Cyprus Private Limited Company & Private Limited Company Structures (Holding, Trading & Shipping)
Introduction:
"To set up a business in Cyprus one must first of all decide the business vehicle he will use. There are plenty of options such as the sole proprietorship, partnership, branch and private limited company. The cyprus private limited company is the most commonly used business vehicle used in Cyprus today.
Following the 2003 tax reforms and the reform of the Exchange Control Law all citizens of the European Union (EU) can register a company in Cyprus as any other Cypriot. The permit from the Central Bank that was previously a precondition for owning shares in a Cyprus company, is no longer required. In addition all companies are the same and are taxed at the same rate i.e. 10%."
Cyprus Company Types & Uses:
Under Cyprus Company Law there are two general Cyprus company types:
1) Company Limited by Guarantee. The liability of its members is limited to the extend to which they have agreed to contribute in the event of winding-up. Such a Company is usually formed for non-profit making concerns.
2) Company Limited by Shares. The liability of its members is limited to the nominal value of the shares subscribed by them. If the shares are fully paid, they are not liable to contribute more.
Companies limited by shares are subdivided into (a) Public Companies and
(b) Private Companies. The latter are further subdivided into (i) Exempt private Companies and (ii) Private Limited Companies.
Following the recent tax reform a company is taxed in Cyprus if it is “resident in the Republic”. A company is only 'resident in the Republic' if its business is centrally managed and controlled in Cyprus. Therefore, under the new rules, a resident corporation is taxable on its worldwide income accrued or arising from sources both within and outside Cyprus if it is managed and controlled from Cyprus. The IBCs incorporated in Cyprus can perform many functions e.g. that of a holding company, and give to its shareholders valuable tax advantages.
Note:
"It is no exaggeration to say that the accession of Cyprus to the European Union (EU) – as of the 1st of May 2004 and the enactment of the new Cyprus tax legislation, which is now compatible with the acquis communautaire, have made Cyprus one of the most attractive locations for the incorporation of International Business Companies (IBCs) which are all incorporated as Cyprus Private Limited Companies."
The Cyprus Private Limited Company:
The Cyprus Private Limited company is generally used for structuring Holding Companies, International Trading Companies and Shipping companies.
The key characteristics of a private limited company are:
1) I must have at least one shareholder , one director and one secretary.
2) Shares cannot be issued to the bearer (In case anonymity is required this can be achieved through local nominees who sign in favour of the beneficial owner of the shares, a declaration of trust as well as an instrument of transfer of shares in blank),
3) It is not necessary for directors or secretary to be shareholders,
4) The appointment or removal of directors is made by the shareholders, meetings of the board of directors can be held either in Cyprus or abroad.
5) The statutory books required are: the register of members, of directors and secretary, the minute book for all directors and members meetings and the register of charges affecting the Company’s property.
6) Bank accounts of any kind may be opened in any currency either in Cyprus or abroad, The Company must have Memorandum and Articles of Association, both of which must be signed by their subscribers.
Essential concept of a Cyprus Holding Company
Introduction:
With the introduction of the new tax legislation on 1 January 2003 Cyprus joined the race to be a major contender for the location of a holding company. The following describes the essential concept of a Cyprus Holding Company
A Cypriot holding company is an ordinary Cyprus Private Limited Company which, besides regularly understood holding activities (ie. having a participation in domestic and/or foreign companies), may also be engaged in other activities such as trading, manufacturing or financing. The company is liable to be taxed in Cyprus on its worldwide income, provided that it is managed and controlled in Cyprus.
Its taxation is based on three pillars, namely the Cyprus Income Tax Law, the Special Contribution for the Defence of the Republic Law, and the double taxation treaties. Take a look at the links for specific understanding of taxation of the Cyprus Private Limited Company.
Cyprus International Business Companies are very suitable for the following activities:
1) hold patents, copyrights, franchises & other intangible rights
2) hold and trade companies/subsiduaries
3) hold and trade shares/bonds
4) finance companies and subsiduaries
For more information on regimes that apply to interest income and royalty income view description and examples provided on our cyprus corporate tax page.
The holding company regime applies only if the company can be defined as a Cypriot-resident company. Under the residence rules for companies, management and control is the key test. Registration in Cyprus alone is not sufficient to subject companies.
Essential concept of a Cyprus International Business/Trading Company (IBC)
A Cypriot trading company is also an ordinary Cyprus Private Limited Company which, besides regularly understood trading activities may also be engaged in holding activities. The company is liable to be taxed in Cyprus on its worldwide income, provided that it is managed and controlled in Cyprus.
Its taxation is based on three pillars, namely the Cyprus Income Tax Law, the Special Contribution for the Defence of the Republic Law, and the double taxation treaties. Take a look at the links for specific understanding of taxation of the Cyprus Private Limited Company.
Cyprus International Business Companies are very suitable for the following activities:
1) e-commerce activities;
2) licensed online gaming/betting activities;
3) licensed investment services;
4) receive commission income;
5) receive management, operational or consultancy fees;
6) perform re-invoicing operations.
An ITC may carry on trading activities outside Cyprus without restrictions except for banking, insurance and financial investment services for which the Company will require a specific license. An ITC may also export Cypriot products.
Important Note:
"A Cypriot International Company (also known as Iinternational Business Company) and a Cyprus Holding Company are both onshore companies. They do not enjoy any preferential tax treatment at the corporate level. In fact, they are liable to tax on a world wide basis at the unprivileged corporate tax rate applicable to all other Cypriot onshore companies – 10%. This way, the Cypriot corporate entity is in a position to enjoy the full benefits of Cyprus’s extensive double tax treaty network and tax exemptions. For this reason the Cyprus Private Limited Company, which comprises all of the above metioned company structuresm is also treaty-protected in terms of the non-discrimination clauses set out in the various double taxation treaties signed by Cyprus to date.
It is the onshore nature of the Cypriot international company that is so fundamental to its role as the tax-efficient corporate vehicle we know."
Cyprus International Shipping Companies:
Cyprus Shipping companies are virtually exempt from any type of tax. This type of Cyprus company has however many more requirements for company registration including documents of registration under Cyprus flag, legalised bills of sales to prove ownership, application to radio licences, deletion of registration from previous registry, ownership declarations, etc.
Provisional and parallel registration of such companies is possible by Cyprus Laws but undergo different procedures.
