Opening a business in Cyprus has great advantages when it comes to tax benefits, strategic location and quality of life.
Below are the main steps needed to get started, but keep in mind that numbers could change depending on new rules and regulations and thus this document is for guidance purposes, not for investment advice. Always seek professional advice before proceeding to the needed scope of work.
1. Steps needed: Opening a business in Cyprus involves several steps. Here is a general overview of the process:
- Make a market study/business plan to best understand the market needs and business requirements.
- Choose a legal form for your business: The first step is to determine the legal form of your business. You can choose between a sole proprietorship, a partnership, a limited liability company (LLC), or a public limited company (PLC).
- Register your business name: Once you have chosen the legal form of your business, you will need to register your business name with the Registrar of Companies.
- Obtain a tax identification number (TIN): You will need to obtain a TIN from the Cyprus Tax Department. This is necessary for tax purposes.
- Open a bank account: You will need to open a bank account for your business in Cyprus.
- Obtain any necessary licenses and permits: Depending on the nature of your business, you may need to obtain certain licenses and permits from the relevant authorities in Cyprus.
- Register for VAT: If your business is registered for VAT, you will need to obtain a VAT number from the Cyprus Tax Department.
- Register with the Social Insurance Department: You will need to register your business with the Social Insurance Department in order to make contributions to the social insurance system.
- Hire employees: If you plan to hire employees, you will need to register with the Cyprus Department of Labor and Social Insurance.
- File annual returns: You will need to file annual returns with the Registrar of Companies.
- Pay taxes: You will need to pay taxes on your business income to the Cyprus Tax Department.
It is important to note that the above steps may vary depending on the legal form of your business and the nature of your operations. It is recommended that you seek professional advice before starting a business in Cyprus.
Note that the registration of the Company usually takes 20-30 days approximately to be completed (Time depends on the experts doing the job, the timing of the process and the rush in governmental institutions)
2. Documents needed
1.Passport of shareholders
2. A recent utility bill (e.g. electricity bill, telephone bill etc) where your personal address will be visible (preferable an English version or legally translated)
3. Current occupation/ profession with supportive documents
4. CV or bio of partners or LinkedIn profile ideally supported by certificate(s)
5. Bank reference letter (needed to open the bank account)
6. Copy of tax declaration (could be demanded at a later stage)
7.Financial statements of the company (if an existing one opening a branch or relocating)
Notes:
- Brief description of the company and its main activities (website is helpful)
- Recommended to have a physical address &local employees such as secretary, accountant, etc.
3.Related fees:
• Company incorporation fees
• Tax registration fees
• Bank account opening for the company
• Fees for address and secretary service (if needed)
• Brainstorming & consultancy with the experts to understand all the setup needs
• Research and contact details of needed institutions/experts in Cyprus
• Facilitation and filing of all needed documentation to setup the business
• Meetings with key experts like lawyer, auditor, banks and potential suppliers
• Follow up on the process until finalized
Average fees: could range from €5,000 to €10,000 depending on the size of business, number of shareholders, trademarks needed, licenses needed and other aspects based on each specific industry.
4. Taxes:
- VAT: 19% on most transaction. There are reduced VAT rates of 5% and 9% for certain goods and services.
- Income tax 12.5% - lowest corporate tax rates in the EU
- Try to benefit from Non-Dom where applicable, to save taxes on foreign income, such as dividends, interest, and capital gains for 17 years.
- Residency program: Non-doms who spend more than 183 days in Cyprus in a year can apply for residency, which can lead to citizenship after seven years. (No warranties, case by case to be studied.
- No inheritance tax: There is no inheritance tax in Cyprus, making it an ideal location for those with substantial wealth to pass on to their heirs.
- Double taxation treaties: Cyprus has signed double taxation treaties with over 65 countries, ensuring that individuals and companies are not taxed twice on the same income.
- No wealth tax: There is no wealth tax in Cyprus, which is beneficial for high-net-worth individuals who have significant assets.
- Personal Income Tax: The personal income tax rate for individuals in Cyprus ranges from 0% to 35%, depending on the amount of income earned.
- In Cyprus, the personal income tax system is progressive, which means that the tax rate increases as the income of an individual increases. The tax rates for individuals in Cyprus are as follows:
-0% for income up to €19,500
-20% for income between €19,501 and €28,000
-25% for income between €28,001 and €36,300
-30% for income between €36,301 and €60,000
-35% for income over €60,000
It is important to note that the above tax rates are applicable only to the income earned in Cyprus. If an individual is a tax resident in Cyprus, they are required to pay tax on their worldwide income in Cyprus. However, if an individual is not a tax resident in Cyprus, they are only required to pay tax on their income earned in Cyprus. Additionally, there are various tax deductions and credits available that can lower an individual's taxable income and reduce their tax liability. - Capital Gains Tax: Capital gains tax in Cyprus is 20%, but there are exemptions and deductions available for certain types of transactions.
- Social insurance: The rate of 8.3% applies for both employee and the employer up to 31 December 2023. Thereafter, the rate will increase every five years by 0,5% until it reaches 10.3% as of 1 January 2039. Maximum annual cap on insurable emoluments as of 1 January 2023 of EUR 60,060. Other: social cohesion fund 2%, Redundancy Fund 1.2%, Industrial Training Fund 0.5%, Holiday Fund (if not exempt) 8%.
- Annual levy: EUR350
5. Other needed services (case by case)
A. Market study; market information and statistics, competition analysis, list of potential suppliers, list of potential clients (in case Business to Business). Fees depends on exact scope of work but common average is anywhere between €3,000 and €30,000.
B.Business plan. Could be needed to better understand the market, the taxation, and the needed costs to start and operate the business. The study includes:
1. The profile of the business
2. The strategy of the business (legal, HR, Sales, marketing, workflow, market and competition analysis)
3. The financial projections: startup costs, operating expenses and financial projections. The study will also include the financial ratios, break-even analysis and funding proposal (if needed for the bank or investors).
Fees would depend on exact scope of work but common average is anywhere between €5,000 and €50,000.
C. Recruitment and training of the needed personnel in Cyprus. Fees to be discussed based on the scope of work. Average rate is 10% from recruits salaries.
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