Yiannis Papazacharia Law Firm has considerable experience and provides extensive support to foreigners wishing to take advantage of the business friendly Cypriot tax régime with its extensive double-taxation treaties, which has created an ideal base for non-European Union companies seeking to penetrate into the Internal Market, as well as for EU companies looking for new opportunities. One of our main area of work is in company formation including Ready-Made (Shelf) Companies, partnership formation and dissolution, trusts, virtual offices, secretarial services (Arranging for the notarizing, legalising and apostilling of documentation, Increase/decrease of share capital, Change of company name, objects of the company), Transfer of shares, Preparation of Minutes and Resolutions, Preparation and filing of Returns, Preparation of Powers of Attorney, bank account signatory, company secretary, nominee shareholders and nominee directors etc.   Yiannis Papazacharia LLC in association with tax accountants and auditors can provide to any legal persons tax schemes suitable for their tax planning.   ADVANTAGES OFFERED TO CYPRUS COMPANIES   A great degree of respectability amongst companies registered in tax incentive or tax haven countries (Cyprus is not black listed in any country in the world). Their profits will be taxed at the flat rate of 10% which is the lowest in the E.U. 100% tax exemption for Cyprus Companies, whose management and control is exercised abroad and are deemed as non-residents.  50% exemption on receivable interest. No withholding tax on dividends, royalties distributed and interests payments. No capital gains tax regarding profits derived from the sale of property abroad, (land, shares etc except on sale of immovable property situated in Cyprus). No V.A.T. on sales or services rendered abroad. Freely transferable accounts of any currency may be kept either in Cyprus or anywhere abroad without any exchange control restrictions. No exchange control restrictions once the approval for the registration of the company is granted. Transfer of assets and liabilities between companies in the course of a reorganisation such as a merger, transfer of activities, exchange of shares are exempted from tax. Where two Cyprus tax resident companies form part of the same group of companies, the loss of the one company can be set off against the profit of the other company. Furthermore, losses from a permanent establishment abroad can be set off against profits earned by a company in Cyprus. Tax relief of foreign tax paid is granted in Cyprus even in the absence of a double-taxation treaty, provided sufficient evidence is produced that the foreign tax has indeed been paid.
CYPRUSTAX REFORM 2003   International Perspective   The new legislation has been effective since 1st January 2003.  The tax legislation aims to conform to European Union law and EU Code of Conduct and abide by its commitment to the EU to eliminate harmful tax practices.  With this new legislation, Cyprus maintains and enhances its competitiveness as an international financial centre.  It remains a suitable location for investments to and from Russia, the CIS and Eastern Europe.  At the same time, having the lowest tax regime in the EU, it becomes a stepping-stone for investments to and from the European Union.  Cyprus companies will no longer be taxable by virtue of their registration in Cyprus but instead they will be considered tax residents if they will be managed and controlled in Cyprus.  The 10% corporate tax will give Cyprus the lowest rate in the EU.    Set out below is a brief summary of the main provisions of the legislation affecting individuals and international investors and in particular Cyprus Companies.   The significant changes in the taxation system include the adoption of the residency basis rather than source basis as the criteria of taxation and the unification of the taxation system and rate of corporate tax for international and local business enterprises.     Taxation for Cyprus Companies   A company is a tax resident if its management and control is in Cyprus.   Cyprus companies will be taxable at the corporate tax rates of 10% and they will be entitled to the new beneficial tax provisions. Cyprus companies, are allowed to derive also income from within Cyprus. Cyprus Companies will be subject to the provisions of the Social Cohesion Fund Law and will be required to contribute at the rate of two per cent (2%) on the gross emoluments of its tax resident employees working in Cyprus. Profits earned from a permanent establishment abroad are fully exempt from corporation tax. Interest income from deposits with banking institutions in Cyprus will remain fully exempt from tax. 50% of income from interest will be exempt from corporate tax but the whole amount of interest received or credited will be subject to the Special Contribution at the rate of 10%.  However, interest from ordinary trading activities such as banking and financing activities will be considered as trading income and taxed only at the normal corporate rates prevailing. Cyprus intends to maintain its company and trust management regime, although the identity of the beneficiaries will have to be disclosed to the tax authorities when a company is registered or when a change of ownership takes place
Tax on Dividends   Every resident person who receives any dividend from a company is liable to Special Contribution at the rate of 15%, except the following:   Dividends paid from one Cyprus resident company to another local or foreign and to non-Cypriot resident.   Dividends received from an overseas company by a resident company of Cyprus or a company, which is not a resident of Cyprus but has a permanent establishment in Cyprus, holding directly at least 1% of the share capital of the overseas company.
TAX TREATIES   Cyprus has concluded an impressive number of treaties for the avoidance of double taxation.   The treaties signed and ratified by the Republic of Cyprus are based on the OECD model.  Cyprus is the only offshore centre in the world which has so many double taxation agreements.   The main purpose of these tax treaties is to avoid the taxation of the same income twice i.e. both in Cyprus and the foreign country. Cyprus has ratified Tax Treaties with over 35 countries including the following:   Armenia, Austria, Belarus, Belgium, Bulgaria, Canada, China P.R., Czech Republic, Denmark, Egypt, France, Germany, Greece, Hungary, India, Ireland, Italy, Kuwait, Kyrgyzstan, Malta, Mauritius, Moldova, Poland, Romania, Russia, Slovak Republic, Slovenia, South Africa, Sweden, Syria, Thailand, Tajikistan, Turkmenistan, Ukraine, United Kingdom, U.S.A., Uzbekistan     Tax for Individuals   Resident persons will be charged tax on the income accrued or arising from sources both within and outside Cyprus.  Resident person, means an individual who stays in the Cyprus Republic for a period or periods exceeding in aggregate 183 days in the year of assessment.   Non – resident persons will be charged tax on the income accrued or arising from sources in Cyprus.   Exemptions from Tax (New Provisions)   Remuneration from rendering of salaried services to a permanent establishment outside Cyprus for an aggregate period of more than 90 days in the year of assessment.   The 20% of the emoluments from any employment, which is exercised in Cyprus by an individual who was not resident of Cyprus before taking up employment in Cyprus or CY£5.000 whichever is the lowest.  This exemption applies for a period of three years commencing from the 1st January 2003 of the year following the year of commencement of such employment.   The taxation of pensions of any individual for services rendered outside Cyprus continues as under the present Law, that is any sum exceeding CY£2,000 will be, in any year of assessment, charged to tax at the flat rate 5% or the individual may elect to be taxed under the normal rules of the Law.
REGISTRATION OF A CYPRUS COMPANY   Name of the Company   The name of the company has to be approved by the Registrar of Companies. This procedure usually takes 7 working days. It is always advisable that a list of 3 names is given to the Registrar, so that he has some flexibility in approving the name.   Memorandum and articles of Association   All companies have to prepare a Memorandum and Articles of Association. The Memorandum states the objects of the company i.e. the nature of its activities and the Articles of Association states the rules governing the internal management of the company.     Capital Structure   There are no legal requirements regarding the amount of the Share Capital of a company.    Shareholders of the Company   Every company must have at least one shareholder.  The maximum number is limited to fifty. One non resident person may register a company by appointing a nominee to hold the shares in trust. Our office can offer trustee services in order to secure the anonymity to the beneficial shareholder and his identity is only disclosed to the competent authority of Cyprus. Each beneficial shareholder other than E.U. citizen has to provide bankers’ references from their bankers abroad to the competent authority of Cyprus. The specimen bank reference stated below is adequate to obtain the permission of the Central Bank to register a company in Cyprus.   “We hereby state and confirm that Mr. X is a well known business relation of our bank.  As far as we know and have been informed Mr. X may be considered as an honest and solvent person who will meet his engagements.”
Directors   Each company has to have at least one director and the information needed for each director is:   Full Name Nationality Residential address Occupation   Directors may be local or foreign. Nominee Directors may also be appointed.  It is not necessary for the directors or the secretary to be shareholders.  The appointment and resignation of directors is effected by the shareholders.  Cypriot nominee directors may also be used.
Secretary   To comply with the legislation each company has to appoint a secretary.  This person can be from our office.
Registered Office   All companies must have a registered office in Cyprus.  Such a registered office can be the address of our firm.   Time needed for the icorporation  of a Cyprus Company   It usually takes about three weeks to register a company depending on the workload of the Company registrar. According to Cyprus law an application for the formation and registration of a company must carried out through a Cyprus law office.   Administrative Offices in Cyprus   A registered company in Cyprus is allowed to maintain its administrative office in Cyprus.  Non resident directors and employees of companies which maintain administrative offices in Cyprus can live in Cyprus.  The family accompanying the directors and employees can also obtain permission from the Immigration officer to live in Cyprus.   The above does not apply for EU citizens.