Incorporating in Cyprus – Incorporating a Cyprus Limited Company

Incorporating a Cyprus Limited can be a good decision for a variety of reasons: Company taxation in Cyprus is between 0%, 2.5% and 12.5% depending on the orientation of the company. A prerequisite is, of course, that the seat of business management (management) is actually located in Cyprus.

Incorporating a company in Cyprus always makes sense if you want to do business within the European Union. As a full EU member, the acceptance of invoices from Cyprus is guaranteed, as long as it is a „real“ permanent establishment and not just a letterbox company in Cyprus. In addition, establishing a Cyprus Limited through an employment relationship can help establish residency in Cyprus and simplify the process.

Quick References – Company Formation Cyprus

1] For whom is a company formation in Cyprus suitable?
2] When does a Cyprus Limited pay off?
3] Company Taxes in Cyprus in International Comparison
4] Costs of setting up a company in Cyprus
5] The Automatic Exchange of Information in Cyprus
6] Private account and business account in Cyprus
7] The Non-Dom status and the Remittance Base in Cyprus
8] CFC Rules in Cyprus
9] Advantages of incorporating in Cyprus
10] Residence of the Shareholder and Managing Director
11] Summary of company formation in Cyprus

For whom is a company formation in Cyprus suitable?

Incorporating a company in Cyprus is especially interesting for location-independent entrepreneurs (freelancers, marketing experts, FBA traders), business models in the field of intellectual property (IP box) but also for private individuals such as day traders, authors, youtubers and digital nomads.

Incorporating a company in Cyprus is comparatively inexpensive and, in combination with tax residency in Cyprus, offers numerous advantages over many other jurisdictions within the European Union. To benefit from the low Cyprus tax rates, a resident director is essential. The tax savings compared to other countries are particularly noticeable in the case of high profits. Basically, the higher the taxable annual profit in Cyprus, the higher the tax advantage compared to the usual high tax countries.

However, even with manageable profits, it is worth setting up a company in Cyprus if you use all the cash advantages in your favor. Therefore, always take into account your current structural costs, corporate taxes, your personal costs for daily living, as well as income taxes. Cyprus offers low corporate tax rates, generous personal income tax allowances, and like England, Ireland and Malta, also offers the British legal custom of non-dom status. These advantages are rounded out with numerous double taxation treaties and EU membership. Cyprus company law is liberal and reliable.

When a Cyprus Limited becomes profitable

The tax leverage depends on the amount of annual profit. The following chart is intended to illustrate this fact in a comprehensible way for you as a successful and long-term entrepreneur. Do you find yourself in these orders of magnitude? The tax effect is particularly noticeable in the case of higher profits. In Cyprus, it is worthwhile not only to look at corporate taxes, but also to include individual personal circumstances in the considerations:

Since income tax for an individual only comes into effect at EUR 19,500 per calendar year and only social security contributions are incurred up to that point, it can make sense, even with a low annual profit of €50,000, to consider taking up residence in Cyprus and setting up a Cyprus Limited.

If you live in a partnership – also applies to unmarried couples – the tax allowance applies equally to both persons. It follows that salaries up to €39,000 per year do not trigger any income tax liability.

If you now reduce the profit by two salaries to be deducted, this can be pushed down to €11,000. With a corporate tax rate of 12.5%, the tax payment burden for Cyprus Limited would amount to just €1,375.

In this calculation, the social security contributions of about € 3,200 for couples and € 1,600 for individuals have been neglected for simplicity. If your potential profit is even less than €39,000 for couples or €19,500 for individuals, you can completely avoid company tax on salary payments. So whether the tax-relevant figures alone persuade you to move to Cyprus depends in particular on your personal circumstances. In any case, a tax-free or almost tax-free life in Cyprus is possible. Depending on the business model, there are even further structuring possibilities.

Corporate taxes in Cyprus in international comparison

Setting up a company in Cyprus inevitably leads to the question of whether it is competitive in international comparison with regard to corporate taxes. After all, corporate taxation determines how much capital a company can invest in research and development or invest in reserves.

In Germany, for example, almost 30% is due, whereas the corporate tax rate in Cyprus is only 12.5%. Since the German state is comparatively frugal, German companies are left with less capital to compete internationally.

The Cypriot limited pays 12.5% income tax on annual profits. An additional trade tax, as in Germany, does not exist in Cyprus. Thus Cyprus occupies one of the top positions within the European Union.

Costs of setting up a company in Cyprus

The costs of setting up a company in Cyprus vary considerably depending on the provider. When choosing your service provider, it is advisable to make a comprehensive comparison of the services and prices offered. Many incorporation agencies do not care whether you comply with legal frameworks or run into legal difficulties with your structure.

(1) Company formation in Cyprus: 1.950 EUR excl. VAT
(2) Application for VAT/TVA number: 200 EUR excl. VAT
(3) Registered Office (12 months): 600 EUR excl. VAT
(4) Commercial register: 350 EUR excl. VAT
(5) Incorporation documents and translations: 250 EUR excl. VAT
(6) Account opening 600 EUR excl. VAT
(7) Registration for social security as employer: 250 EUR excl. VAT
(8) Bookkeeping: from 120 EUR per month excl. VAT
(9) Payroll accounting: 25 EUR per employee per month excl. VAT
(10) Balance sheets: from 1.200 EUR per year excl. VAT
(11) Administration fee: 500 EUR per year excl. VAT

To get the Cypriot Limited „ready to go“, you absolutely need the items (1) – (6) i.e. only 3.950 EUR plus 19% VAT (= 4.700,50 EUR gross) – One time. Like most companies, the maintenance of the Cypriot Limited incurs costs for bookkeeping, balance sheet and other administrative activities. The annual costs for the items from (8) – (11) amount to approx. 3,440 EUR excl. 19% VAT (= 4,093.60 EUR incl. VAT) with an assumed volume of 50 incoming/outgoing transactions per month. Broken down to the month, this results in costs of 287 EUR excl. 19% VAT (= 342 EUR incl. VAT). These costs would also be incurred elsewhere.

Do not fall for windy „consultants“, but take your time for a detailed conversation, at least by phone or even better in person. When choosing your service provider, it is certainly a matter of pricing, but what counts in particular is the reliable safeguarding of your business interests: This of course includes meeting deadlines, complying with legal frameworks, and good and plausible communication with short response times. Just visit the Page of https://huggeconsult.com/ for more information.