Jurisdiction of the month: Cyprus

2014 06 23 | Category: News

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Geography, Population, Languages
Cyprus is located in the north-eastern part of the Mediterranean, at the cross-roads of Europe, Africa and Asia. It is the largest island in the Eastern Mediterranean. It covers an area of 9,251 sq. km and lies 65 km south of Turkey, 96 km west of Syria, 385 km north of Egypt and some 980 km south-east of Athens.

The population of Cyprus is about 840,000. The capital city is Nicosia, which has a population of about 310,000. The official languages in the two zones are Greek and Turkish, but most Cypriots speak English, which is extensively used in business and commerce.

History, Political Structure and Law
Cyprus gained independence from Britain in 1960. In 1974 Turkey invaded Cyprus and has occupied the northern 40% of the island since then.

Since 1960 Cyprus has had a Presidential system of Government, with Presidential elections taking place every 5 years. The executive branch of the Government is the Council of Ministers to which the President appoints members. The Ministers are responsible for the administration of all matters falling within the domain of their ministries and for the implementation of legislation. Legislative power is in the hands of the House of Representatives, which consists of 56 elected members who hold office for a period of five years. A multi-party system operates in Cyprus and the electoral system is based on proportional representation.

The legal system is based on British law, and all statutes regulating business matters and procedure are based on English Common Law. Most laws are officially translated into English. The Company law is modelled on the UK Companies Act of 1948. In addition, Cyprus has signed an associate agreement with the European Union.

Economy and Infrastructure
There are frequent air connections to many international destinations. Larnaca International Airport replaced Nicosia as the main International airport in 1975, and the second international airport near Paphos became operational in late 1985. There are major port facilities at Limassol, Larnaca, and Paphos. All ports in Cyprus come under the Cyprus Ports Authority.

Cyprus has a good telecommunications system, and over a hundred countries can be reached by direct dialling from any telephone; excellent postal and courier services are also available.

Agriculture, traditionally an important sector of economy that still remains the largest employer, is no longer the principal source of income. Tourism accounts for the largest proportion of GNP, and the development of the service sector has exceeded all expectations. Manufacturing also provides an important source of foreign exchange.

The island’s EU accession led to the adoption of the euro as a national currency on 1 January 2008.

Company Incorporation
The Principal Corporate Legislation is the Companies Law, Cap. 113 (as amended).

The international trade and investment companies can be incorporated under the Companies Law, Cap 113 (amended) are as follows:

• Public Companies;
• Private Companies – up to 50 Shareholders;
• Offshore Companies

A Cyprus “offshore” company is defined as an otherwise normal Cyprus company which is owned by non-residents of Cyprus and does business mainly outside the island.

The powers and objects of a Cyprus company are contained within the Memorandum of Association and have to be specific. The languages of legislation and corporate documentation are English and Greek. Off-the-shelf companies are available.

Incorporation procedure involves submitting the Memorandum and Articles of Association to the Registrar of Companies, together with an affidavit sworn before a Court and the appropriate registration fee. As a matter of local company law the company must maintain a registered office address within Cyprus and must also appoint a company secretary who, for practical reasons, advisable to be resident in Cyprus.

Restrictions on trading and business activities are follows:

• The Company cannot engage in banking, insurance or the provision of financial services to the public unless special permission is granted;
• The Company cannot trade with resident individuals or companies located in Cyprus other than in relation to the maintenance of premises or banking and professional services.

Company names are subject to the following requirements:

• Names may be expressed in any language that uses the Latin or Greek alphabet if the Registrar is in receipt of a Greek or English translation and the name is not deemed undesirable.
• Any name that is identical or similar to an existing company name is not acceptable.
• Any name that implies illegal activity or implies royal or government patronage is not permitted.
• The following words or their derivatives are restricted: Asset Management, Asset Manager, Assurance, Bank, Banking, Broker, Brokerage, Capital, Credit, Currency, Custodian, Custody, Dealer, Dealing, Deposit, Derivative, Exchange, Fiduciary, Finance, Financial, Fund, Future, Insurance, Lending, Loan, Lender, Option, Pension, Portfolio, Reserves, Savings, Security, Stock, Trust or Trustees.
• The following names or their derivatives and foreign language equivalents require consent or a license: Bank, Trust, Building Society, Insurance, Assurance, and Reinsurance.
• The suffix Limited or Ltd. denoting limited liability must be included.

The minimum number of directors is one. The directors may be natural persons or bodies corporate. In order to obtain relief under the taxation treaties signed by Cyprus, the Company needs to be Cyprus resident, and must have a majority of its directors based in Cyprus. All Cypriot companies must appoint a company secretary, who may be a natural person or body corporate. The minimum number of shareholders is one.

The following classes of shares are permitted in Cyprus: registered shares, shares with par value, preference shares, redeemable shares, and shares with no voting rights.

Annual Taxation and Fees
Taxation rules imply that by virtue of special provisions in the Cyprus Income Tax Laws, the net chargeable profits of Cyprus Offshore Companies are taxed at a rate of 10%.

Cyprus is a low-tax country rather than a no-tax country. One of the great benefits of Cyprus Companies is that Cyprus has signed a large number of double-tax treaties which provide for reduced or zero withholding taxes on dividends, interest or royalties paid to a Cyprus Company. There are treaties with Austria, Belgium, Bulgaria, Canada, China, the Czech Republic, Slovakia, Denmark, Egypt, France, Germany, Greece, Hungary, India, Ireland, Italy, Japan, Kuwait, Malta, Mauritius, Norway, Poland, Romania, Russia (including all the CIS countries except for Kazakhstan), Singapore, South Africa, Sweden, Syria, Thailand, UK, USA and the former Yugoslavia. Double taxation treaties with Kazakhstan and Finland are currently being negotiated.

License fees are not applicable in Cyprus.

An annual return giving details of all those who have held shares throughout the year and the current directors must be filed and submitted to the Cyprus Taxation Authority and the Central Bank of Cyprus. In addition, every Cyprus Company must prepare audited accounts and submit these to the Central Bank and the income tax office.

EditorJurisdiction of the month: Cyprus