Doing business in Paphos
A sizable number of businesspeople and entrepreneurs eager to start their own companies have recently arrived in Cyprus. The advantages of the economy and ease of doing business in Cyprus are some of the main factors causing this phenomenon.
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Establishing a company in Cyprus, the Benefits
Cyprus was ranked 54th for business ease in the World Bank’s Doing Business Report in 2020 based on five factors, including how easy it is to start a business, find a location, access financing, manage day-to-day business operations, and operate in a secure business environment.
Let’s dive straight into the most important benefits of setting up and running a business on this Mediterranean island.
1. Strategic location & Eurozone
Cyprus’s advantageous geographic location currently offers a significant economic benefit. A gateway to fresh and exciting business opportunities, the island is relatively close to Europe, Africa, and the Middle East.
Cyprus joined the EU in 2004 and switched to the euro in 2008. Cyprus’ membership in the Eurozone community provides security and stability for commercial operations. More than 500 million EU citizens have access to the market, making the nation an ideal entry point for foreign investors in the EU.
2. Attractive tax system
With a corporate tax rate of 12.5% for residents (residency of companies is based on the control and management of that company in Cyprus), Cyprus generally maintains a favorable tax regime in Europe.
Non-resident businesses that don’t have local permanent establishments (PEs) are typically exempt from paying taxes. The nation has extensive double tax treaty agreements with 65 different nations worldwide.
Want to know more? Check out our article on taxation in Cyprus.
3. Simplified incorporation process
Businesses will find it simple to handle the Cyprus incorporation process thanks to simple steps that can be finished in a few working days.
These competitive characteristics of Cyprus have gained popularity over the past few years. As a result, startups and investors have expanded their presence and business activities in Cyprus.
Today, Cyprus has one of the lowest rates of crime in all of Europe and a stable government that stays out of wars and conflicts abroad. The conditions are set for an ideal business environment in this position, which guarantees low economic volatility.
5. Access to human resources
Elite professionals and students from around the world are drawn to Cyprus. They discover an educated society where the majority of people are fluent in English. In other words, a business established here will have access to highly skilled and knowledgeable people from a variety of backgrounds.
Types of business entities in Cyprus
According to your business goals and activities in Cyprus, you can pick an entity type. Your level of liability will vary depending on the type of entity.
In general, there are three main types of business entities that can function in Cyprus: sole proprietorships, partnerships, and companies.
|Company||Partnership||Business Name||European Company||Place of Business of an Overseas Company|
|Registration Cost||€165 in the case of a company with share capital or€235 in the case of a company with no share capital||€120||€80||depending on the type of incorporation (new, holding or subsidiary) it ranges from €20 to €145||€380|
|Personal Liability||limited liability of company members||unlimited liability of general partners (jointly liable for debts and obligations of partnership) and up to the amount they have contributed as capital of the partnership or property for the limited partners||unlimited liability of the owner of a business name||limited liability of company members||depending on the legislation and the regulations of the country of incorporation|
|Obligations after registration||filing of Annual Report, payment of an annual fee of €350, updating company’s register with regards to any changes to the company’s particulars||notify the Registrar of any changes to the particulars of the partnership, filing of the annual report (in case a partner is a company)||notify the Registrar of any changes to the particulars of the business name||filing of Annual Report, payment of annual fee of €350, notifying the Registrar of any changes to the company’s particulars||filing of financial statements, payment of an annual fee of €350, notifying the Registrar of any changes to the particulars of the company’s place of business|
|Management||the board of directors of the company||one or a combination of partners comprising it, as from time to time agreed between them||business name owner||the administrative body in the case of a one-tier system or the management/ supervisory body in the case of a two-tier system||the board of directors and/or the authorized person representing the overseas company in the Republic of Cyprus|
|Ownership||up to 50 members for a private company, unlimited number of members for a public company||up to 100 partners||one owner||unlimited number of members||depending on the legislation and the regulations of the country of incorporation|
|Taxation||12,5% on the company’s revenues||not subject to taxation||not subject to taxation||12,5% on the European company’s revenues||12,5% on the revenues of the place of business of the overseas company|
How to set up a business in Cyprus
Step 1: Prepare information
The first step in starting a business in Cyprus is to gather the necessary data, which includes:
- Business name – you can check if a name is available to use here.
- Type of business entity
- Scope of business, ie. intended activities
- Proof of address of the office in Cyprus
- List of owners and the percentage they own
- Memorandum of Association
- Personal details of the company director and company secretary
You will need to fill out the following forms:
- HE1 – Statutory declaration
- HE2 – Notification of the company’s registered office address
- HE3 – Notification of the information regarding the first directors and secretary of the company
- HE5 – ONLY for incorporating a public company, the consent of the persons who will act as directors.
These forms are downloadable from the Department of Register of Companies and Intellectual Property’s website, here.
Step 2: Submit the forms
You can download the form or submit the application online at the Department of Register of Companies and Intellectual Property’s website, here.
Once you receive the confirmation of reservation of the business’s name, you can submit all the prepared documents mentioned in Step 1. When all the paperwork is approved, your business is officially established.
Step 3: Open a Bank account
After that, we advise creating a unique bank account specifically for running your business. Separating your personal and business finances is generally a good practice.
In Cyprus, opening a bank account takes 10 to 15 days.
Here are what you’ll need to open a bank account in Cyrpus (may vary from bank to bank):
- Corporate documents (Articles of Association written in Greek/English; Registration certificate)
- Signed and notarized board resolution
- Banking resolution
- Proof of assets origination
Read more about considerations and alternatives for opening a bank account in Cyprus.
Step 4: Register for Tax and Social Contribution
You will have to register with the Tax Department for tax purposes and the Ministry of Labour and Social Insurance for Social contribution. If you deal in anything subject to the Value Added Tax, don’t forget to apply for a VAT number.
Words of caution
In terms of time and money, the procedure to form a company in Cyprus might seem advantageous and simple. However, you should keep in mind that the rules are taken seriously and that if you don’t follow them, you could face legal repercussions.
Verify each step of the process twice and obtain a legal evaluation to prevent any inconvenience. Contact our experts to set up an individualized consultation if you want to establish a business in Cyprus quickly and successfully.