business establishment & outsourcing management consultants

Company incorporation - Cyprus

Cypriot International Business Companies are officially henceforth based on the new tax legislation of the Republic of Cyprus (July 2002) and the Republic of Greece (December 2002) are considered Greek companies. Based on the Greek and Cypriot legislation these companies are not considered “offshore companies” and are not “black listed” or under combat status in any country in the world. Based on the new Cypriot Legislation, International Business Companies are now simply Cypriot companies and may be used for both internal (within Cyprus) and international activities for the following reasons:

  • 1. The benefits of international business companies have been extended to domestic companies as well and today there is no distinction between the two.
  • 2. All limiting scheme for activities exclusively in other countries outside Cyprus in force for the International Business Companies has been abolished.
  • 3. All beneficial tax treatment that International Business Companies enjoyed has been abolished under the scheme for uniform corporate tax 10% for all Cypriot Companies [RE: harmonization with EU]. Cypriot “International Business Companies” become fully acceptable after official approval by the EU (including Greece) and OEEC as legal international business vehicles.

The tax treaty of Greece with Cyprus and the New Tax Law of the Greek Republic (December 2002) – "Offshore companies"

Cyprus has concluded 52 bilateral tax treaties (including Greece) that the “internal legislation” of every contracting country (that is based on constitutional provisions they prevail against national legislation), thing that secures any incomes realized by Cypriot companies in transactions with Greek legal and physical persons.

It should be noted that the latest changes in the Greek Tax Legislation in force since 1/1/2003 and especially the (article 5., Law 3091/2002), based on which Cypriot International Business Companies are not considered offshore companies and do not fall under unfavourable tax provisions. [The black list of the Greek Ministry of Finance (companies registered in countries that are considered offshore) was published explanatory circular on 6.3.2003]. In addition, it should be noted that there is probably immediate need of reconstruction of the corporate structures in force that include offshore companies (BVI, Liberia, Panama, Isle of Man etc.) as well as the use of Cypriot International Business Companies or British companies (internal companies) to replace the existing offshore companies.

In general, the practical use of “offshore” companies in Europe ( directly) is considered complicated. The legal use of companies and/or companies structures (not “cheap” companies with low practical value and high legal risks) that have been established or pursue activities and companies that are founded in “cooperative” countries as is Cyprus or the United Kingdom (OECD and EU) having a broad network of bilateral treaties, modern and flexible tax and corporate legislation, low taxation (Cyprus) and that pay their taxes constitute the ONLY AND SUGGESTED SOLUTION OF TAX PLANNING WITHIN THE MODERN BUSINESS ENVIRONMENT.

THE USE OF A CYPRIOT INTERNATIONAL BUSINESS COMPANY BY ENTREPRENEURS IN GREECE

(without any change to the legal status / way of pursuing of activities within Greece)

Advantages of setting up a Cypriot International Business Company

Apart from the very low tax rates the following motives that led may enterprises and natural persons to set up Cypriot International Business companies should be pointed out:

  • The status of Cypriot Offshore Companies was abolished on 1/1/2003.
  • Cyprus is a member state of the European Union since the 1/5/2004. Cypriot companies enjoy now all additional advantages as well as the "protection shield" of the European Treaty (such as freedom of installation, provision of services, capital movement and payments) that aim at creating a Common Market within the Community.
  • The European Court of Justice has vigorously defended in recent ruling ("Cadbury - Schweppes" - September 2006 etc.) the freedom of installation, provision of services and capital movement as well as corporate payments registered in high taxation countries such as the United Kingdom or Greece and that use European companies registered in low taxation countries such as Cyprus or Ireland even if the reason of their installation is avoiding high taxation.
  • Cypriot companies are no longer considered Offshore Companies. They are European domestic companies that are not under any combating status from Greece, the EU or the OECD.
  • Invoices of expenses by Cypriot Companies are recognized in Greek Books and are deducted from the income of Greek enterprises (i.e. complications created by invoices issued by "offshore" companies and may not be deducted are avoided - L. 3091/2002 -).
  • The use of Greek language, being the official language of the Republic of Cyprus, the short distance from Greece (60 min. flight), the perfect infrastructure of the country as well as the high level of the field of provision of professional services and the banking field.
  • The strong banking secrecy (corner-stone of the Cypriot state policy).
  • Full protection of property & unanimity of holders (optional unanimity of each shareholder) - the data of the owners of Cypriot Companies are not registered / declared in no state authority - public fund.
  • Tax Authorities always extremely co-operative and friendly toward foreign investors.
  • Thirty-two (32) years of successful and stable fiscal policy as well as policy of attracting foreign investment.
  • Cypriot Legislation today (since August 2006) allows easy "reinstallation - transfer of the registered seat" from other countries - areas (including offshore companies) to Cyprus. This is useful for offshore companies as well, owners of Greek real estate property that wish to avoid the annual special tax of 3% on the value of the real estate property provided by L. 3091/2002.
  • Tax losses that are not set off with profits within the same fiscal year may be transferred and offset with future profits sine anno. In addition, tax losses may be set off with profits of other companies of the group provided a direct or indirect share relation of 75% exists.
  • Profits originating from shares selling or profits arising from permanent installation abroad or dividends from inland or abroad are not subject to corporate tax.
  • Foreign holders of Cypriot Companies are not burdened with extra taxes or duties apart from the corporate taxing on the taxable profits of the company.
  • Possibility of realising payments, dividends, interests and rights abroad with no tax burdens in combination with the broader Network of Intergovernmental Treaties of Prevention of Double Taxation remain a strong "trump card" for the Cypriot field of international activities.
  • Restructurings, consolidations and mergers of companies may be easily realized with no tax consequences.
  • Access & use of all 40 European Community Directives (plus another 39 that are currently under negotiation) of the intergovernmental treaty of prevention of double taxation, (especially the treaties concluded with Russia and Eastern Europe & Middle East countries).
  • Full liberation of transactions with foreign currency - no limitation regarding capital movement and payments.
  • Possibility of business activity within Cyprus (in the Cypriot market) or/and outside Cyprus, without need of issuing an extra license.
  • Possibility to be included in the VIES System (European VAT Register).
  • Possibility of establishing an office in Nicosia or other towns in Cyprus (in order to conduct local transactions) for direct investments or/and in order to provide increased reliability to the client's tax planning that presents especially high levels of profits of the Cypriot Company.