1. Introduction

The Cyprus Company Law, Chapter 113, is based on the English Companies Act of 1948. Therefore the legal system and return forms are identical to those in the UK.

2. International Business Companies

2.1 Requirements

Shareholders of international business companies should be non-residents and under the Exchange Control Law, the Central

Bank of Cyprus is responsible for issuing permits to such non-residents wishing to acquire equity in legal entities in Cyprus.

2.1.1 Central Bank permit

Non-residents wishing to acquire any share or participation in a Cypriot legal entity should apply through an advocate practising in Cyprus. The advocate will submit to the Central Bank an application containing the requisite information, i.e. share capital, economic activities, etc.

Also, bank references for the non-resident beneficial owners should be provided.

2.1.2 Registration

Upon receipt of the necessary permit, the non-residents’ share or participation must be registered in their names or in the names of their nominees at the department of the Registrar of Companies.

2.2 Confidentiality

It is possible to obtain absolute secrecy of the identity of the shareholders, either through trust fiduciary agreements or through nominees or through other companies. Business entities with non-resident participation are required to prepare and submit to the Central Bank of Cyprus and the Department of Inland Revenue annual financial statements audited by accountants practising on the Island.

2.3 Administration

The international business company may only carry on business activities outside Cyprus, whilst it may well have offices and/or have its administration in Cyprus and have local and/or expatriate employees.

2.4 Registered office

It is necessary for all Cypriot international business companies to have a registered office in Cyprus.

2.5 Objects

There is no restriction as to the type or objects and scope of the international business company. The Memorandum may be changed following an application to the court and having obtained the relevant court order, whilst the articles may be changed by special resolution.

2.6 Directors

It is not necessary for directors to hold qualification shares.

The minimum number of directors is one (natural or corporate) but in such a case he cannot be also the secretary of the company.

Alternate directors may be appointed. The minimum number of shareholders is two, natural or corporate. The annual general meeting and/or any extraordinary general meeting of the shareholders may be held outside Cyprus and proxies are permitted.

2.7 Meetings

Also meetings of the board of directors may be held outside Cyprus. A company must maintain a register of members, directors, secretaries, mortgage or charges and other statutory books.

3. Branches of Foreign Entities

3.1 The Law

A branch of a foreign company may be registered in Cyprus under section 347 of the Companies Law, Chapter 113.

3.2 Requirements

Overseas companies may establish a branch in Cyprus provided they obtain Central Bank permission and file with the Registrar, within one month of such establishment.

With regard to the certification of the above documents, experience has shown that the documents must be legalised and "apostilled" in the country of origin. Alternatively, legalisation is required both by a notary public and the consul of the Republic of Cyprus in that country.

3.3 Central Bank approval

As previously stated a foreign company carrying on business in Cyprus through a branch requires prior exchange control approval of the Central Bank of Cyprus which can be obtained in the manner already explained above in paragraph 2.2. This approval is readily obtained if the business of the branch is of a pioneering nature or introduces expertise or technology not available in Cyprus. Also, for tax planning, the registration of a branch is possible without difficulty.

3.4 Branch documents

As in the case of international business companies it is advisable that the management of the branch and the overseas company are provided, upon the registration of the branch, with a full set of documents, properly legalised and translated, where appropriate, into English or any other language. In the case of a branch such documents normally comprise:

  • certificate of registration
  • the charter of the overseas company or other instrument defining its constitution
  • list of directors and secretary of the company name of at least one person resident in Cyprus authorised to accept on behalf of the company any notices required to be served on the company
  • any other information and documentation pertaining to the activities of the branch and to the date of its establishment.

3.5 Effect of registration

By registering a Cyprus branch of an overseas company no new incorporation is effected since there is an already incorporated company abroad and which is simply establishing a place of business in Cyprus.

The name of the branch is the same with the name of the overseas company.

3.6 Annual Financial Statements

The branch must file with the Registrar of Companies, a certified copy of the balance sheet and profit and loss account of the parent corporation, translated into Greek.

4. Partnership

4.1 The Law

The law governing partnerships is the Partnership and Business Names Law, Cap. 116, which is identical to its English counterpart.

4.2 Registration procedure

The registration of a partnership in Cyprus is effected by submitting a return to the Registrar containing the name, object and duration of the partnership, as well as the names and addresses of the partners and their authority to bind the partnership.

4.3 Definition

The legal definition of a partnership is the relationship between two or more persons carrying on business in common with a view to profit. Joint ownership, however, does not amount to partnership. There are two types of partnerships as described below.

4.4 General partnership

With a few exceptions, any form of business may be carried on in Cyprus by a partnership. A partnership may not, however, consist of more than 20 persons. There is no requirement that all or any of the partners be Cypriot nationals and a corporate body may be a partner.

4.5 Partners and Liability

In general, the partners are jointly liable to the creditors for the debts and obligations of the partnership firm, and each of the partners is also firm not satisfied by the partnership assets. Their rights and obligations are governed by the partnership agreement personally liable for all the debts of the and by the above law.

4.6 Limited partnership

The law also provides for a limited partnership with one or more general partners, who manage the firm’s business and have unlimited liability , and one or more limited partners who invest a fixed amount of capital in the firm and are not liable for its debts and obligations beyond the amount of the capital. Limited partnerships are not common.


1. Tax Exemptions

Some of the more significant tax and other advantages available exclusively to international entities and their foreign employees are as follows:

1.1 Reduced income tax rate

  • A Cyprus international business company is subject to income tax at the rate of 4,25% on its profits regardless of where the management and control of the company is exercised. (The normal rate for onshore companies is 20% of net assessable income up to CYP40.000 and 25% for increase in excess of CYP40.000).
  • A Cyprus international branch is subject to income tax at the rate of 4,25% on its profits if managed and controlled in Cyprus. The international branch is exempt from tax if management and control is outside Cyprus.
  • An international partnership as well as its partners are totally tax exempt.

1.2 Capital gains tax

An international entity is not subject to any capital gains tax except on gains arising from the disposal of immovable property held in Cyprus.

1.3 Reduced income tax rates for foreign employees

Expatriate employees working for international entities are taxed at zero or reduced rates. These rates are as follows:

Tax rates %

Working outside Cyprus and paid through:

Bank account in Cyprus

Bank account outside Cyprus:


0 - 4

Working in Cyprus:

0 - 20

Working partly in and partly outside Combination Cyprus:

of above rates

2 Tax Treaties

The existence of double tax treaties combined with the low tax paid by international entities offer tremendous possibilities for international tax planning through Cyprus in view of the fact that:

  • Any tax paid in a country with which Cyprus has a treaty is deducted from the Cyprus tax payable on the same income; and
  • Cyprus does not impose any withholding tax on dividends, interest and royalties paid by Cyprus international business companies.

2.1 Eastern Europe

It should be noted that Cyprus is one of the few countries in the world that has concluded tax treaties with all Eastern European countries. As a result of the recent liberalization in Eastern Europe, the importance of these treaties in international tax planning has been enhanced.

3 Duty-free benefits

International entities and their expatriate employees are allowed to import into Cyprus, or buy in Cyprus duty free cars, office equipment and domestic appliances (except furniture and air conditioning equipment).

4 VAT exemptions

International entities are exempt from VAT on their trading activities.

Furthermore they do not pay VAT on telecommunications services and on goods eligible to be purchased duty-free.

5 Other tax exemptions

  • No withholding tax is payable on dividends, interest and royalty payments
  • Annual capital allowances and all expenses incurred for the earning of income are allowed as deductions for tax purposes
  • Shares in international business companies inherited in Cyprus are exempt from estate duty
  • Full tax exemption of income derived by way of interest on foreign capital imported into Cyprus and deposited with banks operating in Cyprus
  • International entities are exempt from stamp duty on any instrument relating to their normal trading activities
  • International entities are exempt from special defence contribution
  • International entities are fully exempt from local social insurance schemes in respect of their foreign employees.

6 Other advantages

  • There are no exchange control restrictions on international entities and their expatriate employees can maintain bank accounts in any currency anywhere in the world
  • Housing and office accommodation are easily available at reasonable prices
  • The professional and management services offered in Cyprus are of a very high standard
  • Foreign employees of international entities and their family members can secure work and residence permits
  • Details of beneficial owners are confidentially disclosed at the Central Bank only and anonymity is therefore assured
  • International business companies and their expatriate employees are allowed to purchase immovable property in Cyprus for their own use (office premises) or their residence (subject to obtaining the relevant Council of Ministers’ approval).


1 Introduction

An international business company in Cyprus may perform a wide range of activities the most common of which are set out below:

2 Trading Companies

There is very wide scope for the use of such companies in Cyprus, particularly in conjunction with trading activities in the region. This is indicated by the numerous international trading companies in Cyprus used by persons and entities of various nationalities. Such companies can be used for the export of goods and services from any country to any destination and for transit trade activities in combination with the operation of bonded warehouses and the free trade zones.

3 Headquarter Companies

Cyprus offers ideal conditions for the location of regional management and administrative centers of multinational companies throughout the world with interests in the Middle East, North Africa and Eastern Europe.

4 Holding and Investment Companies

In view of the nil or low withholding tax rates on interest and dividends provided for in the Cyprus double tax treaties, such companies may often be used very advantageously to extract income from treaty countries. An international holding company can be the parent for companies registered abroad as well as Cyprus registered international business companies.

5 Service Companies

These may provide services such as sales promotion, accounting functions, provision of labor etc. They often employ expatriate staff, which benefit from double tax treaty provisions, by paying tax in Cyprus at low rates, thus avoiding the high tax rates in their home country.

6 Construction and Engineering Companies

Cyprus is an ideal location for international construction and engineering companies due to the favorable tax treatment afforded to them and the existence of the Cyprus double tax treaties. Foreign contractors or engineers from a foreign country may avoid paying tax in a Cyprus treaty country provided the project does not exceed the duration specified in the respective tax treaty.

7 Finance Companies:

Such companies may take advantage of the Cyprus double tax treaties by providing loans in treaty or other countries where withholding tax on interest is low or nil.

8 Royalty Companies

Due to the low withholding tax rates for royalties provided in most of the Cyprus double tax treaties, establishing a royalty company in Cyprus can be a very attractive proposition.

9 Trusts

The income of an international trust is not taxable in Cyprus and beneficial owners can remain anonymous. Trust and fund management companies may be set up for the management of trusts, pension funds and investments and can benefit from the high standard of legal, accounting and banking services available on the island.

10 Printing and Publishing Companies

Cyprus has developed into a regional publishing, printing and distribution center mainly due to its low cost, high quality printing services and its excellent telecommunications system. These advantages together with the tax incentives offered, have led to the establishment in Cyprus of many international business companies engaged in the printing and type-setting of books and periodicals for sale and distribution outside the Republic.

11 Real Estate Companies

Such companies can be used very advantageously for dealings in property, especially in conjunction with the Cyprus double tax treaties. They can be of special interest for real estate investments in Sweden, Denmark, France, the UK and all Central and Eastern European countries.

12 Employment Companies

An international employment company can be used to substantially mitigate the tax paid by expatriates employed outside their home country.

13 Shipping Companies

The establishment of an open ship Registry, as well as other incentives provided by the government, have been important factors in the development of the island as a maritime center in the region.

14 International banking units (IBUs)

IBUs and their foreign employees enjoy the same tax advantages as the numerous international trading and investment companies already established on the island.

15 Captive and General Insurance Companies

During the past decade Cyprus has developed into a very attractive center for the establishment of international insurance and reinsurance companies intending to transact insurance and reinsurance business internationally and especially in the Mediterranean, Eastern Europe and the Middle East.

Due to tax incentives offered, special insurance law exemptions, swift registration procedures, low running costs and locally available expertise, Cyprus is especially suitable for the establishment of an international captive insurance company.


1. Introduction

The success of the Cyprus’ government policy and the incentives offered in encouraging shipping activity on the island is reflected in its rapid development in recent years. The popularity of the island for the establishment of legal entities by foreign shipowners and the number of foreign ships flying the Cypriot flag has increased greatly.

Cyprus now ranks fourth internationally as a maritime country and is a member of the International Maritime Organisation (IMO)

2. Registration of ships under the Cyprus flag

The registration of ships under the Cyprus flag is encouraged through tax and other incentives.

2.1 The Law

The law regulating the registration of ships under the Cyprus flag is the Merchant Shipping (Registration of Ships, Sale and Mortgage) Law of 1963, as amended, which is based on the British Merchant Shipping Act 1894 with minor differences.

Also, international conventions on maritime safety, prevention of pollution of the sea and training and certification of seafarers have been ratified by Cyprus.

2.2 Conditions

According to the Merchant Shipping Law a ship may be registered under the Cyprus flag, provided that more than half of the shares in the ship are owned either:

  • By Cypriot individuals
  • By companies incorporated in Cyprus
  • By foreign incorporated companies with the controlling interest vested in a Cypriot national, under special authority from the Council of Ministers.

2.3 Establishment of shipping company

Registration of a vessel under the Cyprus flag is freely open to non-residents through the establishment of a shipping company. Shipping companies registered in Cyprus, and belonging exclusively to non-residents, are accorded a non-resident status, but their activities should be confined to shipping.

The first step to be taken in order to register a vessel under the Cyprus flag is to form a Cyprus shipping company, which will acquire the vessel in its name.

The Central Bank of Cyprus allows non-residents of Cyprus to incorporate and take up shares (up to 100 percent) in a Cyprus shipowning company. Such companies with non-residents as beneficial owners are considered non-resident for exchange control purposes.

The company may sell vessels to or buy vessels from non-residents, borrow outside Cyprus and mortgage its vessel in favour of non- residents without requiring exchange control approval.

Under the above law, a ship is divided into 100 shares which should be distinguished from the shares of the shipowning company.

3. Tax incentives

Cyprus offers significant tax incentives to shipping companies as follows:

  • No income tax is payable on the profits from the operation of a Cyprus registered vessel or dividends received from a shipowning company (a Cyprus registered vessel includes a ship with parallel registration)
  • No estate duty is payable on the inheritance of shares in a shipping company.
  • No capital gains tax is payable on the sale or transfer of a ship or shares in a shipping company.
  • No income tax is payable on the salaries of officers and crew of Cyprus ships which operate in international waters.
  • No stamp duty is payable on bills of sale and mortgages on ships and related documents.
  • Low ship registration costs and annual tonnage taxes and numerous tax advantages stemming from double taxation treaties.
  • Considerable reductions in tonnage tax if crewing and technical management is being carried out from Cyprus or Cypriot seamen are being employed on board.
  • Ship management and crew management companies are liable to tax at the same preferential rate as other international business companies.
  • Foreign employees of international business companies, including ship management and other shipping companies’ headquarters in Cyprus enjoy significant tax advantages as explained earlier under the heading ¨International Entities¨.

4. Other incentives

Advantages available for ships under the Cyprus flag and international ship-owning companies are:

  • No exchange control restrictions.
  • Employment of crew of other nationalities in view of the scarcity of seamen in Cyprus.
  • Recognition of the competence certificate issued by Cyprus by a large number of countries.
  • Certificates for the ship are readily obtainable.
  • Recognition of mortgages registered on a Cyprus ship affording full protection for financiers and mortgagees.
  • Existence of bilateral agreements between Cyprus and other countries.
  • Simple and quick procedure for the deletion of ships from the Registry.
  • Excellent facilities for full local ship management and ability to provide highly qualified manpower and essential services.
  • Full protection for crewmen as provided under local and international law.

5. Registration procedure

5.1 Registrable ships

Government policy provides for registration of ships which do not exceed 17 years of age. Vessels of any type and tonnage over 17 years of age may be registered subject to certain conditions.

5.2 Classes of registration

There are three main classes of registration:

5.2.1 Provisional registration

Ships that are registrable and are not in a Cyprus port at the time of registration may, initially, be provisionally registered. Duration

The provisional registration is deemed to be a full registration for a period of six months and it can be extended further for three months provided an application is made prior to the expiration of the six-month period. Procedure

The usual procedure is for an application to be submitted on behalf of the shipowning company to the Minister of Communications and Works through the Registrar of Cyprus Ships, requesting permission to register the vessel in the Cyprus Register setting out the prescribed particulars and enclosing the necessary documents. Company

A Cyprus company whilst in process of being incorporated may apply for the provisional registration of a ship. However, approval for the registration will not be granted unless a certificate of incorporation and articles of association are submitted to the Registrar of Cyprus Ships. Inspection

The only condition imposed on approval of provisional registration, is that the ship be inspected by a surveyor of her classification society. The vessel’s classification society is required to send a confirmation, which can be in the form of a telex or fax to the Registrar of Ships, confirming that the vessel maintains her class, that the international trading certificates are in full force and that it is prepared to issue new statutory certificates, without any recommendations, on behalf of the Cyprus Government upon registration of the vessel under the Cyprus flag. Accounting authority

An International Radio Accounting Authority of the shipowners’ choice (which must be recognised by the Government of Cyprus for this purpose) is also required to send a telex or fax confirmation to the Registrar of Ships, stating that they have undertaken the clearance of the vessel’s radio maritime accounts. Approval

On receipt of the above corporate documents and confirmations, the Registrar of Cyprus Ships will give his approval and send appropriate instructions by telex or fax to the relevant Cyprus Consul abroad. Provisional Certificate

The Consul is then in a position to provisionally register the ship (after submission to him of certain documents by the applicant) and issue a "Provisional Certificate of Cyprus Registry" on payment of the registration fees that may be paid in advance in Cyprus.

5.2.2 Permanent registration

The permanent registration of a vessel provisionally registered under the Cyprus flag must be completed within nine months (including the three month extension period), which is the maximum provisional registration period. It is not necessary for the ship to be present in a Cyprus port. Certain additional documents have to be submitted to the Registrar of Ships in Cyprus for this purpose. Carving and marking note

On receipt of the prescribed documents, the Registrar of Ships will allot to the ship an official number and issue the carving and marking note containing the official number which must be shown on the ship, together with her name, registered tonnage and port of registry. Certificate of Cyprus Registry

Following receipt of the carving and marking note, duly completed and signed, the Registrar will issue the "Certificate of Cyprus Registry" at no extra cost and the vessel will be permanently registered under the Cyprus flag. Direct registration

Permanent registration of a vessel may be effected directly if the vessel calls at a Cyprus port, thereby dispensing with the need to go through provisional registration formalities.

5.2.3 Parallel registration

Parallel registration of a ship in the Cyprus Register is allowed, under an amendment in the merchant shipping legislation, for a fixed period of time during which the ship may continue to be registered in her current foreign registry. Conditions

The conditions which must be fulfilled are the following:

  • the ship must be bareboat chartered to a Cyprus company (and is registered under the Cyprus flag for the period of the charter)
  • the laws of the ship´s initial foreign flag must allow parallel registration
  • the written consent of both the foreign registry and the mortgagees, if any, must be submitted to the Registrar of Cyprus Ships. Suspended registration

During the period of parallel registration in Cyprus, the ship’s registration in the foreign register will be suspended, except in so far as it is related to ownership, mortgages and other encumbrances. The ship will fly the Cyprus flag (not being allowed to use the foreign flag) and the name of the ship and her Cypriot port of registry shall be marked on her. Foreign corporation

Similarly it is now feasible under Cyprus law for a ship registered under the Cyprus flag to be bareboat chartered out to a foreign corporation, for parallel registration in a foreign register. The conditions for registration correspond to those for the parallel registration of a foreign ship in Cyprus.

6. Deletion from registry

If more than half of the shares in a ship registered under the Cyprus flag are transferred to foreign individuals or companies, the ship must be deleted from the Cyprus Register.

7. Transfer of ownership

If a Cyprus ship is sold to another shipowner who wishes to keep the Cyprus flag, then a transfer of ownership is effected to a new Cyprus company and recorder by the Registrar of Ships on receipt of certain prescribed documents from the vendors and the purchasers of the ship.

8. Engagement of crew

8.1 Seamen

The crew of a Cypriot ship may be made up of seamen of any nationality, provided that they possess certificates of competency which are recognised by the Cyprus government.

The law provides that 15 per cent of the crew must be Cypriot but this is not followed as a matter of policy in view of the scarcity of Cypriot seamen.

8.2 Master of the ship

The master of a Cyprus ship must enter into an employment agreement with the shipowner and the seamen must also enter into an agreement either with the master or the shipowner.

8.3 Qualifications

Members of the crew of Cyprus ships must be qualified i.e. they should hold a Certificate of Competence granted by a competent authority of either Cyprus or any approved country. The Cyprus manning regulations are in line with modern shipping practice in accordance with the principles and guidelines set out in the relevant IMO Resolution.

9. Mortgages

9.1 Registration

A mortgage may be registered for any sum in any currency on any provisional or permanent registration of a ship without any exchange control permission. Any mortgage and charge for mortgages must be registered either through the Registrar of Ships directly or with the Registrar’s permission through a Cyprus Consulate abroad.

9.2 Stamp duty

There is an exemption of all stamp duties on the ship’s mortgage deed.

9.3 Protection

The mortgage is fully protected as soon as it is registered. The registration of a mortgage is required for the purpose of making the mortgage a charge against the shipowning company.

9.4 Registration of companies

If the ship on which a mortgage was created belongs to a Cyprus company it is a requirement by the Cyprus Companies Law that the mortgage be also registered with the Registrar of Companies.

10. Special treatment

The Cyprus Ports Authority gives special treatment to large-scale regular transit operators, including lower than normal charges and special arrangements and facilities for their operations. Over one hundred shipping lines call at Cyprus on a permanent basis, while other lines, interested in using the island as a trans-shipment center, are continuously attracted to it.


1. Introduction

Cyprus is emerging as a European international banking centre since income tax exemptions were granted to Cyprus-based international banking operations.

2. Class of licence

The first step to the incorporation of an International Banking Unit is to obtain a banking business licence incorporating a number of conditions which depend on whether the IBU is in the form of a branch or banking subsidiary.

3. Restrictions as to operation

International Banking Units or IBU’s may only transact business with nonresidents of Cyprus and in foreign currencies. IBUs are allowed to do business with international entities operating from Cyprus and their foreign employees. If permission is given they may provide certain banking services in Cyprus in connection with development projects.

4. Objectives

IBUs are expected to set as their primary objective the improvement, expansion or diversification of banking and financial services to nonresidents of Cyprus.

5. Application for Licence

5.1 Screening

Apart from the legal differences between the two forms of IBU’s, the screening of applications for a licence and the supervision exercised by the Central Bank on operations of a branch may be less stringent than in the case of a subsidiary.

5.2 Conditions

To obtain a licence the Central Bank of Cyprus emphasises that :

  • The branch or subsidiary must be a "fully operational unit" and not merely a brass plate arrangement.
  • IBUs cannot accept deposits from residents and non-residents in local currency.
  • All documents and advertisements must use after their name the expression "Cyprus International Banking Unit".
  • As a rule licences are considered only for branches or subsidiaries of banks enjoying a good international reputation, established in countries where there is adequate banking supervision and where facilities of lender of last resort are available.

5.3 Minister of Finance

The banking licence is issued by the Minister of Finance under the Banking Business Law.

5.4 Required information

5.4.1 Particulars

Applications for banking licences are examined by the Central Bank on behalf of the Minister of Finance. With these applications the Central Bank requires certain particulars which include audited accounts for the last five years, details of other branches, subsidiaries and associated companies, proof of applicant’s ability to function as an IBU, experience, qualifications and reputation of persons directly involved, auditors etc.

5.4.2 Letter of comfort

A "Letter of Comfort" must be presented to the Authorities by the parent company of a Cyprus-based international bank.

5.4.3 Reputation

Less detailed information is required from well established international banks.

6. Capital requirements

6.1 Exemptions

Branches of foreign banks are exempt from the provisions of the Central Bank Law and also from regulations issued for banking prudential purposes, such as minimum liquidity and capital to risk assets ratio and maintenance of reserves with the Central Bank.

6.2 Minimum capital

Subsidiaries of foreign banks, which operate as locally incorporated IBUs, are required to maintain a minimum capital to risk ratio (presently 20-25% of deposit liabilities)

7. Conditions of management

IBUs are required to operate as fully staffed units not as ‘brass plate’ operations. Persons directly involved with the bank must prove their abilities in their application to the Minister of Finance.

8. Licence fees

IBUs are required to pay the Central Bank an annual fee of US$15,000, as reinbursement of the cost of its supervisory function.

9. Reporting requirements

9.1 Annual financial statements

IBUs are required to prepare annual financial statements for submission to the Central Bank, within three months from the end of each financial year.

9.2 Branches

IBUs operating as branches of foreign banks are required to prepare financial statements as if they were a separate legal entity.

9.3 Independent accountants

These financial statements must be audited by independent accountants appointed by the IBU and approved by the Central Bank.

9.4 Auditors’ duty to report

Under the conditions of the banking licence, the auditors have a duty to report to the Central Bank any instances where the operations of the IBU have not been in compliance with the conditions of the licence and the international control system, including reporting whether the information which passes from the IBU to its Head Office/Parent Bank is satisfactory.

9.5 Returns

In addition to the annual audited financial statements, IBUs are required to submit to the Central Bank monthly or six-monthly returns and accounts, including analyses of assets and liabilities by class of customer, country, currency and maturity, plus details of foreign currency exposure.

9.6 Further information

If required to do so, an IBU must supply the Central Bank with further information about its activities and position. from and within Cyprus.

9.7 Letter of authorization

IBUs are also required to give an appropriate letter of authorization to the Central Bank enabling it to pass on information to the banking supervisory authorities of the country in which the parent company or head office is established, on the IBU’s banking activities

10 Benefits

10.1 Exempt from control

International banks are not subject to Central Bank controls over credit policy, liquidity ratios or interest rates.

10.2 Information

Only basic information on their deposits and loans and other transactions must be provided to the Central Bank.

10.3 Confidentiality

Strict banking secrecy rules are observed.

10.4 Tax advantages

IBU’s and their foreign employees enjoy the same tax advantages as the numerous international trading and investment companies already established on the island.


1. The Law

The provisions of the Insurance Companies Law 1984 and 1990, as amended, regulate the formation and operation of legal and international insurance companies in Cyprus, and, in doing so, adopt principles similar to those of the corresponding British legislation.

1.1 Conditions

The law sets out conditions as to the minimum subscription, margin of solvency, investment of premiums, prohibition of loans, reports of actuaries and other regulatory matters usually included in insurance law.

1.2 Exemptions

The Council of Ministers is empowered by the above law to grant exemptions from all or any of its provisions, to any insurance company registered in Cyprus, if it is satisfied that having regard to the nature and extent of the business of a particular insurance company, such provisions are inappropriate or unduly onerous.

Ultimately the Council of Ministers will decide, according to the Insurance Companies Law, which conditions to impose as to, for example:

  • minimum capital, and
  • deposits for each class of insurance carried on etc.

2. International captive insurance companies

2.1 Definition

Captive insurance companies (captives) are wholly owned or controlled subsidiaries established by non-insurance companies for the purpose of providing insurance cover to their holding company, fellow subsidiaries and associated companies.

A captive can also be formed by an association of companies or individuals having as a common interest the insurance of the risks of that group.

Such companies provide one of the most common alternatives to conventional insurance.

2.2 Cover

Besides normal insurance, they provide cover which would not normally be obtainable, or which would be very costly if obtained from third parties. The concept and objectives of captives are similar to those of mutual insurance companies.

2.3 Government Policy

The authorities consider favourably applications for registration of international captive insurance companies in Cyprus and are prepared to grant exemptions from the requirements of the law provided that the company complies with any other conditions which may be imposed, especially those of the Central Bank of Cyprus.

Failure to comply will result in the exemptions being revoked.

2.4 Exemptions

On application to the Council of Ministers, the usual exemptions granted to international captives, upon the approval of the Minister of Finance, who is authorised by the Council of Ministers to act on its behalf, are:

  • a reduced minimum paid-up share capital requirement as described below in paragraph
  • exemption from the requirement for reinsurance arrangements;
  • exemption from the requirement to deposit CYP 30.000 for each of the three classes of insurance business (long term, general and motor business) that may be transacted;
  • exemption from the solvency margin requirement;
  • exemption from the requirement to invest funds locally;

2.5 Registration procedure

The procedure for the establishment of a captive is as follows :

  • application to the Central Bank;
  • registration with the Registrar of Companies;
  • application (feasibility study) to the Superintendent of Insurance stating whether it is a captive or a simple international insurance company;
  • proposed opening balance sheet; to be filed with application;
  • obtaining permit to commence operations (licence).

2.6 Central Bank permit

A typical permit issued by the Central Bank upon application for the establishment of a captive insurance company in Cyprus contains the following conditions:

2.6.1 Operation

The company will operate as a captive insurance company carrying on all of its business outside Cyprus and only within the group of companies to which the beneficial owners of the shares belong. The company will cover risks of such companies or risks to individuals or other third parties, for which there is compliance with the condition in paragraph below.

2.6.2 Conditions for exemption

The company, as specified in paragraph 2.6.1 above, will be exempted from the provisions of the Cyprus Insurance Companies Law provided that it will strictly comply with the following conditions: Minimum subscription

There will be a minimum subscription by way of share capital (paid up) of CYP 10,000.- instead of CYP 200,000.- as provided under section 8(2) of the Insurance Companies Law. Filing of accounts

There will be full compliance with the provisions of the Insurance Companies Law as to the filing of accounts and other relevant documents. With regard to the submission of accounting and other returns to the Superintendent of Insurance, which refer to the revenue accounts, profit and loss accounts and balance sheet, it is clarified that they should be submitted within six months of the end of each financial year, and in accordance in the format specified in the Insurance Companies Regulations which may be slightly modified so as to meet the specific requirements of the company. Auditors

Financial statements must be audited by independent accountants, appointed by shareholders.

Auditors must confirm that all insurance business was conducted only between the companies of a group and that no claim for losses have been raised by third parties Adequate cover

There will be adequate cover, to the satisfaction of the Superintendent of Insurance, regarding claims which may be raised directly or indirectly, by individuals or any other third parties, hence a sum of CYP10.000 is required to be held by a parent company or bank guarantee. Share capital

The share capital of the company will at all times be held beneficially by non-residents. Finance

The company will not obtain any finance from local sources. Local expenses

All local expenses of the company will be covered from funds to be imported from external sources. The company will advise the Central Bank of Cyprus, annually, of the funds imported into Cyprus from external sources. Submission of accounts

The company will undertake to submit to the Central Bank, regularly, copies of its balance sheet and profit and loss account as at the end of each of its financial years.

2.6.3 Non-resident status

Until further notice and provided that the above conditions are observed, the company will be considered for exchange control purposes as non-resident. The Central Bank reserves the right to ask for any additional information regarding the activities of the company as it may consider necessary.

2.7 Capital

It is required that the capital should be paid up prior to the issue of the insurance licence, but, of course, it may be utilized in the course of the company's business.

2.8 Risks

A captive insurance company must:

  • insure only risks of the group (corporate shareholders, subsidiaries of such shareholders, associated companies or even individual risks of individual members of the company);
  • such "group risks" are understood to be, for instance, insurance of premises, equipment, plants, profits etc;

3 Simple international insurance companies

3.1 Adequate cover

Any other insurance company owned beneficially by non-residents carrying on business exclusively outside Cyprus, is considered to be a simple international insurance company and adequate cover must be provided to the satisfaction of the Superintendent of Insurance.

3.2 Definition

By adequate cover to the satisfaction of the Superintendent of Insurance is meant the existence of adequate assets and/or re-insurance arrangements and/or adequate guarantee by the parent company regarding insurance claims by third parties, in such a way that the Superintendent of Insurance will be satisfied that such claims will be met notwithstanding any other claims by the parent or associated companies. It is not, however, possible to quantify the adequate guarantees and re-insurance arrangements which will be provided by an off-shore Insurance Company, as it may vary from company to company depending on the nature and extent of insurance business undertaken in such case.

4. Application to superintendent of insurance

4.1 Feasibility study

Before the licence is issued to commence operations, a captive or a simple international insurance company, must file an application (feasibility study) with the Superintendent of Insurance in whom authority is vested to grant such a licence.

Applications are made in the prescribed forms and must include the type of insurance operations and risks to be covered; the risk control; the service needs; the management of insurance operations and capitalisation.

4.2 Viability

A careful examination of exposures presented by these risks where participation by the company is contemplated, is essential. The objective of the study would be to show the probable viability of the proposed insurance company based upon the spread and nature of the exposures involved, premium flow generated, quality of risk control, commitments and reinsurance facilities available.

4.3 Financial position

Information on the financial position of the parent may also be required where relevant. In addition the application should include financial projections based on the considerations set out below:

  • risks to be included;
  • net risk retention and reinsurance;
  • occasion, including legal and fiscal aspects;
  • capitalization;
  • management;
  • risk control.

5. Benefits

5.1 Taxation

International insurance companies enjoy all the tax privileges available to other Cypriot international business companies.

5.2 Exchange control

Like other international entities, they are also exempt from exchange control regulations.

6. Developments

Cyprus has now more than 100 licensed insurers of which 40 are international.


1. Introduction

For the purpose of attracting foreign investors to establish international trusts in Cyprus, the International Trusts Law of 1992 has been passed which deals with the regularisation of international trusts. The new law is not a self-contained law on trust but it builds on the existing Cyprus Trust Law which is based on the English law.

(The English principles of Equity are applicable in Cyprus and the Cyprus Trustee Law Chapter 193 is based on the English Trustee Act 1925). The new law gives freedom of movement of funds and it removes certain doubts as to whether the existing legislation could cover arrangements such as those which are common in other jurisdictions. Cyprus trusts are becoming increasingly popular vehicles for international tax planning.

2. Definition

An international trust may be described as a trust created by a nonresident settlor for the benefit of nonresident beneficiaries. A trust can still qualify as an international trust for the purposes of the law even if the settlor, trustee or the beneficiaries are international business companies or international partnerships.

3. The new law

The most important provisions of the new law may be summarised as follows:

3.1 Definition

The law defines an international trust as being a trust in respect of which

  • the settlor is not a permanent resident in Cyprus
  • no beneficiary other than a charitable institution is a permanent resident of Cyprus
  • the trust property does not include any immovable property situated in Cyprus and
  • at least one of the trustees for the time being is, during the whole duration of the Trust, a permanent resident of Cyprus.

3.2 Validity

The new law confirms the validity of a trust created by any person who is of full age and of sound mind regardless of any provisions relating to inheritance or succession of the law of Cyprus or the law of any other country. The international trust is irrevocable unless a specific power of revocation is reserved in it and cannot be set aside by the settlor’s creditors unless and to the extent that the creditors can show that the trust was made with the intent to defraud them. The burden of proof of such intent lies with the creditors and an action against the trustees to avoid the trust, on grounds of fraud, must be brought within two years from the date when the relevant transfer of assets is made to the trust.

3.3 Duration

The duration of the trust may continue until the one hundredth anniversary from the date on which it came into existence and accumulation may continue for the duration of the trust. Purpose and charitable trusts may carry on indefinitely.

3.4 Change of governing law

The possibility of changing the law governing an international trust is expressly provided for in the new law. It allows a Cyprus trust governed by Cyprus law to be changed to a foreign law trust and permits a foreign trust to adopt Cyprus Law if such change is recognized by the law of the country concerned.

3.5 Confidentiality

Confidentiality takes a prominent position in the new law. The settlors, trustees and beneficiaries should not disclose information to third parties relating to international trusts, unless a Cyprus Court orders the information to be disclosed.

3.6 Taxation

The new law makes it abundantly clear that the income and gains of an international trust derived or deemed to be derived from sources outside Cyprus is exempt from all kinds of tax in Cyprus and no Cyprus estate duty is chargeable in respect of assets belonging to an international trust created in Cyprus.

3.7 Registration

It is expressly provided that an international trust is exempt from any obligation for registration.

4. Advantages of a cyprus trust

Cyprus international trusts can prove advantageous for a number of reasons. The following are examples:

4.1 Tax reasons

4.1.1 Income arising overseas:

An individual who has income arising overseas which he does not wish to remit to his country of residence, can arrange for such income to be directed to a Cyprus international trust.

4.1.2 Divesting of personal assets:

An individual who wishes to divest himself of personal assets for fiscal or other reasons can achieve this by transferring them to a Cyprus international trust.

4.1.3 Pre-migration arrangement:

Individuals moving to a high-tax country may obtain fiscal advantages in their new country by placing funds in a Cyprus international trust.

4.1.4 Investing in business overseas:

An individual who wishes to invest in business overseas but wishes to ensure that the profits and dividends received are not remitted to the country of his residence, may set up a Cyprus international trust to invest in overseas business.

4.1.5 Investment holding company:

A trust can be used in one country to own an underlying investment holding company in another. This type of tax planning device has many advantages in providing the maximum possible protection for both settlor and beneficiaries alike.

4.2 Other reasons

4.2.1 Exchange control:

An individual with assets outside his country of residence and whose country of residence may in future extend its exchange control restrictions to include remittance of overseas funds, may wish to retain the flexibility of overseas funds by transferring them to a Cyprus international trust.

4.2.2 Confidentiality:

An individual who wishes to keep anonymity can do this by setting up a discretionary trust which owns the shares in the company. This is a particularly useful and popular vehicle for carrying out trading and financial activities, particularly for residents of countries which do not recognize the concept of a trust.

4.2.3 Global estate planning:

An individual, through the use of a trust, can arrange to be succeeded in inheritance by persons, who, due to the legislation of the individual’s country, would otherwise be excluded from the inheritance.

4.2.4 Asset protection:

Individuals from volatile parts of the world may wish to protect part of their fortune from high domestic inflation rates by converting it into strong currency assets, or individuals can protect their assets against possible expropriation laws, future claims of Governments, law suits or international blocking or freezing regulations overseas.

5. Types of trust

There are various types of trusts that can be set up in Cyprus. The choice depends on the circumstances of the settlor and the objectives he is trying to achieve. The following are examples:

5.1 Discretionary trusts

It is possible for a settlor in Cyprus to establish a discretionary trust based on Cap 193 which states that the powers of trustees can be expanded by the settlor in the trust deed.

5.1.1 Definition

A discretionary trust grants the trustees discretion to pay the income or capital of a trust fund to any or all of a particular class of persons defined in the trust deed. The trustee may also be given discretion in deciding when to pay any money to any of the members of the class. Thus, none of the beneficiaries has any right to be paid any money out of the trust fund, since the trustee may exercise his discretion and may postpone any such payment or even decide not to pay a particular beneficiary at all.

5.1.2 Advantages

A discretionary trust is the usual type of trust in Cyprus because of the many advantages it provides including the following:

  • The beneficiaries cannot be taxed on the trust fund, because they have no legal right in the trust fund until the trustees exercise their discretion in their favour.
  • Similarly, the beneficiaries cannot be subject to local exchange control regulations regarding compulsory repatriation of assets until the trustees exercise their discretion.
  • Since the beneficiary only has contingent interest, the trust assets are not available to his creditors, should he go bankrupt.
  • It is a flexible instrument, allowing trustees to vary the various interests under the trust, as and when circumstances change, without the need to have recourse to the procedures of variation of trusts (i.e. getting the agreement of all the beneficiaries or asking the court to vary the terms of the trust).

5.1.3 Letter of wishes

It should be pointed out that in case of discretionary trusts, it is customary that the settlor also prepares a "letter of wishes" in which he expresses his wishes to the trustees on any matters concerning the trust.

5.2 Fixed trusts

Another type of trust is a fixed trust which does not give the trustees any discretion when distributing the assets to the beneficiaries. An example of this type of trust is one which requires the trustees to distribute the income of the trust property to a particular individual during that individual’s lifetime and thereafter distribute the capital to a named beneficiary or beneficiaries in specified shares.

5.3 Fixed and discretionary trusts

It is possible to have a combination of a fixed and discretionary trust. The trustees may have a discretion as to the distribution of income for a period of time, but are required to distribute the capital ultimately in fixed proportions.

Conversely, they may be required to distribute the income to a specified person or persons in fixed proportions but may have discretion as to how to distribute the capital amongst a class of beneficiaries.

5.4 Trading trusts

Under a trading trust the trustee is usually a limited liability company which has powers to carry on business and the trust has trading functions and has employees to manage its business. Third parties are not aware of the existence of the trust as all documentation used is in the name of the trustee company.

5.5 Purpose trusts

The new International Trusts Law of 1992 provides a legal definition of a Purpose Trust. This can be a useful adjunct to corporate international planning and can be used to accumulate corporate earnings for general corporate purposes rather than for any defined group of individuals.

6. Taxation of trusts

Cyprus international trusts enjoy the following tax advantages:

6.1 Income tax and other charges

The income and gains of an international trust derived or deemed to be derived from sources outside Cyprus is exempt from all kinds of tax in Cyprus and no estate duty is chargeable in respect of assets belonging to an international trust. The only charge which will be payable on to the revenue in Cyprus in respect of an international trust is a once and for all amount of CYP250 in the form of stamp duty on the instrument creating the trust.

6.2 Interest

If the trust money is placed on deposit with a local bank in Cyprus the interest earned is exempt, because interest earned on foreign capital imported from abroad and deposited with a bank in Cyprus is exempt. Interest on deposits with Cyprus international banking units or with any bank around the world is also exempt, as it is not considered as income accruing in, derived from or received in Cyprus.

6.3 Retirement

An alien who creates an International Irrevocable Trust in Cyprus and retires in Cyprus is still exempt from tax if all the property settled and the income earned is abroad, even if he is a beneficiary.

7. Administration of trusts

7.1 Management services

The existence in Cyprus of a number of reputable international fund management companies and the high standing of the legal and accounting professions, ensure the availability of expert advice as well as the competent management services required for the operation of a trust.

7.2 Trustee services

Trustees in Cyprus manage the trust property and follow the settlor’s wishes as expressed to them in the letter of wishes.

7.3 Costs

There are no stamp duties on the settlement of property in a Cyprus trust. A stamp duty of CYP250 is payable on the formation of an international trust. A trust can be established within a few days and the cost of creating the trust will vary, according to the complexities involved, from CYP100 to CYP1.000. The annual cost of administering the trust depends on the work involved and the time spent. The fee is not calculated as a percentage of the trust property.

8. Suitability of Cyprus.

Cyprus qualifies as a viable international trust location for the following reasons:

8.1 Administration of trust

Trusts can be both established and administered.

8.2 Tax advantages

International trusts are exempt from all kinds of tax in Cyprus.

8.3 Tax treaties

There is a wide and increasing network of tax treaties.

8.4Legal system

The legal system is a common law system with trust legislation and case law.

8.5 Stability

There is political and economic stability.

8.6 Professional infrastructure

Availability of excellent professional infrastructure; accounting, legal and banking.

8.7 Exchange control

Complete exemption from exchange control.

8.8 Confidentiality

There are no registration or reporting requirements for trusts established in Cyprus nor are the names of the trust or of the persons referred to in the trust deed disclosed.

The only authority to be informed of the creation of an international trust is the Central Bank of Cyprus and only in cases where bank accounts are opened in Cyprus. Again no names are disclosed.

8.9 Flexibility

Cyprus law allows the removal of a trust from its jurisdiction and vice versa. In this way it provides the necessary flexibility if such transfer would be advantageous because of change of circumstances.

8.10 Registration

No requirement for registration of the trust under any law is imposed. On the contrary it is expressly provided that an international trust is exempt from any obligation for such registration.

8.11 Geographic location

Trust clients usually visit their trustees before conferring large sums of money on them and thereafter contact them. The geographic location and time zone of Cyprus as well as the availability of up-to-date telecommunications technology satisfy this criterion.

8.12 Government attitude

The Government encourages the establishment and administration of trusts in Cyprus which is evidenced by the new International Trusts Law of 1992.

This guide is intended to provide general information to professionals, other individuals or corporations interested in Cyprus’ international business opportunities. Detailed professional advice should be sought before acting upon any information contained in this guide.

We gratefully acknowledge the valuable assistance of the Central Bank of Cyprus in the preparation of this publication.