A number of favourable factors make Cyprus attractive to foreign businessmen and investors. These may be summarised as follows:
GEOGRAPHICAL POSITION
Cyprus is situated at the meeting point of the continents of Europe, Asia and Africa. The proximity of this location to the Middle East has led a large number of foreign companies operating in the area to set up a base on the island for their activities outside Cyprus. At the same time it has a very good climate and a convenient time zone in relation to Europe and Middle East.
STATUS OF CYPRUS
Cyprus is an independent country, a member of the United Nations, the Council of Europe, the Commonwealth, a member of the Non-Aligned Countries, it has an associated status with the European Economic Community (it has already signed a Customs Union Agreement with the EEC). Perhaps more significantly Cyprus has friendly relations with the Arab world and other developing countries. Such an important status is considered, from a business point of view, as most advantageous.
INFRASTRUCTURE
The infrastructure of the island is probably one of the most sound ones in its geographical area as a whole. A summary of the most notable features of the infrastructure in Cyprus are:
- First class telecommunications system which is considered as one of the best in the world. Cyprus is ranked among the top 10 countries in the world as far as telephone facilities are concerned.
- High quality professional and managerial services as well as efficient staff available at all levels.
- Pleasant, European standard of living.
- Efficiency of Government services and integrity in the administration of justice.
- Low operational costs and relatively low cost of living.
- English language widely spoken and used.
- All important law, especially in business, is based on English law.
- High standard of medical care and private clinics.
- Well trained and educated labour force and academics.
- Accounting firms and law offices are well organised and provide a service of a high professional standard.
- A well developed banking system, capable of coping with the diversified needs of the local business community as well as those of the foreign investor.
- Good climate, good food, beautiful scenery, historical interest and hospitable, friendly people.
- Freedom of movement of foreign currency.
- Crime free environment.
- Availability of foreign schools.
- Availability of shipping services.
- Good industrial relations.
- Frequent and in many cases daily air connections in all directions.
- High quality hotel, housing and office accommodation.
Tax System
The fact that Cyprus has already tax treaties with a number of countries and bearing in mind that the substantial tax advantages and exemptions which are offered, Cyprus is perhaps one of the most attractive places for International Tax Planning. Furthermore, due to the favourable treaties that Cyprus has with "European Eastern Block" countries a lot of western corporations are using Cyprus for their operations in East European countries.
The important tax and other incentives enjoyed by offshore entities and their employees are as follows:
a. Reduced income tax rate for companies
Limited companies' profits are charged at the rate of 4.25%. In addition, there is not withholding tax on dividends paid by these companies. All expenses incurred for the earning of income as well as annual tax depreciation on fixed assets are allowed as tax deductions.
b. Exemption from exchange controls
Once an entity is given "offshore" status it is not subjected to exchange control restrictions which means that freely transferable foreign currency accounts ( in any currency ) can be kept both in Cyprus and abroad.
c. Reduced income tax rates for foreign employees
Foreign employees working for an offshore company enjoy the following tax incentives:
(a) For services rendered within Cyprus, they are taxed at rates equal to 50% of the normal income tax rates applicable for individuals. The normal income tax rates are as follows:
Chargeable Tax Income Rate £ £ Up to - 5.000 0 5.1 - 8.000 20 cents 5.2 8.001 - 11.000 30 cents 5.3 Over - 11.000 40 cents(b) For services rendered outside Cyprus, they are taxed at rates equal to 10% of the normal income tax rates if their earnings are received outside Cyprus and they are completely exempt from taxation if received in or through Cyprus.
d. Duty free goods
Cars, office and household equipment (excluding office furniture) are free of import duty for offshore entities and their foreign employees.
e. Exemption from social insurance contributions
Offshore entities and their foreign employees are fully exempt from social insurance contributions.
f. Exemption from capital gains tax
Full capital gains tax exemption on capital gains, except on sale of immovable property situated in Cyprus.
g. Estate duty exemption on inheritance of shares in an offshore company.
h. Exemption from stamp duty
Full stamp duty exemption on contracts entered into by offshore entities.
i. Bonded facilities
Full facilities are offered for - bonded warehousing -bonded yards for keeping and maintaining equipment - storing of materials and goods in transit without payment of import duty.
j. Legalisation of documents from Cyprus Chamber of Commerce.
FORMATION OF OFFSHORE COMPANY
The basic steps that our firm will follow in setting up a company are:
a) Obtain approval of company name from the Registrar of Companies.
b) Draft memorandum and articles of association of the Company and submit to the Registrar of Companies together with the necessary documents ( i.e. list of directors and secretary, address of registered office etc. ).
c) Obtain approval from the Central Bank of Cyprus for the issue of shares to non-residents.
The following information is needed to incorporate the company:
a) Proposed share capital. This should be at least C£1.000 (approx. US$2.000).
b) The nature of company's principal activities.
c) Full name, address, occupation and nationality of each proposed shareholder.
d) Number of shares to be held by each proposed shareholder.
e) Proposed company name. Please avoid general names and if possible suggest two or three names in order of preference. The proposed company names should be sent to us by telefax as soon as possible, as obtaining the approval of the company name is the only procedure that delays the registration of an offshore company.
f) Full name, address, occupation and nationality of each proposed director and full name and address of the secretary. It is advisable to appoint at least two directors. There is no necessity to have local directors.
g) Name, address of company secretary and registered office.
h) Bank references as to the financial standing and integrity of each prospective shareholder ( required by Central Bank of Cyprus).
ANNUAL REQUIREMENTS
The company is obliged to file annual audited accounts to the Central Bank of Cyprus and the Income Tax office.
The provisions of the law concerning limited companies in Cyprus are practically identical to those of the U.K. 1948 Act (including requirements for book-keeping, accounting and auditing). Our firm can provide such audit and accountancy services our fees being based on time spent and the level of responsibility required.
Apart from audit and accountancy, our firm could offer its assistance in other areas such as:
a) Formalities in setting up an office
b) Assistance with obtaining the required work permits
c) Assistance with obtaining the required registration for duty free purchases
d) Taxation advice
e) Book keeping and payroll services
f) Recruitment of personnel
g) Company secretarial and directorships
h) General consultancy and other related services
i) Formation of company
j) Applications to the Central Bank for the issue of shares to non-residents
k) Provide registered office
l) Provision of nominee shareholders
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.