The main steps in establishing a new business in Cyprus are:
- Application for approval of a business name (with the Registrar of Companies), at a cost of EUR8.54 for a standard application, or EUR25.63 for an urgent application in 2010
- Registration of a company or partnership
- Application for a business licence, where necessary
- Registration with Cyprus tax authorities for personal or corporate income tax (with the Inland Revenue)
- Registration for VAT (with the local office of the VAT Service)
- Registration for Social Contributions
Need For Tax Residency In Business
An individual will be deemed to be a tax resident of Cyprus if they reside in the country for more than 183 days in a calendar year. In such cases, the person will be liable to pay tax on their income derived from within Cyprus and worldwide. Professional sportspersons and entertainers who are not tax resident will be subject to a 10% withholding tax on earnings made whilst performing in Cyprus.
A company is considered to be tax resident in Cyprus if its ‘management and control’ is situated in Cyprus. This phrase refers to the ultimate level of decision-making or control, for example by a Board of Directors. In order to take advantage of the relatively low 10% corporate income tax rate, it is therefore advisable to ensure that the majority of directors of a company are Cypriot tax residents, and that the business has a bona fide base in Cyprus.
Registration Requirements For An Individual To Begin In Business
All individuals and companies must register for income tax; return forms are available on the Inland Revenue website .
The Department of Registrar of Companies (and Official Receiver) is the starting point for registering a company in Cyprus. This of course does not apply to a sole proprietor who has decided to trade in his or her own name; sole proprietors are not required to register their business, although they may choose to do so.
Where a company name is to be used, whether the business form is a limited company, sole trader, limited partnership or a general partnership, an application must be made to the Registrar of Companies to have the name approved.
Cypriot law requires that any incorporated entity must be registered, regardless of whether it is a native or foreign company. Once a company name has been approved, a Cypriot lawyer is (generally) required to file the relevant documents (which will include the company’s Memorandum and Articles of Association) and pay the necessary fees.
For partnerships, whether general or limited, full details of the partners must be lodged with the Registrar of Partnerships within one month of the formation of the partnership. Details that must be supplied include full names and particulars of each partner, the type of business and the place of business.
Every person (or entity) making taxable supplies must register for VAT. The threshold for registration is quite low – EUR15,600 in a period of 30 days. Registration is by notifying the VAT Commissioner of liability for VAT. An ‘Application for Registration in the VAT Register’ should be submitted to the local VAT office within 30 days of the month end where income is likely to exceed the threshold.
Finally, business entities (including self-employed sole traders, although they will not be eligible to claim unemployment benefits) must register for Social Contributions with the Department of Social Insurance Services in the Ministry of Labour and Social Insurance.
This article is an extract from Personal Business Tax Guide , dated 4th January 2011, for the latest version please click here .