Cyprus

SETTING UP IN BUSINESS

Introduction

Although Cyprus is no longer the offshore tax haven that it used to be before the EU came calling, it remains a dream destination for many foreign investors. An efficient and sophisticated business environment, coupled with corporate income tax of just 10%, help to explain the pull.

What are the other factors that make Cyprus so attractive?

The island has double-taxation treaties with 27 other countries, including most of the high-tax countries in Western Europe, and many states in Central and Eastern Europe. As a low-tax centre, this makes Cyprus a particularly effective location for companies aimed at emerging markets. On top of this, the economy is strong and stable, and business costs are generally low.

What about political stability?

Cyprus remains divided as a result of the Turkish Invasion on 1974, but this does not appear to have hindered the island's economic development, at least in the Greek sector. GDP per capita on the Greek side was $21,600 in 2005, among the highest in the Mediterranean. GDP in the Turkish sector was one-third of this.

What are the main types of Company in Cyprus?

Most investors choose one of the following corporate formats:

• limited company
• branch
• partnership

What are the main features of a limited company?

• no minimum share capital requirement
• number of shareholders must be between one and fifty
• company must have at least two directors
• annual accounts must be filed in Greek and audited

What are the main features of a branch?

• foreign parent responsible for all liabilities of Cypriot branch
• branch required to register with Registrar of Companies
• accounts to be filed annually, in Greek

What are the main features of a limited liability partnership?

• general partnership: between two and twenty members
• limited partnership: at least one partner with unlimited liability
• required to register with Registrar of Companies
• no requirement for audited accounts, but must keep proper books

What about offshore companies?

Any private company based in Cyprus that is 100% foreign-owned is regarded as an offshore company, although the term International Business Company (IBC) is also used. But there is no longer any difference in tax treatment between an offshore company and a regular Cypriot company.

What is the regulatory environment like?

Far more strict than it was until 2003, certainly as far as offshore companies are concerned. Before then, the Government applied the lightest of touches, and offshore companies paid no corporation tax at all. Today the island remains a business-friendly low-tax centre - with 10% corporation tax and low treaty withholding tax rates - but regulatory requirements are now on a par with many other EU states. Our legal and tax experts can help you steer clear of the rocks.

Are there financial incentives available?

Cyprus does not offer particularly generous incentives for foreign investors, although the government may argue that its low-tax regime is a sufficient incentive in itself. However, various grants and loans are available for investors in certain high-tech and traditional economic sectors, and the Larnaca free trade zone offers exemption from customs charges. Moreover, there are personal tax concessions for expatriate workers.

How easy is it to recruit staff in Cyprus?

The economy has powered ahead in recent years, creating near-full employment and raising the stakes for foreign companies seeking to attract good staff. Having said this, the labor pool is generally well educated and rates of pay are low compared to the EU average. If you want the pick of the crop, our recruitment specialists are ready to assist you.

And what about banking facilities?

Cyprus is an important regional investment centre and has developed sophisticated international banking facilities to support it. Many major international banks have branches here, together with local commercial banks, and the financial system, supervised by the Bank of Cyprus, is robust.