ESTABLISHING A BUSINESS ENTITY IN CYPRUS Introduction Cyprus is an EU member state and a common law jurisdiction with a legal system similar to that of the UK. It is located at the eastern end of Europe linking 3 continents, Europe, Africa and Asia and it has a long and strong reputation as an international business center. 1. Types of Business Entities The most common forms of business entities established in Cyprus are (a) limited companies; (b) partnerships; and (c) alternative investment funds. Further, Cyprus international trusts are also commonly formed by non-Cypriot investors and high net worth individuals. 1.A Companies Cyprus companies are registered under the

• Possibility to adjust articles as per shareholders’ agreement.

Limited liability of shareholders.

No minimum capital requirement.

Between 1 and 50 shareholders.

• Can have a sole director or more directors. • No restriction as to nationality or residence of shareholders or directors. Tax • Exemption from tax on profits from the disposal of securities (wide definition of what constitutes eligible securities). • Exemption from tax on dividend income (subject to certain conditions). • No withholding taxes on repatriation of dividends, interest, and royalties to non- residents.

Companies Law, Cap.113 as amended. Private Company Limited by Shares

The private company limited by shares is the most common form of entity established in Cyprus. It has legal personality separate and distinct from its shareholders with the liability of shareholders limited to the unpaid amount of their subscribed shares. There is no requirement for a minimum share capital and generally there is no restriction as to its ability to carry on business activities even where its share capital is small. The company’s governance is regulated by the Companies’ Law and the provisions in its memorandum and articles of association which may be adjusted as wished by the shareholders to reflect their arrangements. Key features

12.5% corporate tax rate.

• Notional Interest Deduction (annual tax expense calculated as a percentage of equity). • Extensive and continuously growing network of double tax treaties. Private Company Limited by Shares registered also as Foreign Interest Company A Cyprus company can employ third country (non-EU) nationals if it meets certain basic requirements under a scheme adopted by the Cyprus Council of Ministers. These employees can be issued employment and residence permits to work and live in Cyprus. The main requirements are the following:

Separate legal personality.

Full and unlimited capacity.

ILN Corporate Group – Establishing a Business Entity Series

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