Cyprus Company Formation


ESSENTIAL FACTS

LOCATION: 35 00 N, 33 00 E
Cyprus is an island in the Mediterranean Sea, south of Turkey; it is considered part of the Middle East.

POPULATION: 788,457

CURRENCY:
Area under government control: Cypriot pound (CYP); euro (EUR) after 1 January 2008
Area administered by Turkish Cypriots: Turkish New lira (TRY)

LANGUAGE: Greek, Turkish, English

CLIMATE: Cyprus has a Mediterranean climate, with hot, dry summers and cool winters.

EDUCATION: For ages 15 and over, 97.6 percent can read and write.

PUBLIC HOLIDAYS: Independence Day, 1 October (1960). Turkish Cypriots celebrate 15 November (1983) as Independence Day.

HISTORY AND GOVERNMENT

HISTORY
Cyprus declared independence from Great Britain in 1960. However, the area dominated by Greece and that of Turkey have had a long history since then of fighting for ultimate control of the entire island. Since Cyprus became part of the European Union in 2004, the Greek territory, called the Republic of Cyprus, has enjoyed more of the EU benefits than the Turkish territory, called the Turkish Republic of Northern Cyprus, for which EU rules have been suspended. Greek-controlled administrations are the only internationally recognized areas of the island.

For the purposes of this site, all information is in regard to the Republic of Cyprus unless otherwise noted.

POLITICAL SYSTEM
The Republic of Cyprus elects a President, who is both the chief of state and head of government. Although there is a vice presidential position, it remains unfilled as a Turkish Cypriot is supposed to hold the position per the constitution. The Council of Ministers is appointed by both the president and vice president.

The unicameral legislature consists of the House of Representatives (Vouli Antiprosopon). Again, although constitutionally there should be a total of 80 members, with 24 going to Turkish Cypriots; at present there are only 56 in the House. In the area administered by Turkish Cypriots, the legislature is called the Assembly of the Republic (Cumhuriyet Meclisi).

JUDICIAL SYSTEM
Cypriot law is based on English common law. There are two separate Supreme Courts, one for each controlled area. Supreme Court justices are appointed by the president.

COMMERCE AND TRADE

COMMERCIAL ACTIVITY
Agriculture: Citrus, vegetables, barley, grapes, olives, vegetables; poultry, pork, lamb; dairy, cheese
Industry: Tourism, food and beverage processing, cement and gypsum production, ship repair and refurbishment, textiles, light chemicals, metal products, wood, paper, stone, and clay products

TRADE PRACTICES
Exports: Greek: Citrus, potatoes, pharmaceuticals, cement, clothing and cigarettes. Turkish: Citrus, dairy, potatoes, textiles. Combined go to UK, Greece, France, Germany, UAE
Imports: Greek: Consumer goods, petroleum and lubricants, intermediate goods, machinery, transport equipment. Turkish: Vehicles, fuel, cigarettes, food, minerals, chemicals, machinery. Combined come from Greece, Italy, Germany, UK, Israel, France, Netherlands, China

BANKING, FINANCE AND INVESTMENT

FINANCIAL FACTS
With tourism being a major source of revenue, Cyprus has had inconsistent stability economically due to fluctuating tensions politically that have driven tourists away for periods of time. However, with clear lines drawn for EU membership, the Greek territory has enjoyed more consistent revenue stream from this sector, which in turn has catalysed the service sector.

Fiscal year: Calendar year

STOCK MARKET
Market value of publicly traded shares: $6.583 billion, with a market capitalization of almost EUR20 billion.

The Cyprus Stock Exchange (CSE) has been in operation for over 10 years, and in the last six years has been partnered with the Athens Stock Exchange (ASE). It also participates in the FTSE Med 100. The Bank of Cyprus, Laiki Bank, Hellenic Bank, Louis Cruise Lines and Tsokkos Hotels represent a type of “blue-chip” list that have been guaranteed to remain with the CSE.

BANKING
Cyprus banking law is about on par with English banking law in terms of the level of confidentiality they apply to individual bank accounts. A law passed five years ago is still traveling through the courts regarding unfettered access of resident bank accounts by tax authorities.

MEMBERSHIPS
Australia Group, C, CE, EBRD, EIB, EMU, EU, FAO, IAEA, IBRD, ICAO, ICC, ICCt, IFAD, IFC, IHO, ILO, IMF, IMO, IMSO, Interpol, IOC, IOM, IPU, ISO, ITSO, ITU, ITUC, MIGA, NAM (guest), NSG, OAS (observer), OIF, OPCW, OSCE, PCA, UN, UNCTAD, UNESCO, UNHCR, UNIDO, UNIFIL, UNWTO, UPU, WCL, WCO, WFTU, WHO, WIPO, WMO, WTO

FOREIGN INVESTMENT
With the advent of the Cyprus Mutual Fund Law, investment transparency has made foreign investors adjust their goals when considering Cyprus as a viable market. Mutual funds can be established using either an International Fixed Capital Company (IFCC), International Investment Limited Partnership (IILP), International Unit Trust Scheme (IUTS) or an International Variable Capital Company (IVCC). Within the framework of these mutual fund companies, there are specific rules about to whom and how the fund can be advertised; trustee approval by the Central Bank of Cyprus; and monitoring and inspection of the funds both onsite and via reporting and other audit requirements.

LABOR

LABOR LAWS
Non-resident foreign employees of offshore companies receive a base exemption on their Cyprus-derived salary for three years. Total income tax exemption applies when the employee works for a Cypriot employer from outside Cyprus.

BENEFITS/PENSION
Items imported for specific use by offshore company expatriate employees are exempt from import tax. This includes cars, office equipment and items for the home.

IMMIGRATION

IMMIGRATION FACTS
Greek-administered Cyprus is now part of the EU, which means that all EU residents can move freely throughout Cyprus without any additional Immigration documentation.

VISAS
EU, Council of Europe, US and Commonwealth nationals do not need visas to enter Cyprus.

EMPLOYMENT
Employers must be able to prove to the Immigration Department of Cyprus that no Cypriot is able to hold the position in question. Once this is approved, Cyprus has made it relatively easy for immediate family members to join the employee in the country for the duration of his or her work permit. However, this acceptance largely depends on the size of the employer’s investment in Cypriot infrastructure and business sector.

RESIDENCE
Retired individuals looking to relocate to Cyprus, offshore company executives and others who are interested in frequent travel to Cyprus and staying for more than six months per calendar year are given a Temporary Residence Employment (TRE) permit.

BUSINESS

BUSINESS ENTITIES
With the advent of the Cyprus Mutual Fund Law, investment transparency has made foreign investors adjust their goals when considering Cyprus as a viable market. Mutual funds can be established using either an International Fixed Capital Company (IFCC), International Investment Limited Partnership (IILP), International Unit Trust Scheme (IUTS) or an International Variable Capital Company (IVCC). Within the framework of these mutual fund companies, there are specific rules about to whom and how the fund can be advertised; trustee approval by the Central Bank of Cyprus; and monitoring and inspection of the funds both onsite and via reporting and other audit requirements.

TRUSTS
Cypriot trust laws have been formed using the English Trustee Act in Great Britain. There are three categories of trusts in Cyprus.

With International Trusts, one trustee - the managerial arm of a trust - must be a Cypriot. With Offshore Trusts, the beneficiaries cannot be Cypriots, and the financial activities performed by the trust cannot be within Cyprus. And with Local Trusts, both the settlor and the beneficiaries must be Cypriots.

TAXATION

PERSONAL TAXATION
The tax rate for non-residents of Cyprus applies only to income derived locally. In order to remain a non-resident to take advantage of this, one must be in Cyprus less than 183 days every calendar year. Go over, that limit, and worldwide income will be taxed on a sliding scale with a maximum of 30 percent.

CORPORATE TAXATION
There is a 20 percent capital gains tax on after the first CYP50,000. Offshore companies must pay 4.25 percent tax on all profits. However, dividends paid out are exempt from withholding tax.

OTHER TAXATION/DUTIES
Estate tax is levied on a sliding scale with a maximum of 45 percent for amounts CYP106,000 and over. Real property value is taxed at 4 percent. Import duties are paid on all goods coming from outside the EU.

DOUBLE TAXATION
Cyprus has signed double tax treaties with the following countries: Austria, Belgium, Bulgaria, Canada, China, Czech Republic, Denmark, Egypt, Germany, France, Greece, Hungary, India, Ireland, Italy, Kuwait, Malta, Mauritius, Norway, Poland, Romania, Russia, Slovakia, Sweden, Syria, Thailand, UK, US, Serbia and Montenegro.