As from 28.7.2006, the Companies Law Cap.113 (the "Law") has been amended and the re-domiciliation of foreign companies to Cyprus is permitted, as per the provisions of the Law.
Foreign companies that are established and operating abroad that consider changing their seat, have the choice to re-domicile to Cyprus and continue their operations uninterrupted as a Cyprus registered company and benefit from the advantages Cyprus, as a European jurisdiction, has to offer.
The purpose of this brochure is to provide a summary as to why a foreign company may consider moving its seat to Cyprus and the procedure of re-domiciliation that needs to be followed, as per the Law.
B. WHY RE-DOMICILE YOUR FOREIGN COMPANY TO CYPRUS
Cyprus' services-oriented economy, with years of experience in servicing international clients, is one of the top business centres in Europe. International clients can benefit from the skills and knowhow obtained from lawyers and accountants from their many years of practice in the services sector.
Cyprus' legal system is based on English common law, one of the most reliable and respectable legal systems worldwide.
The Cyprus Tax System has evolved to comply with all EU and OECD BEPS requirements while still maintaining its attractiveness. The corporate tax rate is set at 12.5% on net profits, however, specific types of income are fully exempt from taxation, such as:
- dividend income
- profit from sale of shares
- foreign exchange differences (unless a company is involved with the trading in foreign currencies or foreign currency derivatives).
In addition, Cyprus does not deduct any withholding taxes on the payment of the following types of income from Cyprus to any foreign person:
Further, Cyprus introduced the Notional Interest Deduction (NID) on new capital, based on which there is a notional recognition of a cost on the capital introduced and this notional cost can reduce the taxable base of the company. NID is restricted to a maximum of 80% of the taxable income generated by the new capital introduced into the company.
In addition, Cyprus has concluded over 60 tax treaties which is of high economic and political importance and strengthen Cyprus as an international business centre.
Therefore, from all perspectives, there are numerous incentives for businesses to seriously consider re-domiciling to Cyprus.
C. PROCEDURE FOR RE-DOMICILIATION OF FOREIGN COMPANIES TO CYPRUS
- Application for re-domiciliation to Cyprus
A foreign company registered in a country which allows re-domiciliation and which company's Memorandum and Articles of Association provide for the possibility of re-domiciliation, may apply to the Registrar of Companies in Cyprus to be registered in Cyprus as a continuing company pursuant to the provisions of the Companies Law Cap 113.
- Necessary documents to be filed with the Cyprus Registrar
The application must be submitted together with the following documents:-
- Resolution by the Shareholders or a similar document issued by the appropriate body according to the laws of the foreign country, authorizing the foreign company to get registered in Cyprus as a continued legal body. This resolution must be issued in accordance with the laws of the foreign country and must be made apostil.
- Notification letter (official notice) to the Commercial Register of the country of incorporation about the intention of the company to be re-domiciled to Cyprus.
- The new Memorandum and Articles (M&A) of the company which M&A must meet the requirements of the Cyprus laws.
- Certificate of good standing duly made apostil issued by the appropriate foreign authority;
- An affidavit made by a director duly authorized by the board of directors of the foreign company confirming the following: -
(a) The current company name of the foreign company and the name under which it will continue its existence in Cyprus; An application must be filed with the Registrar of Companies to receive approval of the desired name; The application can be for the same company name as the foreign company was initially registered;
(b) The country of Jurisdiction where the foreign company is registered;
(c) Date of registration of the foreign company;
(d) The resolution specified above authorizing the registration and continuation of the existence of the Foreign Company in Cyprus;
(e) That the foreign company gave a notification letter (official notice) according to the laws of the country of jurisdiction as to its decision to be re-domiciled to Cyprus. Evidence of such notice must be attached and the relevant letter also;
(f) That no criminal or administrative procedures have been commenced against the foreign company for infringement of the law of the country of registration
- Affidavit as to solvency by a duly authorized director of the foreign company confirming the financial good standing and solvency of the foreign company. Relevant declaration to be signed and the signatories to declare that they do not know of any facts that may impair the solvency of the foreign company for the next 12 months from the application.
- List of directors and secretary and/or the managers of the foreign company as the case may be;
- List of the shareholders / members of the foreign company;
- Legal Opinion to be issued by a lawyer / Notary in the country of incorporation confirming among others that:
(a) The country of foreign jurisdiction allows such an application for re - domiciliation;
(b) The proper number of shareholders or other necessary persons as defined by the foreign law have given their consent for this application.
A director or the management body of the foreign company providing false declaration or making a false declaration as to the solvency of the foreign company, are liable to a crime, and in case of conviction are liable to imprisonment up to 1 year and a fine up to Euro 34.172,00.
- Licensed activities
Companies, which offer licensed activities under certain provisions of the law in their jurisdiction and for which similar licenses are required in Cyprus, must produce relevant consent for their re-domiciliation by the proper authorities of their country.
Any foreign company which will undertake any activity for which a license is required in Cyprus, must obtain such a license according to the requirements of Cyprus Law (Such companies are among others, Financial Services Companies / Insurance Companies / Banking Institutions).
- Public Companies
In case the foreign company is a public company, then the following must be produced in addition to the above: -
- The prospectus of the foreign company, once the shares have been offered to the public;
- If it is listed in any Stock Exchange, evidence of consent of the Foreign Stock Exchange allowing re-domiciliation in Cyprus must be provided;
- List of present shareholders duly certified.
- Registration in the Republic
Once the Registrar is satisfied that the documents submitted as above specified are in accordance with the law, temporarily deposits the relevant documents and certifies that the foreign company is temporarily registered as a continued entity in the Republic as from the date of such registration.
It will issue the Temporary Certificate of Continuation of the Company in Cyprus.
If the name of the foreign company is according to the opinion of the Cyprus Registrar confusing or misleading in relation to any other name already registered, the Registrar will request the amendment of the name before registration.
- Legal consequences of temporary registration
The foreign company as from the date of issuing of the temporary registration:-
- Is considered as a legal person duly incorporated according to the Laws of Cyprus and that is temporarily registered in the Republic for the purpose of the Companies' Law Cap 113;
- Has the same liabilities and is eligible to exercise all powers that registered companies have according to the Laws of Cyprus;
- The constituent document of amendment is considered as the Memorandum of the company and where applicable as its the Articles of Association.
- The registration of the foreign company is not lawful and is void if it is done:-
(a) For the purpose of establishing a new legal entity;
(b) To damage or affect the continuance of the foreign company as a legal body;
(c) To affect the property of the foreign company and the way this company will maintain its assets, rights and obligations;
(d) To render ineffective any legal or other procedures filed or to be filed against the foreign company;
(e) To acquit or prohibit from any conviction, judgment, opinion, debt, order or liability against the Foreign Company or its officials or shareholders.
- Time Limit
Within 6 months period form the issuing of the temporary registration certificate, the foreign company must present to the Cyprus Registrar evidence that it has been stopped from being a company registered in the country of initial incorporation and or that its registration in the foreign country has been cancelled. Usually this document is called Certificate of Discontinuance which must be provided duly made apostil.
The company MUST NOT be removed / cancelled from the foreign registry before the time the Cyprus Registrar issues the Temporary Certificate of Continuation. As at this time it must be in full and proper existence.
The application to cancel its registration in the foreign registry must be made ONLY after the Temporary Certificate of Continuation is issued in Cyprus.
- Production of evidence of deletion from previous registry
In case the above evidence showing that the foreign company has been stopped from being a company registered in the foreign jurisdiction is not submitted, then the Cyprus Registrar may: -
- Delete the name of the foreign company from the registry and advise the country of relevant jurisdiction accordingly;
- Give three months extension to present the necessary documents to his satisfaction. No other extension can be given.
- Final Certificate of Continuation
Once the above document – certificate of discontinuance - is presented evidencing that the foreign company has stopped to be a company registered in the country of initial incorporation, (cancelled from being registered abroad), the Cyprus Registrar issues the final certificate of continuation, which certifies that the foreign company has been registered in the Republic.
- Cases where applications by foreign companies to be re-domiciled to Cyprus are rejected
- When dissolution proceedings have been started against the foreign company;
- A liquidator or receiver or special administrator of its property has been appointed;
- An order or judgment exists limiting the rights of its creditors;
- Procedures have been started for infringement of the law of its jurisdiction.
- LANGUAGE OF DOCUMENTS
Whenever documents are needed to be presented with the Cyprus registrar of companies these must be presented in Greek language or in a certified translation in the Greek language.
This publication has been prepared as a general guide and for information purposes only. It is not a substitution for professional advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case. No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.
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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.