Cyprus is well-known for its strong and open global trade environment for doing business. Apart from its advanced infrastructure and high quality of life, Cyprus is also one of the fastest-growing economies globally, making it an ideal business hub for foreign investors.
This article represents a rich source of information about doing business in Cyprus, including benefits of Cyprus’s business nature, types of legal entities, and obligations for setting up a business in Cyprus.
1. Reasons for doing business in Cyprus
In general, there are many reasons for entrepreneurs to register businesses in The Republic of Cyprus. Below are eight of the top benefits that are worth mentioning:
European Union & Eurozone
Cyprus has been an EU member since 2004 and adopted the euro in 2008. As a member of the Eurozone community, Cyprus ensures safety and stability for business practices.
The country also acts as an ideal gateway to the EU market for foreign investors, offering market access to more than 500 million EU citizens.
Ease of doing business
The World Bank’s Doing Business Report in 2020 ranked Cyprus 54th for the ease of doing business based on 5 criteria: opening a business, getting location, accessing finance, dealing with day-to-day affairs, and operating in a secure business environment.
Pro-business legal framework
Cyprus’s legal system is under UK Common Law principles. It is also aligned with the EU laws and regulations, offering foreign businesses a familiar and reliable framework to operate within.
Attractive tax system
Generally, Cyprus maintains an attractive tax regime in Europe 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).
In most cases, non-resident companies with no local permanent establishments (PEs) can enjoy tax exemption. The country also has an extensive double tax treaty network with 65 countries worldwide.
Simplified incorporation process
Businesses will find it easy to deal with the incorporation process in Cyprus, due to straightforward procedures that can be completed in several working days.
In recent years, these competitive traits of Cyprus have become increasingly popular. As a result, investors and startups have increased their presence and operations in Cyprus.
2. Types of business entities in Cyprus
You can choose an entity type according to your business objectives and activities in Cyprus. Each type of entity will determine your level of liability.
Overall, business entities in Cyprus can operate under two main forms: company and partnership.
2.1. Company
Typically, Cyprus offers a diversity of companies types that brings many opportunities for development, including:
Private limited liability company by shares (LTD): A Cyprus LTD can have a maximum of 50 shareholders and is responsible for its own finances and debts.
Moreover, the company restricts the right to transfer shares to others and prohibits public subscription to its shares.
Public limited liability company by shares: A Cyprus public limited company needs 7 or more shareholders, and at least 2 directors.
The company can invite the public to subscribe to its shares and may be listed on the stock exchange.
Limited liability company by guarantee: A company limited by guarantee has a separate legal entity from its owner.
Its members are referred to as guarantors rather than shareholders, who agree to pay a nominal amount in case the company goes into liquidation.
There are two types of guarantee companies in Cyprus – with or without share capital, which indicates the difference in their initial capital structure.
Variable capital investment company (VCIC): A VCIC is a limited liability company by shares. However, its shares do not have a nominal value but rather a variable value.
The VCIC can take the form of either a private or a public company, with similar characteristics.
2.2. Partnership
Partnerships in Cyprus can be either ‘general’ or ‘limited’.
General partnership means every partner is jointly liable with the other partners for all the debts and obligations of the partnership. Particularly, a general partnership can have from 2 to 20 individual members.
Limited partnership comprises one or more general partners who have to hold unlimited liability, as well as one or more limited partners who will contribute a certain amount of property.
The limited partner shall not be liable for any debts and/or obligations of the partnership beyond the contributed amount. Also, a limited partnership is not considered as a legal entity with an independent legal personality, whether it has a share capital or not.
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