Cyprus: International Business Company (IBC)

Last Updated: 4 May 2000

An International Business Company is a legal entity incorporated in Cyprus, that:

  • is owned beneficially by non-residents, either directly or through nominee shareholders
  • performs its business activity exclusively outside Cyprus.

A Cyprus IBC enjoys certain tax and non-tax advantages that make it a very attractive entity for international tax-planning purposes.

The establishment of a Cyprus IBC requires that a specific 2 stage procedure is followed for:

  • obtaining a Central Bank of Cyprus permission
  • incorporating the IBC with the Registrar of Companies

The whole process for the establishment of an IBC, provided that all required documentation is in place takes around 10 working days.

The IBC has to comply with auditing and reporting requirements prescribed by the legislation and professional standards of the regulatory bodies in Cyprus.

The IBC can enjoy duty free status facilities if it operates out of a fully-fledged office in Cyprus and meets specific requirements. The duty free status facilities can be extended to the foreign employees of the IBC working in Cyprus provided that they obtain a work permit on the island.

The operations of an IBC can be performed without the need for a fully-fledged office in Cyprus.

The financial transactions of an IBC can be performed through a bank in Cyprus or a bank in any other country.

The costs of establishing and operating a Cyprus IBC can be classed as follows:

1. Incorporation Costs

One-off cost that depends on the capital of the IBC.

2. Representation Costs:
  • Nominee Shareholders
  • Nominee Directors
  • Company Secretary
  • Registered Office Facility

Annual fee payable on the 1st of January of each year. This fee is time apportioned to 31st December in the year of incorporation.

3. Administration and Accounting

Time based fee.

4. Auditing and Reporting

Time based fee.

5. Tax liability

4.25% on the reported taxable profits.

A detailed breakdown of these costs and of other services together with the application form for registering a Cyprus IBC can be obtained from the web-site on www.aspen.com.cy

Central Bank of Cyprus permit

Under the Exchange Control Law, the Central Bank of Cyprus is the competent authority for the issue of the permit, for the establishment of an international business company in Cyprus.

The Central Bank exercises a strict supervisory function to ensure that the permit to set up an International Business Company is given only to desirable and reputable persons or concerns. All information received by the Central Bank on the proposed beneficial shareholders and the IBC are treated with the utmost of confidentiality.

Bank Reference Letter

In order for the Central Bank to consider a permit application for the establishment of an IBC, each and every one of the proposed beneficial shareholders must submit a bank reference from a reputable bank. A specimen bank reference letter can be downloaded from our web site on www.aspen.com.cy

Conditions of the Central Bank permit

All permits issued by the Central bank contain certain conditions. The usual conditions are the following:

1. Statutory conditions:

  • The business of the IBC shall be confined to activities outside Cyprus.
  • The share capital of the International Business Company must at all times be held beneficially by non-residents whether directly or through nominees.

2. Financial conditions

  • The International Business Company is not entitled to obtain any finance from local sources other than from an International Banking Unit in Cyprus.
  • All local expenses of the International Business Company are to be covered by foreign funds imported from external sources.

3. Reporting conditions

  • Annual audited financial statements and other required information shall be submitted to the Central Bank periodically.
  • Foreign funds imported and converted to local currency shall be reported to the Central Bank periodically.

The permits for International Financial Services Companies incorporate a number of special conditions to the ones listed above.

Incorporating the Cyprus IBC

On obtaining the permission of the Central Bank, a company must be registered with the Registrar of Companies. The Registrar of Companies requires the following:

  • That the name of the company is approved.
  • The memorandum and articles of association are submitted for filling.
  • The particulars of the directors, the company secretary, the registered office address and the shareholders for the corporate documents.

The beneficial shareholders may choose to use nominee shareholders and directors for confidentiality reasons.

The application form for registering a Cyprus IBC, together with explanatory notes can be downloaded from our web site on www.aspen.com.cy.

Information needed for Incorporation

1. Name of the proposed company

The Registrar is unlikely to accept a proposed name if it is similar to the name of an existing company or considered misleading or offensive. It is, therefore, advisable to submit two or three alternatives to the first choice of name, so as to save time and unnecessary exchange of correspondence.

A search can be performed to assess whether a name is used by another entity.

Furthermore, one can choose from the list of the already approved names held by Aspen Consultants(R) . To request a company name search or to receive our list of approved names, please contact us directly.

Where the proposed Cyprus company has a similar name to that of its parent company, the Registrar will require the consent of the parent company for the use of such name. A specimen of the consent letter for the use of the name of the parent company can be downloaded from our web site on www.aspen.com.cy.

2. Objects of the company

The principal objects of the proposed company should be given, describing briefly the main proposed business activities of the company.

3. Share Capital

There is no legal requirement for a minimum share capital either authorised or issued and paid up. However the Central Bank requires a minimum authorised, issued and paid up share capital of C£1,000 (C£1=about US$2). If the company intends to operate a fully-fledged office in Cyprus the issued paid up share capital must be at least C£10,000.

4. Shareholders

There must be at least two shareholders that can be either individuals or companies. The particulars required for each shareholder are:

  • Full name
  • Address
  • Nationality
  • Occupation
  • Number of shares to be held
  • Passport number in the case of individual

Where the proposed company is to be a wholly owned subsidiary of another company, it is usual that all the shares, with the exception of one, are held by the parent company and the remaining one is held by either another company or individual. Should anonymity be required, it can be effected through nominees (local or foreign) holding the shares for the beneficiaries. In such a case permission is required from the Central Bank, which is readily granted.

5. Directors

A minimum of one director is required and there is no maximum. It is advisable though to appoint at least two directors. There is no necessity to have local directors although in most cases it is advisable. The particulars required for each director are:

  • Full name
  • Address
  • Nationality
  • Occupation

6. Company Secretary

The company secretary may be local or foreign but a local secretary is advisable. The particulars required are the same as for directors.

7. Registered Office

The registered office of the IBC must be in Cyprus. This is the place where notices, orders and other official documents can be served upon the company.

8. Bank References

The Central Bank of Cyprus requires a bank reference letter from a reputable bank as to the credit worthiness of the proposed beneficial shareholders. A specimen bank reference letter can be downloaded from this site.

Auditing and Reporting Requirements

Accounting Records

The company law requires that a company maintains proper accounting records with supporting documentation at its registered office in Cyprus.

The accounting profession in Cyprus defines proper accounting records as those maintained in compliance with the International Accounting Standards.

Audited Financial Statements

The company law requires that a company prepares and submits financial statements in accordance with the International Accounting Standards, audited in accordance with the International Standards on Auditing by a Cyprus registered auditor.

The audited financial statements in the reporting language are submitted to the Central Bank of Cyprus and to the tax authorities annually by the 31st December of the year following the company’s year end. If one of the shareholders or directors of the entity is a company then the audited financial statements in Greek are submitted to the Registrar of Companies.

The first reporting period can be up to 18 months from the date of incorporation. Financial statements for a 12-month accounting period have to be prepared annually after that.

Tax Compliance

1 Companies

A company has to submit a preliminary tax assessment for the estimated taxable income for the calendar year by 31st July of that year. The tax liability at 4.25% on the estimated income has to be paid in 3 equal instalments by:

  • 31st July
  • 30th September
  • 31st December

A revision of the estimated taxable income and the resulting tax liability can be submitted by 31st December.

The revised taxable income may only be reduced to an amount for which provisional income tax was already paid, that is the revision cannot result in a refund.

A company has to file an annual tax return together with its audited financial statements with the commissioner of income tax in Cyprus within 12 months from the end of its financial year.

2. Individuals

The company deducts the tax on earnings of individuals employed in Cyprus on a monthly basis. This PAYE tax is payable one month after deduction.

The company submits by the 30th April each year the employer’s return and analysis (IR7) for the employees working in Cyprus.

Each employee working in Cyprus has to submit an income tax return by 30th April following the year of employment.

Returns to the Registrar of Companies

A company has to submit its audited financial statements together with the annual return to the Registrar of Companies.

Privately owned companies are not required to submit audited financial statements to the Registrar of Companies.

The company’s annual return must be dated 14 days after the company’s Annual General Meeting (AGM) and must be filed with the Registrar within 28 days of that date.

The AGM of the company’s shareholders is held 23 days after the date of approval of the financial statements of the company by the directors.

Notice for the following, must be given to the Registrar of Companies within one month after the passing of the relevant resolution:

  • redemption of preference shares,
  • increase in authorised share capital and;
  • issuance of new shares.

Notice for the following changes, must be given to the Registrar of Companies within 14 days of the relevant change:

  • the board of directors,
  • secretary and,
  • registered address,
  • shareholders.

Returns to the Central Bank of Cyprus

Within six months from the end of the financial year, the audited financial statements must be filed with the Central Bank of Cyprus together with a confirmation from the auditors stating that the company has not carried out any transactions with residents other than local payments for administrative purposes.

To receive more information on offshore services or to discuss the particulars of your international tax planning needs please contact the authors.

Duty Free Status facilities

International business companies and their foreign employees are entitled to a number of benefits with regard to the duty free importation of certain goods

To receive more information on the conditions governing the duty free status facilities please contact us directly.

Employment and Residence permits

All foreign individuals wishing to work and reside in Cyprus need a temporary employment and residence permit.

To receive more information on the conditions governing the temporary employment and residence permits please contact us directly.

Operating a Cyprus IBC

The operations of an IBC can be performed without the need for a fully-fledged office in Cyprus.

In the case where nominee directors are used for the establishment of the IBC the beneficial shareholders or the decision makers can be issued with specific Powers of Attorney to enable them to engage the IBC into business activities as prescribed by the Memorandum and Articles of Association.

Aspen Consultantsâ undertake to perform the day-to-day activities of an IBC, including cash disbursements, re-invoicing, payroll preparation, handling of documentary letters of credit, administration and mail forwarding. A list of the day-to-day management services offered is included in the list of our services.

The bank account accounts of a company can be operated by signatories known to the beneficial shareholders.

Banking in Cyprus

The banking system in Cyprus is highly developed and efficient, capable of coping with the ever increasing needs of the business community in a fast growing economy.

Banking arrangements and practices, the range of services available and the methods of management and control, closely follow the British pattern.

The banks operating in Cyprus include:

Local

International

Bank of Cyprus

Barclays Bank PLC

Cyprus Popular Bank

Bank Nationale de Paris

Hellenic Bank

Credit Suisse First Boston

Arab Bank

HSBC investment Bank

Alpha Bank

Societe Generale

National Bank of Greece

UBS

The commercial banks of Cyprus have strong international connections, which enhance their ability to provide banking services on an international level.

There are over 30 international banking units offering services to IBC’s in Cyprus.

The content of this article is intended only to provide general guidelines related to this particular matter. For your specific circumstances, full specialist advice is recommended.

To receive more information on a specific bank and its service or to receive account opening forms please contact us directly.

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Click to Login as an existing user or Register so you can print this article.

 
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