FAQ Cyprus IBCs What are the main uses of a Cyprus IBC? Cyprus IBCs are most commonly used as holding companies as they are not taxed on dividends received. They may also used for trading of goods, re-invoicing, transfer pricing billing of services, real estate holding and other uses.
How long does it take to incorporate/acquire a Cyprus company? New companies take 3-5 days to incorporate if the name has already been approved. Name approval can take 3-4 days but we keep a list of pre-approved names that are valid for six months. We also have shelf companies available with pre appointed nominees director and shareholder ready to use.
What is the standard authorised capital for a Cyprus company? There is no minimum authorised capital required but EUR 1,000 is the standard amount. Most clients do not increase their capital post-incorporation. For clients that choose to do so the fees to the registrar are 0.6%. For example, to set up a company with EUR 100,000 share capital would cost EUR 600 to the registrar in fees, plus our fees (see price list). For large increases, clients may prefer to do share capital increase at a premium. For example, issue an additional 1000 shares at premium of 1,000 Euro each for a value of 1-million. In this way they avoid the 0.6% Registrar fee on 1 million and will only pay it on the 1,000 additional shares.
Can beneficial owners remain anonymous? Yes, anonymity is provided by the use of a nominee shareholder. The beneficial owner’s details are not recorded anywhere with any government authority, but the information is kept by MF Cyprus.
Are corporate seals mandatory in Cyprus? Yes, rubber stamps are mandatory. Electronic seals are prohibited.
What is the annual government licensing fee? An annual fee of EUR350 per company is payable to the Cyprus Registrar of Companies. For groups of companies, the maximum duty is capped at EUR20,000.
What is the penalty for late payment of government licensing fees? If the duty is not paid on time, a penalty of 10% is imposed if the duty is paid within two months from the due date. The penalty is increased to 30% if the duty is paid within five months of the due date. If the duty is not paid within five months, the Registrar of Companies will remove the company from the registry. There are provisions for the restoration of a company back to the registry provided a penalty of EUR500 is paid within two years from the time the company was stricken off and thereafter with the penalty payment of EUR700.
Can foreign companies re-domicile to Cyprus and what is the cost? According to Cyprus law, a company may re-domicile to Cyprus provided that it is accepted by the laws of the company’s country of incorporation and that such a provision as to the transfer of its registered seat is allowed by the company’s constitutional documents.
When are the annual fees due? The duty for 2011 is due by December 31, 2011, for subsequent years it must be paid by June 30 each year.
When do we issue annual invoices to clients? If the company was incorporated between 1 Jan and the end of June, the invoices are issued in January. If the company was incorporated between 1 July and the end of December, the invoice will be issued in June.
What is the tax rate for Cyprus companies? The general rule is that for resident companies, net profits are taxed at a flat rate of 10%. There is no withholding income tax of the payment of dividends to its shareholders. There is no withholding defence tax on dividends payable to non-resident shareholders (non-Cypriot
residents). Dividends received are exempt from tax (subject to rules). Profits from the disposal of shares and rights are exempt from tax whether trading or capital in nature. Income of a foreign permanent establishment is exempted from Cyprus income tax – losses can be offset against Cyprus income (subject to rules). There is no withholding tax on interest paid to non-residents (income or defence). Resident companies pay 10% withholding defence tax. There is no withholding tax on payments for intellectual property (royalties) to non-residents for use abroad. If for Cyprus use, the withholding tax is 10%.
What double taxation treaties does Cyprus have? Cyprus has DTTs with 45 countries and many more are currently being negotiated. The list of DTTs includes CIS states, most EU countries, India, China, US, Canada, and many Arab, African and Asian countries.
What foreign embassies are located in Cyprus? Cyprus is home to embassies from the following countries: Australia
Austria
Barbados
Belgium
Belize
Bulgaria
Burundi
Cameroon
Canada
Central African Republic
China
Colombia
Costa Rica
Croatia
Cuba
Czech Republic
Denmark
Ecuador
Egypt
Estonia
Finland
France
Germany
Greece
Greenland
Guyana
Hungary
India
Indonesia
Irish
Israel
Italy
Jamaica
Latvia
Lebanon
Liberia
Luxembourg
Malta
Moldova
Monaco
Nepal
Netherlands
New Zealand
Norway
Palestine
Papua New Guinea
Peru
Philippines
Poland
Portugal
Qatar
Romania
Russia
San Marino
Serbia
Seychelles
Slovakia
Slovenia
Spain
Sweden
Switzerland
Syria
Thailand
Uganda
Ukraine
United Kingdom
United States
Uruguay
Are mixed boards of directors allowed? Mixed boards are allowed, but for tax residency purposes, it is recommended to have a majority of Cypriot directors. Tax residency is determined by management and control not by country of registration. Therefore if the majority of the directors are foreign, the foreign tax authorities could argue that even though the company is registered in Cyprus, it is a tax resident of the foreign country. If you have no Cyprus directors than the company is not tax resident in Cyprus and would be resident of the country from which the director resides.
What documents are required from the client to complete the due diligence process? From the ultimate beneficial owner we must receive:
Passport copy Bank reference letter Utility bill (or other comparable proof of address) KYC form BO consent letter
If I am working with professional clients, what is the alternative to the above due diligence requirements? We can enter into an administration agreement to resolve KYC and DD issues. An administration agreement allows us to not require a letter of consent from the beneficial owner, but it does not bypass due diligence requirements. By law, we need these documents (passport copy, proof of address, bank reference letter and KYC questionnaire). One option is if a trust company has a trustee they put as the owner and supply us with that person’s documents, they (the trust company) would then have their own agreement between themselves and the ultimate owner.
What are the name restrictions for Cyprus IBCs? Names of Cyprus IBCs can include majuscule (upper case) or miniscule (lower case) letters. Names can also include foreign characters as long as the Registrar knows the meaning of the name and the activity of the company.
What is the suffix of CyprusIBCs? Cyprus companies end with the term “Limited�. Does the Cyprus registry have a website where directors and shareholders can be viewed online? Yes, but it is fee-based access costing EUR 9.
What does the corporate package include? -
Certificate of Incorporation Certificate of Directors/secretary Certificate of Shareholders Certificate of Registered Address Memorandum and Articles of Association Appointment of the First Directors Resolution of the Directors (Inaugural meeting) Declaration of Trust (only if we are nominee shareholders) Instrument of Transfer (only if we are nominee shareholders)
When must a company acquire a VAT registration? In accordance with EU VAT legislation effective from 1 January, 2010, all entities inside the EU which provide services, import/export goods (regardless of the amount) to entities which are registered for VAT in other EU member states must register immediately at the VAT authorities in Cyprus and obtain an EU VAT number as well as be entered in the VAT Information Exchange System (VIES). Furthermore, entities which receive services either from within the EU of from outside the EU may also have to register for VAT purposed in Cyprus. The law applies in cases that the company has already started the activities, received services from abroad (EU and non-EU), exceeded the threshold of EUR 15,600 and the services received were paid for. The company must prove to the VAT authorities that the services were actually paid for.
If a company is simply holding a bank account or an asset without any other activity, that company does not have to register with VAT authorities.
When is the annual return compulsory for a company? The annual return is always compulsory. If the client does not file there is an accumulative penalty of EUR 100 per year. If the company has annual returns outstanding for many years, the registrar may refuse to issue certificates until the returns are filed.
When is the annual return due? The first annual return is due within 18 months of incorporation and every 12 months after that.
Must a client use our office for their accounting? No, a client can use any accounting firm they wish. The process is faster and less expensive if they use our services since we already have the documents required and if we are providing secretarial and director services we would need to sign the accounts before they are filed
How do you ensure that your clients pay the annual maintenance fee if the compulsory annual return filing is not enforced? There are several ways. If the company has a power of attorney issued, we only will issue it for a one-year period, so when a client comes back for a new POA we make sure they have settled their annual fees. We also have an internal document we require from all clients called a Letter of Consent. The letter allows us at our discretion based on certain conditions (one of which being non-payment of fees) to appoint the beneficial owner as director and/or shareholder of the company. This would mean that their name would appear on the public registry in Cyprus. In the vast majority of cases, the client does not wish for this to happen, as they would then be responsible for all filings and dealings with authorities and most importantly, they would lose their confidentiality. If a client runs into financial difficulties and for some reason cannot continue with the company, we offer them several options. They may liquidate the company, in some cases strike the company, or, we are willing to arrange some form of payment schedule – particularly for clients who have a number of companies. Also, we do not do additional work for clients who have not paid their annual fees.
What is the process of opening a bank account in Cyprus using a Cyprus company? To open a bank account in Cyprus, the bank requires the following documents: -
Bank forms fully completed and signed The certificates of the company Passport copies of all beneficial owners, signatories, cardholders, internet banking users, Director and Secretary Bank reference letter for all beneficial owners, signatories, cardholders, internet banking users, Director and Secretary Proof of address for all beneficial owners, signatories, cardholders, internet banking users, Director and Secretary
When we receive the completed bank questionnaire, we (MF Cyprus) complete the bank forms and send them to the client to sign. The signed originals must then be returned to MF Cyprus. A scanned copy of the above documents and the bank questionnaire is sufficient. We do not need the documentation for Director, Secretary or Signatory if our office is offering these services, however the other documentation is still required. If MF Cyprus acts as the signatory of the bank account, the account can be opened in approximately three days. If the client is the signatory, the bank account will be opened in approximately two days of the reception of the original signed bank form. For clients who have bank accounts in Cyprus (a significant majority of companies do), as nominee directors we are in a position to place significant pressure on the bank not to accept any transactions until our fees are settled. In extreme cases, we are able to ask that the bank request from the company a certificate of good standing. If the bank did not receive said certificate they can block the company’s bank account. As we would not be in a position to obtain any documents for clients who have not settled their fees, the client would have to settle outstanding fees to enable the bank to unblock their account.
How can a company apply for a strike-off to the registrar of companies? This option can be considered when the company has no assets and liabilities and carries no business. Hence it follows the company must be completely clean before its application and the directors/beneficial shareholders need to be in a position to certify such position (i.e., no assets, liabilities, litigation, business). If the company had taxable income in prior years it is advisable to obtain before the application a tax clearance certificate and in order to do so, up-to-date financial statements must be prepared and filed. The advantage is that the procedure for the strike-off is simple. The disadvantage is that under certain circumstance an “interested party� may make an application to restore the company and make a claim within 20 years. It takes about 8-12 months
for the registrar to strike-off the company and the annual fees (pro-rated) need to be paid until the actual strike-off of the company. The fees would not apply in the case we are not providing directors or secretary for the company.
How can members voluntarily liquidate in accordance with the Companies Act? In this case, a liquidator needs to be appointed. In order to shorten the time required for the winding-up and minimize the costs involved before the appointment of the liquidators, the assets of the company may be liquidated and creditors paid off, audited financial statements prepared and taxes paid. Then the liquidation procedure may start and may take about 3-4 months to file final returns. The advantage of this procedure is that it is formal and that it does not carry the disadvantage mentioned in the strike-off procedure. The fees for the preparation of audited accounts depend on the activity of each company and on whether the company is being liquidated or stricken-off. The documents required for liquidation are dependent on whether the financial statements have been finalized and if the company has any creditors.
Whom do I contact if I have other questions that have not been answered? For detailed information pertaining to specific cases, please contact: In Cyprus: Geoffrey Magistrate: Olga Papadopoulou: Theano Polydorou: General Email:
gmagistrate@mossfon.com opapadopoulou@mossfon.com tpolydorou@mossfon.com cyprusrep@mossfon.com
In Panama: VeronicaVelasquez: vvelasquez@mossfon.com Tomas de Leon: tdeleon@mossfon.com General email: Cyprus-panamaoffice@mossfon.com