security contributions?
No, if they do not reside in Cyprus, no social security payment shall be due.
How does the sale of shares of a Cypriot company take place?
The sales operation is very simple and consists of the signing of a stock transfer form, which needs to be filed with the Cypriot companies’ register, without the need for an intervention of any notary public.
Double taxation: is there a bilateral agreement between Italy and Cyprus?
Yes, the Convention between the Italian Government and Cyprus prevents tax evasion, while avoiding double taxation, and entered into force on 30 June 1990.
Shall a company incorporated in Cyprus always be taxed in accordance with Cypriot tax law?
The income tax shall be based on the company's tax residence. Normally a company resides where its main activities are undertaken and where the management is located. If, therefore, a company owned by Italian members has its registered office in Cyprus, but it is actually managed from Italy, then it shall be considered fiscally resident in Italy and shall pay the Italian IRES [corporate income tax] on the income realised in Italy and abroad.
However, if the company is managed in Cyprus, then the taxes due shall be calculated on the basis of in the tax regime of Cyprus; only the taxes on income realised in Italy shall be paid there.
VAT: where is it paid?
If the Cypriot company has its fiscal residence in Italy, then it shall pay the Italian VAT like any other Italian company; if, instead, the company is fiscally resident in Cyprus, it shall request a VAT number from the Cypriot tax authorities and pay the taxes levied by this island’s government.
May Italian tax authorities object to the use of a Cypriot company?
No. If the company operates in full compliance with the law, the tax authorities shall recognise the lawfulness of the company itself.
It is necessary to hire employees?
No, hiring employees is at the sole discretion of the company.
For further information on incorporating a company in Cyprus please contact us on + 39 02 36 63 86 10