Cyprus is a gorgeous island located in the Eastern Mediterranean Sea. It is an attractive destination for investors, individuals and families to set up shop. Combined with a strong banking system, Cyprus offers a competitive and transparent legal, financial and regulatory framework as well as an advantageous tax policy.
Why are high-profile international powerhouses like eToro, Columbia Shipmanagement, Plus500, Exness, Easybrain, Nexters, Amdocs, and Technorion registering companies in Cyprus? And why is setting up a Cyprus International Trust becoming all the rage?
The answer is simple: more money, protection and happiness. Okay, the happiness part is more of a lived experience, but you’ll see why in a moment.
Delve into our guide to register a company in Cyprus or to set up a Cyprus International Trust. Doing so just might mean greater opportunities for your business.
Tax Rundown on Cyprus
Local governments are promoting Cyprus with favourable tax laws and the Cyprus Government fast track scheme. Thus, it has become a reputable business and financial centre. The advanced legal, accounting, and Euro-based banking system supports and allows Cyprus to flourish.
Some key numbers of how you benefit from registering your business in Cyprus:
- As a full member of the European Union since 2004, Cyprus maintains the Lowest Corporate Tax Rate at 12,5% on profits from trading income, a generally favourable tax regime and blanket tax exemptions for international activities. For technology companies, tax can go as low as 2.5%!
- It benefits from an impressive network of over 60 double tax treaties. It is therefore considered an ideal base for international corporate investment.
- There is 0% tax on capital gains (except for real estate) and 0% dividends tax for Cypriot non-domiciled tax resident individuals (and non-tax residents).
Cyprus is an ideal jurisdiction for people looking to sell the shares of their startup or software (being an asset of a capital nature). That’s because both dividends and tax on exit are tax free.
For many in the Lexidy diaspora, registering a company in Cyprus as a Private Company Limited by Shares (LTD) or registering assets under the Cyprus International Trust (CIT) law is the best way to take advantage of Cyprus’ favourable tax regime.
Instructions to Register a Business in Cyprus as a Private Company Limited by Shares (LTD)
To begin, incorporating a company in Cyprus is comparatively easier and faster than in most other European countries.
The most common type of company registered in Cyprus is the Private Company Limited by Shares (LTD). It is for companies founded by one-to-fifty total partners.
To set up a private limited liability company, you must:
- Initiate the process with an application for name approval. Then, you must register the company with the Registrar of Companies/Department of Labour.
- Get a local address and a secretary for the company
- Establish at least one director who could be a physical person or legal entity, resident or non-resident for your company
- Establish the shareholders. At least one shareholder must form a limited company. This can be either a physical or legal person, resident or non-resident, without limitations. Details of the shareholders will be publicly accessible.
In a private company limited by shares, there is no minimum required capital.
The shareholders subscribe shares, monetary or non-monetary, which are given a nominal value and cannot be transferred. The members of a private company limited by shares are liable to the company’s debts and obligations only to the extent of the nominal value of their shares.
- Fill out the forms of incorporation at the Registrar of Companies. These forms include a copy of your passport and/or ID, your occupation and the addresses of the shareholders, director, and secretary. You’ll also need to include corporate documents stating the purposes and activities of the company, and the amount of subscribed share capital.
- Store a copy of the statutory records and other documents. These have to be available for review at all times at the physical business address.
- Your company could be incorporated within 7-10 days!
- Once incorporated, you should open a business bank account at a Cyprus-licensed bank institution. Additionally, you must apply for a social security number, and self-employment certificate.
- The last step will be to apply for the business registration certificate at the Civil Registry and Migration department.
Lexidy’s experts recommend not taking on a complicated process like this without help. Knowledgeable professionals can help ensure each step is done correctly the first time.
Talk with our expert team for more information about registering your company in Cyprus.
Why Register for a Cyprus International Trust (CIT)?
The Cyprus International Trusts Law (CIT) has also created one of the most attractive trusts legal frameworks in the world for non-tax residents of Cyprus.
The CIT has it all. The highest possible degree of asset protection or international estate planning, incredible tax benefits, and strict confidentiality.
To qualify for a CIT, you as “the settlor of the trust” can’t have been a Cyprus tax resident during the year prior to the trust settling. The beneficiaries can’t be Cyprus residents at the time of the filing. That stated, they may relocate to Cyprus after a year following the trust settlement. The last stipulation is that at least one of the CIT-designated trustees (the legal owner) must be a local Cyprus resident throughout the duration of the CIT.
You can use a CIT for commercial and business transactions, but also use it as a vehicle for personal and charitable purposes. If your CIT has a trust property, it can include all kinds of assets situated anywhere in the world and/or comprise of real estate property located in Cyprus.
How Can I BEST Use A CIT?
Manage your funds.
Investment Trust Funds, Credit Institutions, Banks etc. may, through the use of a CIT and a Cyprus International Business Company acting as a Trustee, manage funds on behalf of their clients.
Hold property which cannot personally be held.
A minor or otherwise legally incompetent person may not be able to hold property in their own name. A trustee can often hold and manage it on their behalf through a CIT until maturity or some future event, in order for them to take control (or otherwise, as the settlor decides).
Hold shares in non-Cyprus legal entities.
A CIT may fully own a Cyprus International Business Company which, in turn, may own all the shares of a non-Cyprus legal entity. The settlor, trustee, or otherwise designated person can maintain control over the trust assets as a manager of the Cyprus International Business Company. The beneficiaries of the CIT can still receive any distribution of income to be made.
Establish a joint venture or collective investment.
You can use a CIT as a vehicle joining several people to make joint investments. Later, the trust can provide the basis of their co-operation and can regulate their relationships and sharing of the financial results of their joint venture.
Protect against high taxation.
Minimise and better manage tax exposure of individuals’ income or wealth by transferring property to a CIT. Once created, they can utilise (under a proper tax structure) the beneficial extensive double taxation network of Cyprus and the non-taxability of any income of the trust in Cyprus. This may be the most traditional utility for the CIT.
Protect your assets.
Through the CIT, you can protect your assets against possible expropriation laws, future claims from the government and creditors, lawsuits or international blocking/freezing regulations in a different country.
Promote causes and charities.
A CIT is a tax effective method for funds to be donated to charity. It is also a great way to promote a religious or artistic cause. You can also use it to establish a foundation to support a worthy project.
Invest in business overseas.
You can establish a CIT to better invest in business overseas. This is the case as long as they ensure that the profits and dividends are not remitted to the country of their residence.
Protect against spendthrift beneficiaries.
You can use a CIT as a vehicle to protect family fortunes for future generations by safeguarding capital. This also works to protect your family fortune from any spendthrift beneficiaries hoping to fritter it away.
Manage profit sharing & pension schemes.
Through the use of the CIT, companies can offer pension scheme benefit plans and profit-sharing arrangements. Of course, in this case they would declare their employees as one class of beneficiary. The CIT provides an effective method of grouping and sharing benefits. It also has the additional advantage of being able to cover any specific circumstance.
The Perks of the Cyprus International Trust
Some of the greatest legal benefits of creating a CIT are that assets transferred to a trust are no longer part of the property you own as “the settlor”. Therefore, most of the time creditors and litigators cannot claim it. So in the case of bankruptcy or liquidation, your assets are protected. (Note: this is the case unless there is reason to believe the trust was made with the intent to defraud).
A CIT is not a public document and is highly anonymous and confidential. Only a court order can reveal this information. As an asset protection vehicle, CIT assets are immune from the right of inheritance, and there is no limit on the period for which a trust continues to be valid and enforceable.
Because the beneficiary of the international trust is not a legal owner of it, the income and capital gains are taxed in accordance with the rules of the residence the trustees. That said, you as the Settlor have the ability to maintain certain powers in relation to the trust and/or to grant yourself certain powers in the capacity of protector of the trust or supervisor on the application of the trust.
To add to that, the government treats CITs as tax transparent, hence not subject to any form of Cyprus tax provided the Beneficiary is not a Cyprus resident, and the trust does not own/dispose immovable property situated in Cyprus.
Summing Up The CIT
The main advantage of a CIT is the separation of the legal ownership from the beneficial ownership of a trust property. Trustees are recognised as the legal owners of the assets and the beneficiaries are protected by a body of legal rules. These rules require trustees to adhere to strict duties as to how to manage or distribute the trust property. Assets transferred to a trust are no longer part of the property owned by the settlor. So remember, Creditors and litigators cannot claim them.
That is why an international trust is such an irreplaceable tool for asset protection.
Cyprus trusts fall within the scope of double tax treaties provided that:
+ … the other contracting state recognises trust structures
+ … and principles of equity and the trust itself meets the eligibility criteria set out in the relevant treaty.
The CIT can be an exceptional tax planning tool. When correctly structured, it produces substantial savings in income tax, capital gains tax, inheritance tax, and stamp duty.
Connect with our legal experts for the peace of mind a CIT brings.
WHY CONNECT WITH LEXIDY CYPRUS
At Lexidy Cyprus, our team of legal experts can help you with the full range of Cyprus corporate services. They can speed up the process and increase your chances of overall success with their experience in the incorporation, management and administration of companies in Cyprus.
We advise and assist our clients with the selection, establishment and administration of corporate, trust, and foundations structures. We can support you with the legal and advisory services on all matters relating to Cyprus Company Law.
Additionally, the wide international network of legal experts at Lexidy can help you incorporate your company in jurisdictions like Greece, Spain, Italy, France and Portugal. Having this expertise at your disposal will help you to capitalise on different jurisdictional advantages and frameworks.
Reach out through the form below for guidance on registering a company in Cyprus, setting up a CIT, or info for your unique circumstances.
