Re-domiciliation procedure and establishment of a branch office in Cyprus
Copyright, CHRISTIANA ARISTIDOU LLC., September 2021.
The re-domiciliation procedure in Cyprus for foreign companies is governed by the Cyprus Company Law, Cap. 113. The law allows the transfer of a business’s registered office within the country, as well as outside of the country. The re-domiciliation process on the island is quite straightforward as it is not required that a company is established from scratch from somewhere else. Also, foreign companies can do that without winding up their legal entities in their countries of origin. Briefly, the re-domiciliation procedure for foreign companies in Cyprus consists of five steps.
The first step would be that the foreign company applies for the registration as a continuing legal entity in the island and the second step involves providing the Registrar of Companies in Cyprus with the documents which prove, among others, that the business is in good standing in its country of origin. The third step includes the preparation of an affidavit of the director of the foreign business, the next step would be that a temporary Certificate of continuation is issued by the Registrar of Companies, and lastly, the Registrar of Companies issues a final Certificate of Continuance in the country.
One may question why relocating a business to Cyprus would be a beneficial decision and this can simply be answered by the fact that Cyprus has one of the lowest corporate income taxations in the European Union countries, which is only 12.5%. In addition to that, Cyprus offers an exemption for dividend participation and an exemption from tax on profits that derive from the securities disposal, as well as the fact that there are no withholding and succession taxes.
Also, the branch office is considered to be one of the business forms available for foreign companies interested in setting up a presence in Cyprus. The main characteristic of a branch in Cyprus is that a branch office is an extension of a company that operates under its umbrella. Therefore, it must bear the name of the parent company and must be entailed in the same activities. The branch office can either be created by other Cypriot companies or by foreign companies seeking to expand on the Cypriot market.
It should be noted that the branch office can be created solely by other corporate entities. Furthermore, the opening of a branch office in Cyprus implies respecting the provisions of the Company Law which provide for the creation of this business form in Chapter 113, according to which a foreign company must register its business seat in Cyprus within one month after starting its activities in Cyprus. Along with establishing a branch in Cyprus, there are some benefits such as increased flexibility to a company is doing business in Cyprus in a fast, flexible, and easy manner. A foreign branch registered in Cyprus can enjoy all the advantages extended to all Cyprus legal entities.
The procedure is easy, straight forward and shall contribute towards the growth and development of a company. The corporate environment is ideal and the advantage of European Union Directives and Regulations along with one of the lowest tax rates in the European Union should be taken into consideration. Thus, as long as a company’s subsidiary in Cyprus is managed and controlled in Cyprus the advantages shall apply.
Many foreign companies decide to operate through branches in Cyprus since they can have full control over the actions and decisions in the branch office, while the branch office cannot complete activities other than the parent company’s object of activity. The requirements for setting up a branch office are also simpler than those for setting up a local company and from a taxation point of view, branches have several advantages over local companies and it is possible for a foreign company to establish more than one branch office in Cyprus.
Moreover, the branch office is obliged to bear the same name as the parent company and there is a requirement that the foreign business appoints a resident of Cyprus to be its representative in Cyprus. The key difference between setting up a branch in Cyprus and relocating an existing company is that the branch has no legal personality on its own, unlike the existing company, but it is rather an extension of the parent company. Consequently, the parent company is completely liable for the branch’s debts and obligations and responsible for the management of its profit.
A private limited liability company is usually considered to be the most suitable type of company that serves the purposes of most companies. The reasons are many, the most important being that this type of company, by its description, as it is considered limited, limits the personal liability of the shareholders who formed it. In other words, it offers the maximum protection to the shareholders who founded it as it grants them protection over their assets.
In other words, it has a separate legal personality from that of its members/shareholders, as it can sue and be sued as a separate person, it offers flexibility and freedom of movement as it can move on its own with its name and legal personality, it can allocate duties and responsibilities as well as rights on the shareholders, it can make arrangements for the dividend rights (shareholders profits) and equally important is the fact that it is taxed by a fixed rate of 12.5% on its income yearly.
On the matter of any relevant permits needed for any employees that will be relocated to Cyprus from international countries, the employees will either have to obtain temporary residence and employment permits which are renewable every two years, and allow the employees to travel to and from
Cyprus without visas, or in the case of Startups, there is the option of the Cyprus Startup Visa, which also allows non-EU residents to enter and work within Cyprus to form a business. We will be prepared and ready to assist our clients, according to their needs, and assist them with all the relevant and required actions that need to be taken to best accommodate them in their move to Cyprus.
Our clients should rest assured that after we are provided with an overview of what their business would wish to achieve in Cyprus, which employees would be moving into the country, and certain other important information, we will be happy to advise on any questions raised of any context such as living and business expenses that will allow our clients to effectively relocate to Cyprus.
We will be able to provide our clients with suggestions as to the most suitable area for them to be located, according to their requirements, as well as connections to any real estate agents and co-operators who would be able to facilitate our client’s move to Cyprus. We may also provide our clients with an estimation of the basic annual expenses for maintaining an office in Cyprus.
Please contact us in case you are interested in relocating your business to Cyprus, wish to establish a branch, or set up a limited liability company. There are no legal requirements as to the minimum or maximum authorized share capital of a Cypriot limited company.
Nevertheless, it is recommended that a minimum of authorized share capital is EUR 5.000 divided into 5.000 shares of EUR 1 each. Not all these shares have to be subscribed for, however, it is recommended that at least 100 shares are issued upon incorporation.
It should also be noted, that the share capital of a company can be increased and decreased at any time, while unissued shares can be easily issued. Furthermore, there are many banks in Cyprus that we could suggest which may assist our clients and offer services for the opening and maintenance of corporate, as well as personal bank accounts.
It should be mentioned that all companies have a year-end on the 31st of December. Each year, the company will have to pay an annual levy fee of EUR 350. The professional tax fee also has to be paid, and it differs according to the municipality of the registered office of each company.
Furthermore, the appointment of an Auditor is also necessary, audited accounts must be presented to the members within twelve months from the year-end and filed with the Registrar annually for the previous year.
Eighteen months after the date of its incorporation, the First Audited Financial Accounts must be filled in at the Registrar of Companies along with the Company’s First Annual Return. As a law firm, we have a big network of Auditors with whom we cooperate, and we will be able to introduce our clients to many of them.
It will be our pleasure to work with any client concerning the above. We work with engagement letters; therefore, our clients will know exactly the fee, delivery time, and way of business. Please do not hesitate to contact us to arrange an e-meeting, and discuss your specific needs and ambitions.
We assist clients by providing our services and guidance, to enable businesses in establishing the suitable and best business plan and solution and create the right conditions to achieve the desired outcome. We are an innovative hybrid lawtech firm, formed in actual and virtual teams of experts supported by a diverse network of advisors and researchers, offering extremely competitive and transparent fees.
Driven by purpose, we use legal, technology, scientific, and industry knowledge and experience to solve our clients’ problems and serve their needs and provide them with alternative fee arrangement schemes, that fit their budget. Please rest assured that this hybrid lawtech firm, is supportive of start-ups and there should be no concerns about the payable fees.