📌 Introduction
Cyprus continues to attract international entrepreneurs, holding structures, and investment vehicles due to its business-friendly regulatory framework, EU membership, and access to a wide network of double tax treaties. Setting up a company in Cyprus is straightforward, but requires a clear understanding of local compliance, tax residency requirements, and substance expectations.
This article outlines the key legal, tax, and operational aspects of establishing a Cyprus company in 2024.
🏛️ Legal Structure and Types of Companies
The most common vehicle for doing business in Cyprus is the private limited liability company (Ltd), which offers flexibility, limited liability, and full access to Cyprus' corporate and tax framework.
Key features:
- Minimum 1 shareholder and 1 director
- Share capital can be as low as €1
- Corporate and foreign shareholders permitted
- No minimum local ownership requirement
- Company can be 100% foreign-owned
Alternative structures include holding companies, IP companies, branch offices, and trusts/foundations under specific conditions.
🧾 Taxation Overview (2024)
Cyprus offers one of the most competitive corporate tax regimes in the EU:
- Corporate tax rate: 12.5% on net profits
- No withholding tax on dividends, interest, or royalties paid to non-residents (with exceptions)
- Extensive double tax treaty network (60+ countries)
- IP regime under OECD-compliant "nexus" approach
- Notional Interest Deduction (NID) available on equity financing
- No CFC rules for companies with proper substance
- Exemption on gains from disposal of securities (shares, bonds, debentures)
🏢 Substance and Management Requirements
To benefit from Cyprus' tax and treaty advantages, companies must demonstrate effective management and control in Cyprus.
This includes:
- Cyprus-resident directors
- Board meetings held locally
- Operational activity within Cyprus
- Accounting records and bank accounts maintained in Cyprus
- Alignment with economic substance expectations as per BEPS and EU standards
Substance is particularly important for Cyprus holding companies, finance companies, and IP structures.
✅ Compliance and Reporting
Cyprus companies are subject to:
- Annual audited financial statements
- Submission of tax returns (TD4)
- Annual Return (HE32) to Registrar of Companies
- Ultimate Beneficial Owner (UBO) reporting
- Transfer pricing documentation for intercompany transactions (where applicable)
Late filings and non-compliance can result in administrative penalties and risk of strike-off.
🌍 Advantages of Cyprus for International Business
- EU member state with full access to EU markets
- Common Law legal system, based on English law
- English widely used in business and legal sectors
- Strategic location between Europe, Middle East, and North Africa
- Robust banking and professional services infrastructure
- Attractive jurisdiction for HQ relocation, group treasury, and IP planning
🧭 Conclusion
Cyprus offers a modern, flexible and tax-efficient jurisdiction for international business. However, the global trend towards transparency and substance requires careful structuring and compliance from day one. International investors and corporate groups should ensure that their Cyprus companies are properly managed, documented, and aligned with both domestic and international expectations.
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.
