Cyprus Limited FAQ
Welcome to our comprehensive guide to Cyprus Limited – one of the most popular forms of company for international business activities. Due to its favorable tax regime and strategic geographical location, Cyprus attracts many entrepreneurs and investors from all over the world looking to set up or relocate a business. In this article, we’ll answer some of the most frequently asked questions about the Cyprus Limited. From incorporation requirements and fees to tax legislation, we will try to clarify all your doubts so you understand how to set up a company in Cyprus.
What Does an Ltd Cost in Cyprus?
With us, the cost of setting up a simple limited company is around 1,300 EUR – with an all-inclusive add-on of EUR 250 net more. However, the average price of an agency is around EUR 2,000 (net). You should note that there is no annual levy of EUR 350 for each Cyprus Ltd anymore. You save even more money! We recommend you seek advice from a specialized consultant before setting up a Limited Company in Cyprus to avoid unnecessary costs and take the right documents. Choose us as you will find transparent Cyprus prices.
How High Is the Corporate Tax Rate After Company Formation in Cyprus?
Cyprus is very popular with entrepreneurs and investors due to its comparatively low tax rates for a company. In particular, the corporate tax rate of 12.5 % is one of the lowest in the European Union, making the country an attractive location for companies. Additionally, there is no capital gains tax on specific transactions, such as the disposal of shares listed on recognized stock exchanges and certain gifts. Income tax is also kept moderate, with a maximum rate of 35%. The standard VAT rate of 19% is supplemented by reduced tax rates of 5% and 9% for certain goods and services.
Different VAT rates apply, and businesses must meet VAT registration requirements, including mandatory registration thresholds and the submission of VAT declarations and payments.
Is Cyprus Tax-Free?
The island of Cyprus offers some attractive tax advantages. Especially for people with the so-called ‘Non-Dom Status’ there are particularly few taxes. In addition, you only pay 12.5 % corporation tax after setting up a company in Cyprus, so the country is not really tax-free. You can save taxes here:
- Tax-free foreign-earned income for persons with Non-Dom status: For those with the so-called ‘Non-Dom status’, foreign-earned income is tax-free in Cyprus. This means you can enjoy considerable tax savings if you work abroad or receive dividends from foreign sources.
- No business tax: There is no business tax in Cyprus. If a Cypriot company has a stake in another company, the resulting profits are also tax-free.
- Tax-free allowance of up to €19,500 income per year for private individuals: Private individuals can draw up to €19,500 of yearly income tax-free through the tax-free allowance. Individuals earning up to €19,500 are exempt from personal income tax, making it an attractive option for many.
- No tax on interest income, dividends, cryptocurrencies or gains from the sale of securities: If you invest in securities in Cyprus, you benefit from another tax advantage: there is no tax on interest income, dividends or gains from the sale of securities. However, this activity must be a hobby.
- Tax-free dividend income and profits from a foreign permanent establishment: If you earn dividend income from foreign companies or profits from a foreign permanent establishment, you do not have to pay tax in Cyprus. Despite these advantages, Cyprus is not a low-tax country by definition. Note that this is general information, and you should consult a tax advisor for advice specific to your situation. This way, you will not make a mistake when it comes to taxation after setting up a company in Cyprus.
Can I Set up an LTD With a Residence in Germany?
You can enjoy the benefits of a Cyprus Ltd without relocating to Cyprus and applying for a Yellow Slip. If you fulfil certain requirements, you can set up a Cyprus Ltd and benefit from the tax advantages. However, a managing director must be a Cyprus resident to manage the Ltd legally. You should also familiarize yourself with the tax implications of founding a German-based Cyprus Ltd. As an employee in your company, you will pay German taxes as usual.
Why Does a Company Domicile in Cyprus Make Sense, and Why Should Entrepreneurs Set Up a Cyprus Limited?
These are the reasons why a company domicile in Cyprus can make sense:
- EU membership: Cyprus is a member of the European Union. This makes it easier to trade as an entrepreneur with a Cyprus Ltd. within the EU and offers many advantages to various regional industries.
- Tax advantages: Cyprus has several tax benefits for companies. The reduced corporate tax rates and the tax exemption on the inheritance of company shares make it a very attractive country for setting up companies. It is also important to provide company documents to beneficial owners upon incorporation.
- Quality of life: The quality of life in Cyprus is impressive. The Mediterranean climate, sites full of history, crystal clear beaches, beautiful nature, and comparatively favorable property prices make it the ideal place to live for entrepreneurs, employees, and their families. Cyprus is also a safe place to live. This is an important factor for many when choosing a company base.
- Quick and unbureaucratic company formation: Setting up a company in Cyprus is relatively fast and unbureaucratic. The processes are simple and transparent. No complicated and burdensome applications are required. The regulations for setting up a company are designed to make entrepreneurship easier. It is essential to maintain and manage company documents properly.
How High Is Income Tax and Capital Gains Tax on the Mediterranean Island?
Income tax (EC tax) in Cyprus is progressively graded and depends on annual income. The breakdown is as follows:
- Annual income 0–19,500 euros: tax rate is 0 percent
- Annual income 19,501–28,000 euros: tax rate is 20 percent
- Annual income 28,001–36,300 euros: tax rate is 25 percent
- Annual income 36,301–60,000 euros: tax rate is 30 percent
- Annual income over 60,000 euros: tax rate is 35 percent
Cyprus tax residents are subject to taxation on their worldwide income and non-residents only pay taxes on income sourced from Cyprus, with various benefits and exemptions available for different categories of taxpayers. In addition, there is a corporation tax of 12.5 percent for the Cyprus Ltd. after the company is founded in Cyprus.
When Are You Liable to Pay Tax in Cyprus?
You are subject to tax in Cyprus if you are resident there after emigrating and earn income. However, tax liability varies depending on your situation and status. If you decide to give up your residence in Germany and immigrate to Cyprus, you should pay attention to a few details. For example, Germany has an exit tax. In addition, Cyprus offers foreigners the so-called ‘Non-Dom’ status, which allows you to receive certain investment income tax-free. The Cyprus Tax Department plays a crucial role in tax registration and compliance, ensuring that companies meet mandatory tax registration processes and deadlines.
Cyprus has an extensive network of over 67 double tax treaties, which provides significant benefits for businesses seeking to implement effective tax planning strategies.
When Does a Cyprus Limited Pay Off?
We can answer this question for you individually in a free initial consultation. In general, entrepreneurs who wish to register a Cyprus Limited in Cyprus should take various factors into account. These include the annual profit, as corporation tax in Cyprus is 12.5 %. Consider other costs such as the incorporation and annual fees, accounting costs, and possibly the expenses for a local director or secretary.
Additionally, Cyprus companies must submit audited financial statements annually to both the Income Tax Office and the Registrar of Companies, ensuring compliance with EU regulations and International Financial Reporting Standards (IFRS). Furthermore, both employees and employers must register for social insurance services and the general health system in Cyprus. Social insurance contributions are required, with specific rates distributed between the employee, employer, and government funding, highlighting the importance of these contributions in the context of employment regulations in Cyprus.
Cyprus has an extensive network of over 67 double tax treaties, which provides significant benefits for businesses seeking to implement effective tax planning strategies.
How Do Company Taxes After Company Formation in Cyprus Compare Internationally?
Cyprus Ltd offers low corporate taxes of 12.5 % in international comparison. Especially concerning many EU countries, this rate is extremely attractive – which is why some people refer to the island as a „tax haven“ even though it is not one. Since 2018, Hungary has had the lowest corporate tax rate in the EU at 9 percent, followed by Bulgaria with 10 percent and Ireland and Cyprus with 12.5 percent. In addition, Cyprus offers numerous other tax advantages and ‘tax loopholes’ for the Cyprus company that Hungary and Bulgaria, for example, do not have. This allows you to minimize tax payments for your company.
Financial institutions play a crucial role in verifying customer identity and ensuring compliance with KYC (Know Your Customer) and AML/CFT (Anti-Money Laundering/Counter-Terrorist Financing) regulations. They assess risks associated with money laundering and financing terrorism, ensuring that various regulatory requirements are met during the onboarding process. Please note, however, that the actual tax implications depend heavily on the individual or business circumstances. Intellectual property (IP) is also taxed very attractively in Cyprus. The country offers a so-called IP box regime.
This offers considerable tax advantages for income from intellectual property. Essentially, this provides for 80% of income from the use of IP rights (such as patents, trademarks and copyrights) to be tax-free. Only the remaining 20 % of income must be taxed. As the country is a member of the European Union, you also trade with other countries such as Germany using a VAT identification number.
Additionally, Cyprus companies must submit audited financial statements annually to both the Income Tax Office and the Registrar of Companies, ensuring compliance with EU regulations and International Financial Reporting Standards (IFRS). Furthermore, both employees and employers must register for social insurance services and the general health system in Cyprus. Social insurance contributions are required, with specific rates distributed between the employee, employer, and government funding, highlighting the importance of these contributions in the context of employment regulations in Cyprus.
Cyprus has an extensive network of over 67 double tax treaties, which provides significant benefits for businesses seeking to implement effective tax planning strategies.
Establish a Cyprus Limited Company With Experts and Open a Corporate Bank Account
Discover the advantages of a Cyprus Limited with the BS Holding. Our experienced team of experts will guide you through the entire formation process. This way, we ensure that your new company fulfills all legal requirements and is aligned with your business objectives. Opening a corporate bank account is crucial, and we will assist you in gathering the necessary documents for legal entities. With our help, you can benefit from Cyprus’ low tax rates, flexible company law and strategic location.
Having a local registered office address in Cyprus is essential for official correspondence and must be shown on all company documents and stationery. Get in touch with us today!
Cyprus Ltd vs Gmbh: What’s Different?
The differences between a Cypriot limited company (LTD) and a German limited liability company (GmbH) are significant. Company law in Cyprus is based on the English Companies Act, while German law is based on the German GmbH Act. Another difference lies in the share capital requirements. A Cypriot LTD can be founded with a starting capital of just EUR 1,000, while a German GmbH requires a minimum capital of EUR 25,000. At 12.5 %, corporation tax in Cyprus is also lower than in Germany. There is also no trade tax and no solidarity surcharge on the island.
What Does Non-dom Status in Cyprus Mean for Entrepreneurs?
Non-Dom status in Cyprus offers considerable tax advantages for individuals and entrepreneurs. This concept offers tax-free dividends and interest under certain conditions. Please note, however, that income earned in Cyprus is taxed at the country’s progressive tax rates. However, the law passed in 2015 created an attractive option for people such as digital nomads. For entrepreneurs setting up a limited company, Non-Dom status in Cyprus can be an attractive option to minimize their tax burden.
Why Is the 60-Day Rule Relevant for Entrepreneurs in Cyprus?
For entrepreneurs, the 60-day rule in Cyprus is an important factor. It allows them to be considered tax residents in the country if they spend at least 60 days per year there. This is an advantageous concept, as Cyprus is known for its lower tax rates and favourable tax regulations such as non-dom status. This allows certain types of income to remain tax-free for entrepreneurs. Bear in mind that despite the 60-day rule, other criteria must also be met for you to be considered taxable in Cyprus.
How Does Company Formation in Cyprus Work?
Setting up a company in Cyprus is a comparatively quick and uncomplicated process with low fees. It usually takes up to 6 working days. The company formation process in Cyprus is usually as follows:
- Company name and business activity: The first step in this area is to choose a suitable name for your company and clearly define the planned business activity before company incorporation in Cyprus.
- Finding a registered office: You need a registered office (not just an address) to set up a Cyprus Limited. A virtual office is not enough. However, there are many options such as our business premises service. This allows you to rent an office space in Paphos without having to buy or rent property.
- Open a bank account: Open a bank account with experts like BS Holding. We offer many options with online banking.
- Registration: Once the name has been approved, the company must be registered in the Cyprus Business Register. The application in the EU country is done quickly.
- Legal advice and accounting: Many agencies such as the BS Holding provide additional services alongside their main services. These include legal advice, professional bookkeeping, tax advice and accounting. We will also inform you about double taxation agreements and give you tips. Play it safe as a shareholder with our services and a little preparation! Additionally, a Cyprus Company is required to submit audited financial statements annually to the Income Tax Office.
- Bank account: It is also necessary to open a bank account in Cyprus to carry out financial transactions. It offers the opportunity to organize financial matters. Before employing personnel, mandatory registration with Social Insurance Services is required.
If you want to live permanently in Cyprus and bring your profits into the country, you should also apply for a Yellow Slip.
What Legal Form Is Available for a Company in Cyprus?
Cyprus offers several legal forms for companies. The LTD is the most commonly chosen, as it can be established with share capital from EUR 1,000 and offers the advantage of limited liability. There are also two types of partnership – the General Partnership and the Limited Partnership. In the latter option, liability is limited to the amount of the capital contribution. The Private Limited Company is structured similarly to the LTD. It is particularly suitable for smaller companies. Another option is the public limited company, which is referred to as a public limited company. This is a company that assumes liabilities. The shares can be traded publicly.
Who Is the Right Tax Advisor in Cyprus?
Cyprus – that’s our program for our clients! Would you like to relocate to Cyprus or set up an (offshore) company there (a reading tip: definition of an offshore structure)? Then BS Holding could be the perfect partner for you. We can help you benefit from the favorable tax system in Cyprus. We offer a wide range of services and several years of experience. This includes advice on tax matters and support in setting up or buying a company and setting up an offshore bank. This way you can emigrate with maximum security. Visit the BS Holding website. Here you will find a comprehensive guide to Cyprus and a reliable partner.
This will help you to familiarize yourself with the special features of this country.