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Company registration In Cyprus. Service offer

Those who wish to form a legal entity in Cyprus usually choose a private or a public (a less common choice) company with members’ liability limited by shares. The most commonly used structure is a private company; such companies cannot offer their shares for public subscription and have a minimum of one and a maximum of fifty members.

COMPANY INCORPORATION

The incorporation of a private company takes 4 to 5 weeks.

Director of a Private company

A private company must have at least one director, a legal entity or an individual, wherever resident or registered. But the details of a Cyprus company director must be filed with the Registrar and therefore are accessible to third parties. Besides, the directors’ tax residence affects the tax residence of the company: the company is regarded a Cyprus tax resident if it is managed from or within Cyprus, so either the sole director or the majority of the board must be tax residents of the Republic of Cyprus.

In this case the company can be treated as resident in Cyprus, which, among other things, enables it to apply the Double Tax Treaties made by the Republic.

Shareholders of a private company

The shareholders of a private company can be individuals or legal entities, wherever domciled/registered or resident. Their details must be filed with the Cyprus Registrar as well.

The Cyprus Companies Law, Cap. 113 does not set a minimum share capital for private companies. The company normally issues 1000 shares of EUR 1.00 each. All the issued shares must be paid by the shareholders. There is also a special Capital Duty of 0.6% charged on the share capital of the company and payable to the Registrar. This duty should be taken into account when forming companies with large share capital or subsequently increasing the share capital.

Companies cannot issue bearer shares, or fractional shares, or no par value shares

Secretary of a private company

A Cyprus company must appoint a secretary, either corporate or individual.

The company incorporation procedure, step by step, is as follows:

1) You need to select

  • company name to be checked for its availability (the name of a private company must include “Limited” or “Ltd.”);
  • company structure (director, secretary, shareholder, beneficial owner);
  • share capital;
  • company’s objects (activities).

2) Payment of fees

3) The following documentation must be provided:

  • copies of passports for director, shareholder (unless nominee services are used), beneficial owner and attorney (if a power of attorney is required): a copy of the internal passport should contain all pages that have any information, a copy of the international passport can only contain the photo page;
  • reference letter: this can be a reference letter from a bank where a personal account is held, or from a professional such as attorney-at-law or auditor, stating that they personally know the client and have worked with him/her for at least 1 year;
  • if the director or shareholder is a legal entity, then a full set of constitutive documents is required; for companies older than 1 year we also require a certificate of good standing (or its equivalent). The documents for the corporate shareholder must disclose the ownership structure right down to the ultimate beneficial owner.

For each company, a contract for administration and audit services is signed with the beneficial owner and a client information form is completed.

4) Name check at the Registrar

After the name of the would-be company is cleared at the Registrar, the incorporation documents can be drafted.

5) Drafting and filing constitutive documents with the Registrar, preparing the company file

The subscriber (who then becomes the company’s first shareholder) adopts the memorandum and articles of association and appoints the first director. The company’s memorandum and articles of association and specialized forms containing the details of the would-be company are submitted to the Registrar. The company is allocated a registration number within 10-15 days. After another 2-3 days the Registrar issues a certificate of incorporation, as well as certificate of director and secretary, certificate of registered office and certificate of shareholders.

Upon incorporation, a company file is prepared which includes:

Certificate of Incorporation (apostilled);

Certificate of Registered Office (apostilled);

Certificate of Directors and Secretary (apostilled);

Certificate of Shareholders (apostilled);

Original Resolution appointing the first director and apostilled copy of such Resolution;

Minutes of the First Meeting of the Board;

Share certificate(s);

Deed of Trust (if shares in the company are issued to a nominee shareholder);

Certified Greek to English translation of Memorandum and Articles of Association;

Apostilled copies of Memorandum and Articles of Association (with English translation);

Nominee Director Declaration (if a nominee director is appointed);

Non-Trading Warranty by the Director and Secretary (in the case of a ready-made company);

Power of Attorney (if a nominee director is appointed).

The client also receives the company’s common seal.

SUBSEQUENT ADMINISTRATION OF THE COMPANY

Cyprus companies must pay to the Registrar an Annual Government Levy of EUR 350. The company must pay this levy before 30 June each year starting from the year of incorporation. If the company is registered after 30 June, it must pay the levy before 30 June in the year following the year of incorporation.

Late payment attracts penalties:

  • 10% of the levy amount if the delay is not more than 2 months;
  • 40% of the levy amount if the delay is 2 to 5 months.

Then the company can be struck off the register. According to Law 89 (I) of 2015 amending the Cyprus Companies Law, Cap. 113, companies that have not paid the annual levy will be struck off the register under section 327 of Companies Law, Cap. 113. The Registrar of Companies may proceed with the strike-off if the levy is not paid within a year of the stipulated date.

It should be noted that dissolution and strike-off are two different things. Dissolution means the ultimate termination of the company’s existence. A dissolved company can be restored by court order within 2 years.

Strike-off can be revoked by court order within 20 years. If a company is struck off and then restored, it is restored to the same status it had immediately before the strike-off (same officers etc). If a company is struck off without filing audited accounts, the director carries a risk of facing claims from the Inland Revenue, apart from committing a criminal offence which late filing of financial statements constitutes in itself

In order to restore a company struck off for non-payment of levy, it is necessary to apply to court, pay restoration fees of appr. EUR 4900, and pay a levy of EUR 490 for each past outstanding year. It would also be necessary to file audited accounts for all past periods, to proceed with restoration.

Company officers are deemed to be committing a criminal offence once they fail to submit accounts in due time. Therefore if a company is struck off, whether for non-payment of levy or voluntarily, its officers still have committed a criminal offence.

If a company is struck off voluntarily, its officers are still responsible for all unsettled matters that arose prior to filing an application for strike-off. Besides, when applying for strike-off, a company provides to the Registrar a letter confirming that it has no outstanding obligations to third parties. This means that a company has broken this rule too, if it had outstanding accounts.

However a nominee director does not accept such risks and will not provide services to companies that have a substantial debt of unpaid levy. An Indemnity signed by the beneficial owner authorizes a director to resign and appoint the beneficial owner as new director who will carry the full responsibility.

The annual payments also include provision of secretary, registered office and nominee directors/ shareholders (if any).

Under section 142(2) of Companies Law, Cyprus companies must prepare and submit audited financial statements in accordance with International Accounting Standards. This is a statutory requirement irrespective of whether the company carried on any business or not. If the company remained dormant, the auditors must prepare and submit dormant accounts

The company must submit returns to the tax authorities within one year of the financial year end.

Cyprus companies that have subsidiaries (with holdings in excess of 50%) must prepare consolidated financial statements for the group.

Exemption is granted to the so-called small-sized groups.

A group of companies qualifies as small if it meets the following criteria:

the company is not public, meaning that its shares are not traded at any stock exchange;

preparation of consolidated financial statements is not governed by any other legislation;

at the date of closing of the balance sheet of the parent company, the group meets two of the following three criteria:
  • the total of the assets of the companies (without deducting the liabilities) does not exceed the amount of EUR 17 500 000;
  • the turnover of the companies does not exceed the amount of EUR 35 000 000;
  • the average number of employees in the companies does not exceed 250 people.

In addition to annual reporting, all companies must before 31 July of each financial year submit a provisional tax return showing the estimation of their profit in the current year. Based on this return, the company must pay provisional corporate tax (if there is any profit declared) in three equal instalments – by 1 August, 30 September and 31 December in the same year. Adjustments to the provisional tax return can be made before 31 December.

Account should be taken of VAT matters as well. In most EU countries, Cyprus included, VAT registration is not obligatory until the sales turnover within the country exceeds the registration threshold, which is EUR 15 600 in Cyprus. But a voluntary VAT registration is possible.

VAT registration becomes mandatory in the following cases:

there are reasonable grounds to believe that the taxable turnover will exceed the registration threshold in the following 30 days (for example, a contract is made);

at the end of the month the total value of taxable transactions in the preceding 12 months has exceeded the registration threshold;

the company receives services which are subject to reporting under the reverse charge method the total value of which exceeds the registration threshold.

A voluntary VAT registration is possible. Upon registration at the VAT Authority and allocation of VAT number, the company must every quarter prepare and submit a VAT return and pay VAT within 40 days of submission of the VAT return.

The general VAT rate in Cyprus is 19%
As Cyprus is not an offshore jurisdiction, and a Cyprus company must regularly submit financial statements and pay taxes prescribed by law, we recommend seeking lawyer’s and auditor’s advice regarding subsequent administration of the company before it is actually incorporated
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Amendments to the Prevention and Suppression of Money Laundering and Terrorism Financing Law (2007) came into force in Cyprus on 23 February 2020, introducing a public register of beneficial owners and a number of new requirements for companies to file beneficial ownership information.

Full and unrestricted access to the register is provided to certain government authorities of the Republic of Cyprus, whereas all other persons can only access the following information by making a request for a fee (EUR 3.50 per company): name; month and year of birth; citizenship; country of residence; nature and scope of control.

Any changes must be filed with the Registrar within 14 days. In addition, the company must annually confirm the accuracy of the information contained in the register

FEES

Services
Fees (EUR, without VAT)[1]
Total cost of incorporation (including compliance fee, preparation and provision of original constitutive documents of the company and apostilled copies of such documents, share issue documents, and common seal)
2400
Annual administration (starting from the second year), including provision of registered office, but not including compliance fee
1200
Nominee director and shareholder (for 1 year, including one apostilled power of attorney), and nominee secretary
1145
Annual Government Levy payable to the Registrar (not including late payment penalties)
350
Preparation and submission of “dormant” accounts (for companies that did not trade during the financial year and do not hold bank accounts)
1140
Filing of the register of beneficial owners:
- initial filing
350
- annual filing
350
- filing of changes (change of beneficial owner, change of personal data, etc.)
220
Preparation and submission of financial statements for companies that started trading
USD 100 – 400 / per hour of work
Compliance fee. Payable in the cases of: renewal of a company, liquidation of a company, transfer out of a company, issue of a power of attorney to a new attorney, change of director/shareholder/beneficial owner, except the change to a nominee director/shareholder)
250 (standard rate, includes the check of 1 individual) + 50 for each additional individual (director, shareholder, or beneficial owner) or legal entity (director or shareholder) if such legal entity is administered by GSL; + 100 for each additional legal entity (director or shareholder) if such legal entity is not administered by GSL. 350 (rate for high-risk companies, includes the check of 1 individual)

[1] The fees are valid as of September 2021. The invoices will include 19% VAT on the services provided, except Annual Levy and payment of taxes.

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