Cyprus: The Benefits Of Establishing A Branch In Cyprus

Last Updated: 21 November 2016
Article by Antonis Paschalides

The worth of establishing a branch in Cyprus

Do you want to increase your company's flexibility and do business in Cyprus in a fast, flexible and easy way? A foreign branch registered in Cyprus can enjoy all the advantages extended to all Cyprus legal entities. The procedure is easy, straight forward and shall contribute towards the growth and development of your company. The corporate environment is ideal and you shall take advantage of E.U Directives and Regulations along with one of the lowest tax rates in the E.U. As long as your company's subsidiary in Cyprus is managed and controlled in Cyprus the advantages shall apply. The many benefits your company shall gain are briefly developed hereunder.

Sections 347 to 353 of the Cyprus Company Law Act apply to:

  1. to all overseas companies, meaning companies incorporated outside Cyprus, which after the commencement of the abovementioned provisions, establish a place of business within Cyprus; and
  2. Companies that have been incorporated outside Cyprus which established a place of business within Cyprus before the commencement of the abovementioned provisions, and continue to have an established place of business within Cyprus at the commencement of these provisions.

It should be emphasized that the establishment of a branch does not amount to the creation of a new legal entity in Cyprus; the entity incorporated abroad simply has a branch and may operate through it for some of its international activities. Even though each branch may have its own managers, the directors of the parent company are ultimately responsible for the activities of its branches.

Advantageous Cyprus corporate tax rates : one of the lowest in the E.U

Any overseas companies have so much to gain from establishing such a company in Cyprus.

  • As long as the management and control of the branch takes place in Cyprus then the profits of the branch are subject to the Cyprus corporate tax rate (12.5 %).
  • The overseas company shall enjoy same tax benefits as Cyprus companies
  • If the management and control of the branch is not in Cyprus, then the profits of the branch are exempted from taxation in Cyprus.
  • Dividends received by a Cypriot holding company are generally exempted from the corporate income tax and in most cases are also exempt from the special defense contribution
  • An ideal business environment with flexible company law regulations

The Cyprus branch as a solution after the Brexit

International companies, which currently maintain their seat in the U.K have during the previous years done so, in order to enjoy the benefits and flexibilities provided by the E.U legislation and/or to have access to the E.U are now considering to relocate to other European countries due to the Brexit. After the exit of the U.K from the European Union such companies will lose this benefit. An interesting option for these companies would be to establish branches of such companies in Cyprus in order to be monitored and controlled in Cyprus and therefore be taxed accordingly and enjoy all the benefits the E.U entails.

Branch can hold property in Cyprus:

An overseas company shall have the same power to hold immovable property in Cyprus as if it were a company incorporated under the Cyprus Company Law Act. In order to enjoy this benefit, it must comply with the obligation to deliver to the Registrar of Companies the documents and particulars mentioned above, in Section 347 of the Law. An overseas company that has gone through alterations of its charter, memorandum and articles or statutes shall, within the prescribed time, deliver to the registrar for the registration a return containing the prescribed particulars of the alteration.

The procedure to establish a branch in Cyprus is relatively easy.

Overseas companies may establish a branch in Cyprus by filing with the Registrar of Companies in Cyprus the following according to s.347:

  1. Written report which provides: (i) name and legal form of the overseas company, as well as the name of the branch, if that is different from the name of the company; (ii) head office and address (postal or other) of the overseas company, as well as the address (postal or other) of the place of business; (iii) purpose and objects of the overseas company; (iv) where applicable, the register abroad of the overseas company, where its basic data has been entered; (v) its subscribed capital where this exists; (vi) where applicable, information in relation to the winding-up of the overseas company, the appointment of liquidators, etc; (vii) in the case of an overseas company of a non-member state of the European Union, the law of the state, governing the company. (vii)In the case of an overseas company of a non-member state of the European Union, the law of the state, governing the company.
  2. Certificate of incorporation of the company (certified) and a certified copy of the memorandum and articles of the company or other instrument constituting or defining the constitution of the company as well as every amendment to the said documents
  3. List of directors and secretary of the company as well as of all the persons which are authorised to represent the company. d. Name and address of one or more persons resident in the Republic authorized to accept on behalf of the company service of process and any notices required to be served on the company.

All the aforementioned documents should be legalized and apostilled in the country of issue and translated into Greek.

Benefit from the exemption from Financial Reporting obligations Under s.350.

Section 350 (1) (a) provides that Every overseas company, which has a branch in the Republic, shall deliver in each financial year to the registrar of companies, copies of: (i) the financial statements; (ii)the directors' report; (iii)and the auditors' report presented at its last general meeting. Fortunately E.U companies shall be exempted from this obligation, by virtue of their status as E.U Member States. "(b) Every company of a member state of the European Union, which, in accordance with the laws of the said state and in harmonisation with the provisions of Directives of the European Union No. 78/660/EEC, 83/349/EEC and 84/253/EEC is exempt, in whole or in part of the above- mentioned obligations, shall be exempt from the aforementioned obligation". Such exempted companies must deliver to the Registrar a certificate signed by a director and the secretary of the Company stating that it is an exempt company and the law that provides for such exemption. Furthermore a statement from the relevant authority of the home state providing that the said company is exempted pursuant to the provisions of the said law will also be required. If any overseas company fails to comply with any of the foregoing provisions of this Part the company, and every officer or agent of the company who knowingly and wilfully authorises or permits the default, shall be liable to a fine not exceeding four 127 euros, or, in the case of a continuing offence, 85 euros for every day during which the default continues.

Considering the above an overseas company whether registered in the E.U or in any other country in the world can only benefit, from deciding to follow the route of establishing an overseas branch in Cyprus. The high quality of corporate and legal services, the low corporate tax rate and favorable legislative foundations for such a move are some of the many advantages your company shall gain.

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.

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