Business set up
International Corporations and High Net – Worth individuals choose Cyprus as a transparent and tax efficient jurisdiction for setting – up legal entities through which they implement their overall strategy to invest into Europe, Asia, Middle East and Africa, or to mitigate tax exposure and manage wealth.
The main types of legal entities used are:
- Cyprus Company
- Branch of a Foreign Company
- Sole Proprietor / Trader
- Cyprus International Trust
Legal Forms of Companies
A Cyprus company can be formed under the Companies Law, Cap 113, and subsequent amendments.
The most common is the limited liability company by shares which can take the form of Public or Private Limited Company.
The Public Limited Company by shares is the main vehicle used for IPO’s and listings in the regulated or unregulated stock market, as it is permitted to offer its shares and other titles to the public. The minimum number of shareholders is seven, with no maximum and it has at least two Directors.
The Private Limited Company by shares can be formed by one or more persons and there is an upper limit of 50 shareholders. The right to transfer its shares is restricted by its articles of association which also prohibit any invitation to the public to subscribe for its shares or debentures. This is the most popular corporate vehicle used by International business entities which presents a number of advantages (less set-up time and expenses, control over the membership, simple reporting obligations).
A branch of a foreign company may be registered under the Cyprus Companies Law and it is not a separate legal entity from its founding foreign company. Within one month of its establishment, a branch has to file with the Registrar of Companies a certified copy of the Charter, Memorandum and Articles of the Company, particulars of the Directors and Secretary of the Company and the name and address of at least one person resident in Cyprus authorised to accept on behalf of the Company of any notice.
A partnership may be formed in Cyprus under the Partnerships and Business Names Law by at least two, but not more than twenty persons. It may be either general or limited and a company may be a member of a partnership. A partner of a general partnership is liable jointly and severally with all the other partners for all the debts and obligations of the partnership incurred while a partner. In a limited partnership, a limited partner contributes a certain amount to the capital and he is not liable beyond that amount.
A sole proprietor/ trader may be a Cypriot or non Cypriot and he may register a business name under the Partnership and Business Names Law, and carry on business in Cyprus. Non-EU nationals will need to secure prior permission under the Aliens and Immigration legislation.
Cyprus International Trust (CIT)
Generally, a trust is an obligation established by an individual (settlor) and binding a person (trustee) to manage property (trust property) for the benefit of persons (beneficiaries). International Trusts in Cyprus are regulated by the International Trusts Law, 1992 and the International Trusts (Amendment) Law of 2012.
A CIT is one where the settlor and beneficiaries (other than charitable institutions) are non-residents, and trust property does not include any immovable property in Cyprus and at least one of the trustees during the whole duration of the trust is a permanent resident in Cyprus. The most important advantages of CIT are:
- Trusts and beneficiaries are exempted from taxation
- Trusts are allowed to be moved to and from Cyprus jurisdiction
- Confidentiality. The identity of the settlor does not have to be revealed, and there is no obligation to file accounts or tax returns.
The use of CIT is popular in international business planning as well as in individual wealth management planning.