SETTING UP BUSINESS IN CYPRUS
General Aspects
Cyprus is an island country located in the Eastern Mediterranean, serving as a strategic business hub between Europe, the Middle East, and Africa. As a member of the European Union, its monetary unit is the Euro. The country has a total area of approximately 9,251 square kilometers and a population of around 1.2 million people. The official language is Greek, but English is widely spoken, especially in business and legal environments.
Legal Forms of Business Entities
Legal form Feature
Cyprus Limited Liability Company (Ltd)
Public Limited Company by shares (PLC)
Company Limited by Guarantee
Cyprus follows the English Common Law system, making it an attractive jurisdiction for international businesses. Cyprus offers a high standard of living, a favorable climate, and a relatively low cost of living compared to other EU countries.
It requires at least one shareholder and can have up to 50 shareholders. The shareholder’s liability is limited to their investment. Shares cannot be offered to the public.
Must have at least seven shareholders and a minimum of two directors. Requires a minimum issued share capital. Subject to stricter disclosure and reporting rules. Permits the invitation of the public to subscribe for its shares.
Does not have share capital; members act as guarantors. Members’ liability is limited to a pre-agreed amount, usually defined in the company’s constitution.
General Partnerships Formed by two or more persons running a business together. Partners are jointly and severally liable for all debts and obligations. Not a separate legal entity; profits are taxed as personal income of the partners.
Limited Partnerships Combines one or more general partners (with unlimited liability) with one or more limited partners (whose liability is confined to their capital contribution). General partners manage the business while limited partners are primarily investors.
Sole Proprietorship/ sole trader
An individual runs the business on their own. The owner bears unlimited liability, meaning personal assets are at risk.
Branch A foreign company can register a branch in Cyprus to conduct business locally. The parent company remains fully liable for the branch’s operations.
Trusts Governed by the Cyprus International Trusts Law, which blends common law principles with local requirements. Offers confidentiality and flexibility in structuring the trust. At least one trustee must reside in Cyprus. Can be established for an indefinite period and tailored for charitable or private purposes.
Remarks
Most common form of business entity in Cyprus. Favoured by small and medium-sized enterprises.
Suitable for larger ventures or those planning to list shares publicly.
Commonly used for non-profit organizations, charities, clubs, or societies.
Minimal regulatory and administrative requirements, but less separation between personal and business finances.
Must comply with local registration requirements and have a physical presence (even if minimal).
Organizational Questions
Topic
Commercial Register In Cyprus, the Department of the Registrar of Companies and Intellectual Property oversees the registration and regulation of various business entities. This department maintains a comprehensive register of companies, partnerships, business names, and intellectual property rights, ensuring legal compliance and transparency within the Cypriot business environment. All businesses operating in Cyprus, except for sole proprietorships and civil partnerships, must register with the Department.
Incorporation usually takes 7-10 days and requires a unique name approved by the Registrar, a registered office in Cyprus, at lease one director and one shareholder (can be the same person), a company secretary and a memorandum and articles of association.
Financial statements need to be submitted to the Registrar of Companies on an annual basis along the annual return.
UBO registry In Cyprus, the Ultimate Beneficial Owner (UBO) Register is managed by the Department of the Registrar of Companies and Intellectual Property, requiring companies, partnerships, and SEs to disclose individuals who own or control at least 25% of the entity. Newly registered entities must submit UBO details within 90 days, while updates must be reported within 45 days. Annual confirmations are due by December 31, with the 2024 deadline extended to March 31, 2025. Non-compliance results in fines starting at €100, increasing daily by €50, up to a maximum of €5,000. UBO information is accessible to authorities, financial institutions, and certain public users. Recent amendments shifted penalties solely to legal entities, extended compliance deadlines, and granted the Registrar authority to strike off non-compliant entities.
Bank Account Individuals: Individuals eligible to open a bank account in Cyprus will need a valid passport, proof of address, reference letter, CV and source of wealth declaration
Companies: Any legal entity can open a corporate bank account in Cyprus subject to the acceptance criteria of banks. In general corporate documents, financial statements (or business plan), proof of business address, and the details mentioned above for individuals for the ultimate beneficiaries of the companies.
Cyprus banks adhere strict AM: regulations. Be aware of potential fees, including account maintenance, transaction feesm and minimum balance requirements.
EU Residents: Citizens of EU/EEA member states can enter Cyprus with a valid passport or national identity card without the need for a visa. They are entitled to reside, work, or establish a business in Cyprus without prior authorization. For stays exceeding three months, EU/EEA citizens must apply for a Registration Certificate (MEU1) within four months of arrival. This document confirms their right to live and work in Cyprus. After five consecutive years of legal residence, EU/EEA citizens acquire the right to permanent residence and can apply for a Permanent Residence Certificate (MEU3). This application should be submitted before the expiration of the initial registration.
Non-EU Residents: Non-EU nationals may require a visa to enter Cyprus, depending on their country of origin. Some nationalities are exempt for stays up to 90 days within a 180-day period. For stays exceeding 90 days, non-EU nationals must obtain a temporary residence permit. The type of permit varies based on the purpose of stay. Non-EU nationals wishing to extend their stay beyond the initial visa period can apply for a “Pink Slip,” allowing them to reside in Cyprus temporarily without employment rights. This permit is typically valid for one year and can be renewed annually.
Employment
Topic
Work permit
EU/EEA/Swiss Nationals: Citizens from the European Union (EU), European Economic Area (EEA), and Switzerland can work in Cyprus without any restrictions. They enjoy the right to move, reside, and seek employment under the EU’s freedom of movement principles. While no work permit is needed, these individuals must register with the Civil Registry and Migration Department within four months of arrival to obtain a Registration Certificate (often referred to as a “Yellow Slip”). This process involves providing proof of employment or financial means, a valid passport or ID, and evidence of health insurance coverage.
Non-EU Nationals: Individuals from countries outside the EU, EEA, or Switzerland must secure a work permit to be employed legally in Cyprus. The process is employer-driven, meaning the prospective employer must initiate the application on behalf of the foreign employee. The employer must demonstrate that the position cannot be filled by a Cypriot or EU citizen. Upon approval of the work permit, the non-EU national must apply for a temporary residence permit to legally reside in Cyprus during their employment period. Certain categories, such as members of the management boards of corporations, may have specific provisions or exemptions regarding work permits
Labour law In Cyprus, employment law provides a structured framework that ensures the protection of workers’ rights while maintaining employer obligations. The standard workweek typically consists of 38 to 40 hours spread over five days, with a maximum of 48 hours including overtime, averaged over a fourmonth period. Employees are entitled to at least 11 consecutive hours of daily rest and a minimum of 24 consecutive hours of uninterrupted rest per week.
Annual leave entitlements vary depending on the working schedule, with employees on a five-day workweek receiving a minimum of 20 working days of paid leave per year, while those working six days per week are entitled to at least 24 days. Public holidays are granted in addition to annual leave, with entitlement determined by law or collective agreements.
Termination of employment is regulated under Cyprus labour law, with required notice periods varying according to the employee’s length of service, ranging from one to eight weeks. Employees are also protected against unfair dismissal, with legislation requiring employers to provide valid reasons for termination once the probationary period has been completed.
Social system See details about the social insurance contributions and General Healthsystem contributions under other contributions in the taxation section below.
Taxation
Tax Feature
Corporate Income Tax Levied on the worldwide income of companies tax resident in Cyprus. Non-resident companies are taxed only on income generated through a permanent establishment in Cyprus.
Tax rate: 12.5%
Special Defence Contribution (SDC)
Imposed on specific types of passive income received by individuals and companies tax resident and domiciled in Cyprus, including dividends, interest, and rental income.
Tax Rates:
• Dividends: 17%
• Interest: 30%
• Rental Income: 3% (effective rate on gross rental income, after a 25% deduction)
Personal Income Tax Applies to the worldwide income of individuals who are tax residents of Cyprus.
Tax Rates:
• Up to €19,500: 0%
• €19,501 – €28,000: 20%
• €28,001 – €36,300: 25%
• €36,301 – €60,000: 30%
• Over €60,000: 35%
Note: These rates are progressive; income is taxed at increasing rates as it moves through each bracket.
Remarks
Certain income streams, such as profit from disposal of titles, dividends, etc may be exempt from Corporate Income Tax.
There are also beneficial tax incentives in place such as the IP Box Regime, Notional Interest Deduction, etc.
There is intention to increase the corporate tax rate to 15% as of 2026.
Non-domiciled residents are exempt from SDC, which is advantageous for expatriates and foreign investors. Active trading income is not subject to SDC.
Various deductions and allowances are available.
Individuals earning over €55,000 per year from first-time employment in Cyprus are eligible for a 50% exemption on their taxable income (provided that the relevant criteria are met).
There is intention to increase the tax-free amount to €20.500 as of 2026.
Partnerships Partnerships in Cyprus are not taxed as separate entities. Instead, each partner is taxed individually on teir share of the partnership’s income. Individual partners are taxed under personal income tax rates and companies under corporate income tax. Any losses incurred by the partnership are allocated to the partners and can be offset against their other taxable income.
Capital gains tax Applies to gains from the disposal of immovable property located in Cyprus and shares of companies that own such property.
Gains from the sale of securities, including shares not involving Cypriot real estate, are generally exempt from CGT, promoting investment in financial instruments.
Tax Rate: 20%
Value Added Tax (VAT)
A consumption tax levied on the sale of goods and services in Cyprus, as well as on imports.
Businesses with taxable supplies exceeding a certain threshold are required to register for VAT. The VAT system aligns with EU directives, ensuring consistency within the internal market.
Rates:
Standard Rate: 19%
Reduced Rates: 9% and 5% (applicable to specific goods and services, such as hotel accommodations, foodstuffs, pharmaceuticals, and books)
Zero rate
Stamp duty Charged on documents relating to property or business transactions within Cyprus. It is typically a one-time tax, payable at the time of executing the document. It legalizes documents for official and judicial purposes.
Other contributions:
General Healthcare System Contributions
The General Healthcare System (GESY) is a compulsory national health insurance scheme introduced in Cyprus to provide universal healthcare coverage. All individuals earning income in Cyprus, whether residents or non-residents, must contribute to GESY. There is an annual contribution cap of €4,770 per individual.
Social insurance contributions Cyprus has a compulsory social insurance system that provides coverage for various benefits. Employees and employers contribute 8.8% with the maximum insurable earning being €66,612 per annum/€5,5551 per month/€1,281 per week. Self employed persons contribution rate is 16.6% but this may vary depending on the occupational category and subject to minimum and maximum limits. In addition to social insurance, employers are also required to contribute to several other funds (social cohesion fund 2%, redundancy fund 1.2%, industrial training fund 0.5%, holiday fund – if applicable 8%).
This guide has been prepared by ELSAVCO, an independent member of Antea
ELSAVCO
Grigori Afxentiou 90, 2nd Floor, Agios
Dometios, Nicosia
Tel: +357 22 811 900
Mail: mnicolaou@elsavco.com
Web: www.elsavco.com
Mallorca, 260 àtic
08008 – Barcelona
Tel.: + 34 93 215 59 89
Fax: + 34 93 487 28 76
Email: info@antea-int.com www.antea-int.com
SETTING UP BUSINESS IN
This publication is intended as general guide only. Accordingly, we recommend that readers seek appropriate professional advice regarding any particular problems that they encounter. This information should not be relied on as a substitute for such an advice. While all reasonable attempts have been made to ensure that the information contained herein is accurate, not Antea Alliance of Independent Firms neither its members accepts no responsibility for any errors or omission it may contain whether caused by negligence or otherwise, or forany losses, however caused, sustained by any person that relies upon it.
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