BUSINESS IN CYPRUS FOR THIRD-COUNTRY NATIONALS
The following is a step-by-step guide for creating a business by registering a company in Cyprus, by an individual and/or legal entity that does not have EU citizenship, or by a company that is not incorporated (not registered) in the EU.
Steps for registering a company in Cyprus:
- Approval of the company name.
Before registering a company, its name must be approved by the body responsible for registering companies. The basis for this procedure is the application for approval of the company’s name submitted. Currently, the authority responsible for this procedure in Cyprus is the Companies Section of the Department of Registrar of Companies and Intellectual Property, operating under the authority of the Ministry of Energy, Commerce, and Industry, which from now on will be referred to as the “Registrar.”
An application for a company’s name approval (by completing the approved form) can be submitted either in person or through an online service (through the so-called electronic document management system/portal Ariadni). It is important to understand that the online application can be submitted only after verifying the applicant in one of the existing Citizen Service Centers (KEP). A complete list of Citizen Service Centers can be found on the Ariadni portal’s website.
The Ariadni portal, an electronic document management system, has been created to facilitate document management procedures in Cyprus. It allows online submission of documents and forms for company registration, applications for approval of company names, obtaining certified copies of certificates, making changes to information on registered companies, registering encumbrances, entering data on mortgage payments, and more. Soon, an “e-government” system (https://gov.cy) will become fully operational, taking over, among other things, the functions performed by Ariadni.
As a rule, the Registrar considers the application for up to 10 working days, and an expedited review option is available if required. It is important to note that after formal approval of the name, the applicant must register the company within six months of receiving such approval from the Registrar.
- Incorporation documents and registration of the company.
Once the name is approved, the second step is the preparation and registration of the company’s incorporation documents and information on the founder, director, secretary, and company address.
The founding documents of a Cypriot company are its Memorandum and Articles of Association (the so-called Memorandum and Articles of Association of the Company).
These documents must be signed by all founders/shareholders of the to-be-established company, a witness confirming the intentions and signatures of the founders/shareholders in establishing the company (affidavit – for online filing), and a certified/licensed lawyer admitted to practice in the Republic of Cyprus. By law, the incorporation documents must be in the country’s official language (Greek and/or Turkish). In practice, a Greek version and a certified translation into English (or another language if the applicant desires) are always submitted.
In addition to the above constituent documents, particulars of the company’s registered office and particulars of the founder/shareholder, secretary, and directors of the company are submitted to the Registrar.
The complete application packet is attached to the signed application form and is submitted online through the e-filing portal or directly to the Registrar’s office in Nicosia.
As a rule, the Registrar considers the application within 20 business days from the date of submission of applications to the Registry. If required, an expedited review option (10-14 business days) is available.
The total period of registration (including approval of the name) of the company may take less than ten business days when selecting the fast track, or expedited, procedure, compared to 14-30 days when filing on general grounds (in some cases periods may be longer, depending on the workload of the Registrar or other external reasons).
- Payment of fees and final package
The applicant is charged state fees when submitting the application and the documents. The amount is regulated and depends on the timing of the application, formation/payment, or non-payment of the company’s share capital.
The final document issued by the Registrar is a certificate of incorporation in Greek.
After company registration, other company documents may be issued to the applicant on a separate request with payment of separate additional fees. The most common in practice are the following:
- Copy of the incorporation documents with the Registrar’s mark/stamp (in Greek, English);
- Certificate of company address;
- Certificate on the director and secretary of the company;
- Certificate on the company’s shareholders;
- Certificate of company registration in English.
Opening a company bank account in Cyprus
As a general rule, the company representative (director) must open a bank account for the company. The procedure for opening and the number of documents and data depends solely on the internal policies and procedures for customer due diligence (CVC) of the particular bank.
Generally, when considering opening a corporate account, Cypriot banks request:
- the memorandum and articles of association of the company;
- certificate of registration;
- certificate of address proving the existence of a registered office (sometimes asking for proof of the “reality” of the office, such as utility bills);
- certificate of appointment of directors and company secretary (copies);
- copies of passports of the beneficiary, director, and secretary;
- Application in the form approved by the bank.
- To open an account for a legal entity – all shareholders’ tax returns and an agreement on how the first funds will be deposited in the company (loan or increase in capital).
It is also highly likely that the following may also be requested:
- Certificate of Incumbency, Letter of Good Standing.
- Documents confirming the corporate structure of the legal entity, showing the entire structure down to the beneficial owner. This documentation must be provided in a clear and understandable form.
- Financial statements and/or data confirm the company’s legal source of funds.
It should be noted that in recent years, the requirements and strictness of the banks and how stringent the KYC procedures have increased, especially for customers from Russia and the “former Soviet Union.” Before opening an account, we recommend thoroughly studying the package of documents and being ready to promptly provide the bank with additional information and documents in case they request it.
COMPANY ADMINISTRATION AND OTHER COSTS
GENERAL INFORMATION
A company resident in the country, as in most “onshore” jurisdictions, must pay all taxes, fees, and duties established by the legislation of the Republic of Cyprus (from now on referred to as “mandatory payments to the Republic of Cyprus”) and file the relevant reports.
Failure to pay or delay in payment of mandatory payments in the Republic of Cyprus is subject to fines (depending on the period of delay, the amount may be increased in proportion to the period of delay).
In some cases, there are more severe sanctions.
For example, the company is struck off the official register for failure to pay the mandatory annual fees, which suggests that it is not engaged in economic activities on the island (the so-called strike-off procedure). A company that has been struck off can subsequently be reinstated by paying all fees and a special fee.
Also, the following functions/personnel are paid for when the company is not able to self-sustain:
- office maintenance services (including rental of premises, payroll, IT service providers, and other related services);
- secretarial services, provision of registered office (or virtual office) and services of nominee directors and/or shareholders (if applicable), corporate legal services (if applicable);
- Accounting, financial, and auditing services. Cypriot companies are required by law to prepare and file audited financial statements following International Accounting Standards. This requirement is mandatory regardless of whether the company was engaged in an activity. The company’s auditors must prepare and submit nil returns if no activities were carried out. The company must submit the accounts to the tax authorities within one year from the end of the reporting period. Furthermore, Cypriot companies with subsidiaries must prepare consolidated group accounts.
- account maintenance;
- Anything else, depending on the nature of the business, structure, and company needs.
Director, registered office, and company secretary. Services of nominees.
A Cypriot company must have a director and a secretary duly appointed during the company’s incorporation.
The director of a company may be either a natural person or a legal entity. This rule also applies to the company secretary.
Secretary and registered office
The existence of a secretary is a prerequisite for companies incorporated in Cyprus. Their duties are conducting corporate events, filing with the Registry, keeping documents (including company shareholder resolutions and drafting/signing them as secretary), and corporate correspondence. They have no “managerial” signature rights and do not carry out the company’s operational management. The provision of such a service is developed in Cyprus and usually comes “bundled” (but not necessarily) with a nominee address and/or director.
As noted above, a company resident in Cyprus must have a registered address. This may be the address of the company/shareholder’s premises or the address provided by the advising company address service provider.
Director – Real or nominal?
A company may have one or more directors. A director may be the owner/shareholder or a person appointed by him. Persons may also hold a director position in a company without remuneration.
The duties of a director include (the final list of duties depends on the founder/shareholder) the company’s operational management, signing company documents, and representing the company.
Formally, there are no restrictions on the residency status of the director. Still, it is always required to consider the requirements to ensure the “economic presence” of the company in the country. It is highly recommended to ensure that a country resident holds the Director’s position to lower the risk of failing to meet the standard of sufficient presence (substance).
Conventionally, directors in a company can be classified as follows:
-real or nominal;
-with or without remuneration;
-residents or non-residents;
If the director receives remuneration and is an individual residing in Cyprus, the best way for the shareholder to formalize his status is by entering into an employment contract with him (if this person is not a Cyprus/EU citizen, the company must obtain permission for him to work in the company and legitimize his long-term stay in Cyprus).
It should be noted that a business owner in his company may be employed in any position. An official company employee receiving a salary must have all those documents issued to any employee. This includes a work permit obtained per the procedures under the Cypriot migration law.
*There are several different legal forms of companies in Cyprus. This article provides an example of setting up a business based on one of the most popular formats – a private company limited by shares.
See:
https://www.companies.gov.cy/en/21-eservices/efiling-of-documents
https://www.gov.cy/en/digital-services/business-activity
REGISTRATION AS VAT PAYER IN CYPRUS
All companies and self-employed persons who in the last 12 months have sold (or will sell in the next 30 days) more than €15,600 worth of goods and services must register as VAT payers.
Those also have to register if they make purchases in Cyprus (total value exceeding €10,251.61 since 1 January and those who make remote sales (on behalf of another person in another EU country) if the sales exceed €35,000 in the period from 1 January.
If a person fails to register as a VAT payer when the above limits are reached, a fine of €85 is imposed for each month of delay.
To register, a completed and signed form TD 1101 must be submitted to the District VAT Office, along with a copy of the official document proving the taxable activity in Cyprus. This can be, for example, a copy of the service contract, a copy of the invoice, etc. Please note that the form and all other VAT-related documentation are only available in Greek.
The registration certificate in the Register of VAT payers will be ready and sent by post within 8-12 days (if necessary, you can find out the assigned taxpayer number even before receiving the document by contacting an employee of the Department by phone or e-mail).
STARTUP REGISTRATION IN CYPRUS
Back in October 2020, the Ministry of Energy, Trade, and Industry launched the implementation of the so-called Rapid Business Start-Up Mechanism, a procedure that should help speed up company registration. This program allows the necessary procedures to be completed in seven working days, and foreign employees can obtain a residence permit in four to six weeks. One of the goals of this initiative is to help foreign entrepreneurs move their businesses to Cyprus.
Advantages of startup registration
One of the main advantages of startup registration is the quick processing of employee residence permits. According to the program, this factor should positively affect the country’s economy. Companies, in turn, undertake either to expand their activities in Cyprus or to move their head office here.
Requirements for startup registration
Companies must meet several criteria to take full advantage of the quick business startup program. In particular:
- to be physically present in the country, i.e., open an office here;
- have a minimum annual turnover of €500k in three of the last five years;
- have a business plan describing the development prospects for five years (for new companies);
- prove that the company’s ultimate beneficiary has invested at least €200k in launching the company.
Based on these criteria, the Ministry decides whether or not to approve the application.
More information on the requirements can be found on the Ministry of Energy, Trade and Industry’s new website at www.businessincyprus.gov.cy.
Summary for registering a Startup company in Cyprus
The procedure for issuing residence and employment permits for third-country nationals is simplified. Participation in the Startup program helps register the company as quickly as possible, approving the name, registering in the Social Insurance Fund, employer registers, and VAT. Applicants are also provided with information and instructions on obtaining the necessary permits for economic activity.
The program allows all necessary procedures to be completed in seven working days. Foreign employees can obtain a residence permit in four to six weeks. In addition, these enterprises can hire more foreign workers from third countries, provided they have specific qualifications. These are primarily employees of the IT sector.
Cypriot companies operating in the fields of shipping, high-tech, innovation, pharmaceuticals, biogenetics, and biotechnology that wish to hire employees from third countries for vacancies for which there are not enough specialists in Cyprus will also be able to take advantage of these special conditions.
CONCLUSION, REMARKS, AND RECOMMENDATIONS
To conclude, this article does not describe and analyze other possible procedures for incorporating resident companies with special status/tax regimes (IT companies, foreign companies, etc.). However, the processes are similar.
Issues related to corporate or tax structuring of the business, as well as internal corporate legal procedures for setting up a company (preparation of constituent documents, payment for shares, execution of powers and appointment of staff, shareholders’ decisions, etc.), are also not covered in this article.
Above, we have described only the essential points concerning the creation of a business in the form of registration of a private company (with the liability of participants limited by shares) and other related procedures for business administration.
Setting up and administering a business in an unfamiliar jurisdiction may involve nuances and unforeseen complexities that require the qualified assistance of professionals working in the local services market.
Comprehensive services for Cyprus company registration, as well as services for company administration and provision of nominal service, depending on the selected law firm’s pricing policy, the business’s format, and the client’s request, are discussed individually. We strongly recommend professional legal (and auditing, if applicable) assistance. This option is preferable if a person or company wants to eliminate the risks of mistakes, save time and get the best results.
