1.1 Definition and environment

An international business entity in Cyprus can take the form of a company, a partnership or a branch of a foreign entity. It is required to satisfy the following two basic conditions:

  • the entity registered in Cyprus must belong, directly or indirectly, exclusively to aliens (in this connection the term aliens includes also persons of Cypriot origin living abroad)
  • the income of the entity must be derived from sources outside Cyprus

This article describes the registration procedures relating to international business companies (IBCs) only. The use of international business branches or partnerships may also be very advantageous in certain circumstances and interested persons should seek information.

1.2 Non-resident Status

The formation of an IBC in Cyprus requires the prior permit of the Central Bank of Cyprus, the main regulative authority for international business in Cyprus.

In order to grant such status the Central Bank requires, for each shareholder, a reference letter from a bank outside Cyprus, normally in the country of residence of the shareholder. The reference letter may also be from a reputable professional firm or institution.

All information given to the Central Bank of Cyprus is strictly confidential.

1.3.Double Tax Treaties

Cyprus has signed treaties for the avoidance of double taxation with 26 countries. This is a very important advantage for Cyprus, when compared with alternative international business centres, as the provisions of the DTTs can be used advantageously in international tax planning. Cyprus has concluded double tax treaties with the following countries:

1. Austria

14. Italy

2. Bulgaria

15. Kuwait

3. Canada

16. Malta

4. China

17. Norway

5. Czech Republic

18. Poland

6. Denmark

19. Romania

7. Egypt

20. Slovakia

8. France

21. Sweden

9. Germany

22. Syria

10. Greece

23. United Kingdom

11. Hungary

24. United States

12. India

25. USSR (Russia and most other CIS)

13. Ireland

26. Yugoslavia

A treaty with Belgium has been signed and is awaiting ratification.

A treaty with Finland is awaiting signature. The treaty with Norway is being renegotiated.

The treaty with Russia, which was considered as extremely advantageous for Cyprus IBCs investing in Russia, has been re-negotiated recently and the new one retains the strong comparative advantages for Cyprus, establishing the island as the gateway for western investors into Russia.

Out of all the treaties concluded by Cyprus, only the treaties with Canada, France, U.K. and USA exclude to some extent the use of the Cyprus international business entities. However, even these treaties can be used advantageously with some creative and careful tax planning.

This rare combination of the international business incentives with the large number of DTTs make Cyprus very interesting for international tax planning.


2.1 Legal Status

The IBC is registered in Cyprus as a company with limited liability (limited by shares) under the provisions of the Cyprus Companies Law. In general the Cyprus legal system is modelled on the English law, and the Cyprus Companies Law is very similar to the United Kingdom Companies Act (in fact, it is completely based on the U.K. Companies Act 1948). Under the Cyprus Companies Law it is possible to have private or public companies. In practice, IBCs are invariably private companies because of the simplified procedures involved.

2.2 Taxation

The profits of a Cyprus IBC are taxed at a reduced rate of 4.25%. There is no additional tax on dividends paid out of the company's profit, either on the company or on the recipient. Withholding taxes on income received from foreign countries is treated as a tax credit in Cyprus.

Expatriate (i.e. foreign) employees working for IBCs are taxed at zero or reduced rates as follows:

Employees working outside Cyprus and paid through:


Tax Rates %

A Cyprus bank account


A bank account outside Cyprus

from 0 to 4

Employees working in Cyprus

from 0 to 20

Employees working partly in Cyprus and partly abroad pay taxes on a combined basis at the above rates.

2.3. Formation Of The Ibc

2.3.1 Company name

A name chosen by the persons wishing to register the company must be submitted to the Registrar of Companies for approval. Names which are not desirable by the Registrar should be avoided and in this respect it should be mentioned that the Registrar is very strict. The Registrar will normally answer within five working days. To save time, it is possible to use names which have already been approved by the Registrar.

2.3.2. Powers of the company

These should be wide enough to cover the whole spectrum of activities into which, it is envisaged, the company will engage. Details should be furnished to enable the appropriate drafting of the objects clause of the Memorandum of Association.

2.3.3 Authorised Share Capital

The minimum authorised and issued share capital for an IBC is CYP 1.000 (approximately USD 2.000). If the company wishes to have an administrative office in Cyprus, the minimum authorised and issued share capital is CYP 10.000. There is no upper limit for the authorised share capital but larger amounts result in additional (one-off) payments of duty to the Government upon incorporation.

2.3.4 Shareholders

(i) General

A minimum number of two shareholders (individuals or corporations) is required for the incorporation and continued existence of a Cyprus private company. The shareholders must either be "non-resident" aliens (whether holding the shares beneficially or in trust) or resident Cypriots acting as nominees (or trustees) for "non-resident" beneficiaries. It should be noted that provided the registered shareholders are at least two, the beneficial shareholder may be one or more. Each beneficial shareholder must be approved by the Central Bank of Cyprus following an application accompanied by a bank reference letter. Similarly all transfers of the beneficial ownership of shares in the IBC must be approved by the Central Bank. All information submitted to the Central Bank is treated as strictly confidential.

(ii) Anonymity and Confidentiality of Beneficial Shareholders

This is achieved by having Cypriot nominee (or trustee) shareholders. In this case, the name of the beneficial owner is disclosed in confidence to the Central Bank of Cyprus on applying for "non-resident" status.

This is also procedurally convenient as it does not require the signatures of the beneficial shareholders who may be away from Cyprus. Another way of securing full anonymity is by using as beneficial shareholders, companies registered abroad. Note, however, that if the IBC will have an administrative office in Cyprus then the Central Bank normally insists on knowing the ultimate beneficial shareholders.

Bearer shares are not possible in the case of Cyprus private companies.

(iii) Security of beneficial shareholders

The documentation given to the beneficial owner to secure his ownership of the shares comprises of the following:

1. The Trust Deed;

2. The original Share Certificates issued in the names of the nominee shareholders;

3. Instruments of Transfer of Shares executed by the nominees in blank.

2.3.5 Directors

The Cyprus IBC is managed by its directors. The minimum number of directors is one and there is no maximum number. The directors of the company may be of any nationality (including Cypriot). The following information relating to each director is filed at the Cyprus Registrar of Companies and is available to the public:

  • Name
  • Nationality
  • Address
  • Profession

Where anonymity and confidentiality is of importance the appointment of nominee directors is essential.

Resolutions by the directors may be taken in one of two ways:

(i) at Board Meetings duly convened and held, or

(ii) by a Circular Resolution signed by all the Directors.

2.3.6 Secretary

Every Cyprus company must have a secretary. The secretary is an officer of the company who has certain legal responsibilities. As in the case of the directors, certain details relating the secretary must be filed at the Registrar and are therefore available to the public.

2.3.7 Registered Office

This must be situated in Cyprus. Normally it is located at the offices of the local professionals who administer the company, unless the company has a more substantial presence on the island by operating its own offices.

2.3.8 Procedure for incorporation

Following the granting of the necessary Permit by the Central Bank of Cyprus (normally within about five days from the submission of the application), the two Cypriot nominee shareholders will normally subscribe the Memorandum and Articles of Association. If desired they can later transfer their subscription shares to the actual shareholders. The necessary forms and the Memorandum and Articles of Association are submitted to the Registrar of Companies and the company is soon incorporated.

The following certificates are then obtained from the Registrar of Companies:

(i) Certificate of Incorporation

(ii) Certificate of Registered Office

(iii) Certificate of Directors and Secretary

(iv) Certificate of Shareholders

It is also possible to obtain certified copies of the Memorandum and Articles of Association.

Following the issue of the Certificate of Incorporation by the Registrar of Companies the company may commence its activities forthwith. The whole procedure should normally be completed within about two weeks, although it could be done considerably faster if certain practical time saving methods are used.


The advantages which Cyprus offers to IBCs and their expatriate employees are of two main categories. Those which are inherent in the nature of the island and its population (the inherent advantages) and those which are the result of specifically designed legal and regulatory measures taken by the Government of Cyprus (the legal advantages).

3.1 Inherent Advantages Of Cyprus

1. Central geographic location, at the meeting point of three continents

2. Good air connections

3. Excellent telecommunications

4. Educated and well trained population

5. High standard of professional services

6. Excellent residential and office accommodation

7. Reasonably low cost of living

8. Crime free society

9. Good schools from elementary to University level

3.2. Legal Advantages Of Cyprus


1. Zero or very low taxation of income

2. No withholding tax on dividends

3. All revenue expenses incurred for the earning of income as well as annual allowances on fixed assets, are allowed as a tax deduction

4. Full estate duty exemption on inheritance of shares in an IBC

5. No capital gains tax, except on sale of immovable property situated in Cyprus

6. Full exemption from local Social Insurance Scheme for foreign employees

7. Full stamp duty exemption on contracts

8. Zero or low income tax for expatriate employees

9. Duty-free facilities

10. The large number of Double Taxation Treaties with opportunities for advantageous tax planning


Cash can be held in Cyprus or anywhere in the world and is freely convertible and transferable.


The owners may keep their identity confidential if this is desired.


Residence and work permits for foreign employees and their families can be readily obtained.


Non Cypriots may easily acquire property in Cyprus.


4. 1 For all Cyprus IBCs

(i) Opening and operation of bank accounts

Cyprus has excellent local and international banks providing a full range of banking services at a high standard. Bank accounts in all the main currencies can be opened and operated very easily. All the banks in Cyprus accept instructions by telefax, provided a special indemnity form has been signed by the company. This makes the operation of the bank account very easy and fast. Furthermore, for security purposes, test key arrangements can be made with the bank. Some banks have also introduced internet banking facilities.

(ii) Business address and office facilities

Very often, IBCs without their own administrative office in Cyprus, need to have an address on their stationery, where all correspondence can be addressed. Normally their local consultants provide this facility. All correspondence and/or telefaxes are collected, brought to the attention of the client and acted upon in accordance with his instructions.

Each entity has its own administrative files which include all the entity's records and are available to the client at any time.

Furthermore, it is not unusual for the client to visit Cyprus either alone or accompanied by other business associates. They may then use the office facilities of their local firm of consultants.

(iii) Management information

Persons setting up Cyprus IBCs very often need to be informed on matters relating to their business. Such information could be:

  • operational, e.g. details of orders received etc.
  • legal
  • accounting

Their local professional consultants can provide the regular information reports needed to ensure the smooth running of the company.

5.2.For Cyprus IBCs with their own administrative office on the island

(i) Applications for work permits for non-Cypriot employees

These are normally obtained relatively easily. The first one is normally for a period of two years and then it is renewed for periods of three years. The procedure for obtaining the first work permit of expatriate employees differs according to whether the employee is classified as an executive or a non-executive.

Foreign employees working in Cyprus have to satisfy certain conditions in order to ensure renewal of their work permit. The main conditions are the following:

(a) Clear all income tax obligations and obtain a relevant certificate from the tax authorities

(b) Use a special account, known as the Local Disbursements Account, to pay their local expenses. When applying for renewal of the work permit the expatriate employee must present a certificate from his bankers showing the amount of his local expenses.

(c) The Central Bank of Cyprus must give a letter to the immigration authorities recommending the renewal of the work permit.

The procedure for obtaining and renewing work permits may seem difficult for the inexperienced and help is needed from specialist consultants. It is strongly advised that a very close relationship is maintained between the IBC (and its employees) and their Cypriot consultants. This is especially important in the first year of setting up the business in Cyprus when the newcomers are still unfamiliar with local regulations and practices.

(ii) Obtaining office and residential accommodation

There are no restrictions as to the size or location of the Cyprus office of the IBC. This should satisfy the following conditions:

(a) located in suitable distinct premises not part of a dwelling house

(b) equipped with normal office and telecommunication facilities

(c) staffed with full time personnel.

Good office facilities at low prices are available in all the main towns of Cyprus. Residential accommodation in Cyprus is of a high standard and not expensive. As stated above, it should not be part of the IBC's office but other than this there are no restrictions or conditions.

(iii) Obtaining duty-free permits

IBCs which have their own offices in Cyprus can apply and obtain relief from import duty for most office equipment. In addition, their qualifying expatriate staff can obtain relief from import duty on their household effects and on their cars.


6. 1 Books and Records

Proper books of account must be kept either at the company's registered office or at any place designated by the directors. The books and records of a company are not open to inspection by anyone other than the directors and auditors. The Inland Revenue can, however, request the production of any records in the course of examination of the accounts for tax purposes.

The accounting records must show all sums of money received and expended, all sales and purchases and the company's assets and liabilities.

Other books required to be kept are the following:

  • register of members
  • register of directors and secretary
  • register of directors' interests (in shares of the company)
  • register of debentures and charges
  • minutes of directors' and shareholders' meetings.

Records or documents which are required to be filed with the Registrar of Companies must be in Greek or accompanied by a certified translation in Greek if maintained in any other language. Other documents and records may be maintained in Greek or any other language. The accounting records may be kept in any foreign currency.

6. 2 Financial Statements

Audited Financial Statements must be prepared by all Cyprus incorporated companies once a year and presented at the shareholders' annual general meeting. The accounting period should be for twelve months ending on any date decided upon by the directors. Financial Statements are prepared under the historical cost convention and should comply with the Companies Law, Cap. 113 and with International Accounting Standards. The Accounting year-end is deemed to be 31 December, unless notice of another date is given.

6.3 Annual Returns

IBCs are required to file with the Registrar of Companies an annual return giving details of the company's capital structure, mortgage particulars, and particulars of shareholders, directors and secretary. They are not, however, required to file a copy of their audited financial statements.

The information filed with the Registrar of Companies is available to the public.

6.4 Audit of Financial Statements

The Financial Statements have to be audited by an independent auditor or auditors who are required to express an opinion on those statements. The matters required to be stated in the auditors' report are:

(a)whether they have obtained all the information and explanations which, in their opinion, were necessary for the purpose of their audit,

(b)whether, in their opinion, proper books of account have been kept by the company,

(c)whether the financial statements (balance sheet and profit and loss account) are in agreement with the books of account, and

(d)whether, in their opinion, the said accounts give the information required by law, and give a true and fair view of the state of the company's affairs as at the date of the balance sheet and the profit or loss for the financial year ended on the balance sheet date.

6. 5 Control by the Central Bank of Cyprus

The annual audited financial statements of all Cyprus IBCs must be sent to the Central Bank of Cyprus. Furthermore, the auditors must give assurances to the Central Bank that the company has complied with all the regulations and conditions imposed by the Central Bank. The auditors of IBCs which maintain an administrative office in Cyprus are also required to submit to the Central Bank, in addition to the audited financial statements, a "Confidential Annual Return" which provides some additional information relating to the IBC's activities in Cyprus. This information may enhance a company's status if it shows a strong position according to the criteria used by the Central Bank.

6. 6 Control by the Inland Revenue Department

A copy of the audited financial statements of the company, together with relevant forms and the taxation computations must be sent to the Department of Inland Revenue where the appropriate income tax is paid.


A Cyprus IBC can be a very useful tool in international business and tax planning. The general regulative environment is such that it provides excellent facilities for reputable international business, while ensuring that any abuses of the privileges given to IBCs are minimised or eliminated.

The advantages of Cyprus itself and the incentives offered by its Government to IBCs make it very attractive to many foreign businessmen. A great number of these foreign businessmen have found out for themselves that Cyprus, in addition to being an excellent tourist destination is also a very successful and well established centre for international business. In other words it achieves the perfect mixture of BUSINESS WITH PLEASURE.

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 from a local lawyer or accountant.

For further information contact us.