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All companies are taxed at a rate of 12,5% (10% up to the year 2012).

Exceptions:
Type of income
Profit from the sale of securities (Note 1) 100
Dividends 100
Interest not arising from the ordinary activities or closely related to the ordinary activities of the Company (passive income) (Note 2) 100
Profits of a permanent establishment abroad (if more than 50% of the income of the permanent establishment derives from trading activities or the foreign tax burden rate is not lower than 5%) 100

1. Cyprus has a tax system that complies with EU legislation and OECD (Organization for Economic Co-operation and Development) requirement;
2. Cyprus has concluded significant number of double tax treaties worldwide which offer important international tax planning opportunities and advantages;
3. A uniform income tax rate of 12.5% (prior to 2012: 10%) is applicable for all companies;
4. It is very easy for such companies to obtain tax exemption for income (dividends and gains) they generate;
5. Profit from disposal of securities (shares, debentures, bonds etc) are exempt from taxation apart from the sale of shares in companies owing immovable property in Cyprus, which will be subject to capital gains tax;
6. Cyprus does not levy withholding tax over outbound dividends, so people using Cyprus holding companies have full flexibility in repatriating their profits.

If you are seeking anonymity and privacy, various firms in Cyprus can provide you with nominee directors, secretary or nominee shareholders for your company. The beneficiary’s ownership of the Company is secured by the execution of a Deed of Trust, between the beneficiary and each nominee shareholder appointed, giving the beneficiary full access to any future transfer of benefits derived from the shares in question. An indemnity letter address ot the nominee director and secretary must also be signed by the beneficial owners.

The minimum number of shareholders for incorporation of a private company is 1 (one) and for public company is 7 (seven).

A private company may have only one director and a secretary but the sole director of the Company cannot also be the corporate secretary. Nevertheless, where a single member private limited liability company is concerned, the sole director may also be the secretary of the company.

A public Company is required to have at least 2 (two) directors and a secretary.

The shareholders of a Cyprus company may be legal or natural persons and may be resident and/ or nationals of any country. They have to be the legal
age of 18 and over, and in order to be a director, they should also be sane mind and be able to contract under law.

The Council Regulation (EC) No 2157/2001 on the Statute for a European Company was adopted on 8th October, 2001 containing rules for European Public Companies known as Societas Europaea (SE) (Latin for “European Company”). The new legislation entered into force in October 2004. Cyprus has amended the Companies Law in 2006 (Law 98(I) of 2006) in order to implement the Council Regulation (EC) No 2157/2001.

An SE can be formed in four ways:

1. by ‘merger’ of two or more public limited liability companies provided that at least two
   of them are governed by the law of different Member-States;
2. by the creation of a holding SE by public or private limited-liability companies provided that each of at least two of them: 1) is governed by the law of a different Member-State, or 2) has for at least two years had a subsidiary company governed by the law of another Member State or a branch situated in another Member State;
3. by formation of a subsidiary SE by private or public companies provided that each of at least two of them:
   1) is governed by the law of a different Member-State or
   2) has for at least two years had a subsidiary company governed by the law of another Member State or a branch situated in another member state;
4. by the transformation of an existing public limited-liability company into an SE if for at
   least two years it has had a subsidiary company governed by the law of another Member-State.

The SE must have a minimum capital of EUR 120,000. The registered office of the SE must be the place where it has its central administration, that is to say its true centre of operations. The SE can easily transfer its registered office within the Community without dissolving the company in one Member State in order to form a new one in another Member State.

The Regulation provides that the provisions of Member States’ laws which would apply to a public limited-liability company in that state, apply to an SE with a registered office in that state in relation to matters not regulated by the Regulation.

Paragraph 20 of the Preamble to the Regulation provides that the Regulation does not cover, inter alia, taxation matters. The provisions of the Member – States’ law and of Community law are therefore applicable in relation to taxation matters.

Cyprus is a most attractive jurisdiction for SE’s considering its low tax rates and its extensive network of double taxation agreements.

1. A private Company Limited by shares Most registered companies are limited by shares. The effect of a company being limited by shares is that, on liquidation, the liability of a member is limited to the amount, if any, which remains unpaid on his shares. A private company is a company which, by its articles of association:
   1. restricts the right to transfer the company’s shares;
   2. limits the number of its members to 50 (fifty), excluding persons who are in the employment of the company and persons who, having been formerly in the employment of the company were, while in that employment and have continued after the termination of that employment, to be members of the company;
   3. prohibits an invitation to the public to subscribe to any shares or debentures of the company;
   4. prohibits the issuance of bearer shares
2. A Private Company Limited by Guarantee.
   This type of company is used primarily for charitable and non-profit purposes. Unlike private companies limited by shares, the liability of members in a
   Private company limited by guarantee is limited to the amount that the members promise to contribute to satisfy creditors when and if the company is
   wound up.
3. A Public company limited by shares. Where a company is registered as a public company this must be stated in the memorandum and the words Public Company Limited (or Public Co. Ltd or P.L.C e.t.c) must come at the end of its name. The principal differences with private companies are as follows:
   1. The shares of a public company are freely transferable;
   2. A public company can issue shares or debentures to the public;
   3. Before issuing any of its shares or debentures to the public, a public company must issue a prospectus or statement in lieu of prospectus;
   4. The company is not entitled to commence business until a trading certificate is obtained from the Registrar of Companies;
   5. There is no restriction as to the maximum number of members such a company may have but there must be a minimum of seven members;
   6. The minimum share capital of a public limited company must be CYP15,000 (approx. €25,650);
   7. A public company must have a minimum of two directors but a private company need only have one;
   8. A public company must hold a statutory meeting;
   9. A public company can issue share warrants;
   10. A public company may not issue shares at a discount;

Companies which are tax residents of Cyprus are taxed on all income accrued or derived from all sources in Cyprus and abroad. A company must register with the Inland Revenue Department within 60 days of incorporation.

A non-Cyprus tax resident company is taxed on income arising from immovable property in Cyprus and on income accrued or derived from a business activity, which is carried on through a permanent establishment in Cyprus. Permanent establishment is a fixed place of business through which the business of an enterprise is wholly or partly carried on. The term permanent establishment includes a place of management, a branch, an office, a factory and a workshop.

As per the Income Tax Legislation (Article 5(4)), legal or natural persons non-Cyprus tax resident but with a permanent establishment in Cyprus, may elect to be treated as Cyprus tax resident persons.

A Company is a tax resident of Cyprus if it is managed and controlled in Cyprus. Under the Cyprus Law there is no exact definition of management and control. However, the basic requirements for management and control are as follows:

• The residence of the majority of the directors;
• The location where the board meetings of the Company are held;
• The location of the formation of the general policy of the Company.

(For further information please refer to our tax guide and corporate brochure)