FAQ Cyprus IBCs

What are the main uses of a Cyprus IBC?

Cyprus IBCs are most commonly used as holding companies as they are not taxed on dividends

received. They may also used for trading of goods, re-invoicing, transfer pricing billing of

services, real estate holding and other uses.

How long does it take to incorporate/acquire a Cyprus company?

New companies take 3-5 days to incorporate if the name has already been approved. Name

approval can take 3-4 days but we keep a list of pre-approved names that are valid for six

months. We also have shelf companies available with pre appointed nominees director and

shareholder ready to use.

What is the standard authorised capital for a Cyprus company?

There is no minimum authorised capital required but EUR 1,000 is the standard amount. Most

clients do not increase their capital post-incorporation. For clients that choose to do so the fees to

the registrar are 0.6%. For example, to set up a company with EUR 100,000 share capital would

cost EUR 600 to the registrar in fees, plus our fees (see price list). For large increases, clients

may prefer to do share capital increase at a premium. For example, issue an additional 1000

shares at premium of 1,000 Euro each for a value of 1-million. In this way they avoid the 0.6%

Registrar fee on 1 million and will only pay it on the 1,000 additional shares.

Can beneficial owners remain anonymous?

Yes, anonymity is provided by the use of a nominee shareholder. The beneficial owner’s details

are not recorded anywhere with any government authority, but the information is kept by MF

Cyprus.

Are corporate seals mandatory in Cyprus?

Yes, rubber stamps are mandatory. Electronic seals are prohibited.

What is the annual government licensing fee?

An annual fee of EUR350 per company is payable to the Cyprus Registrar of Companies. For

groups of companies, the maximum duty is capped at EUR20,000.

What is the penalty for late payment of government licensing fees?

If the duty is not paid on time, a penalty of 10% is imposed if the duty is paid within two months

from the due date. The penalty is increased to 30% if the duty is paid within five months of the

due date. If the duty is not paid within five months, the Registrar of Companies will remove the

company from the registry. There are provisions for the restoration of a company back to the

registry provided a penalty of EUR500 is paid within two years from the time the company was

stricken off and thereafter with the penalty payment of EUR700.

Can foreign companies re-domicile to Cyprus and what is the cost?

According to Cyprus law, a company may re-domicile to Cyprus provided that it is accepted by

the laws of the company’s country of incorporation and that such a provision as to the transfer of

its registered seat is allowed by the company’s constitutional documents.

When are the annual fees due?

The duty for 2011 is due by December 31, 2011, for subsequent years it must be paid by June 30

each year.

When do we issue annual invoices to clients?

If the company was incorporated between 1 Jan and the end of June, the invoices are issued in

January. If the company was incorporated between 1 July and the end of December, the invoice

will be issued in June.

What is the tax rate for Cyprus companies?

The general rule is that for resident companies, net profits are taxed at a flat rate of 10%. There is

no withholding income tax of the payment of dividends to its shareholders. There is no

withholding defence tax on dividends payable to non-resident shareholders (non-Cypriot

residents). Dividends received are exempt from tax (subject to rules). Profits from the disposal of

shares and rights are exempt from tax whether trading or capital in nature. Income of a foreign

permanent establishment is exempted from Cyprus income tax – losses can be offset against

Cyprus income (subject to rules).

There is no withholding tax on interest paid to non-residents (income or defence). Resident

companies pay 10% withholding defence tax. There is no withholding tax on payments for

intellectual property (royalties) to non-residents for use abroad. If for Cyprus use, the

withholding tax is 10%.

What double taxation treaties does Cyprus have?

Cyprus has DTTs with 45 countries and many more are currently being negotiated. The list of

DTTs includes CIS states, most EU countries, India, China, US, Canada, and many Arab,

African and Asian countries.

What foreign embassies are located in Cyprus?

Cyprus is home to embassies from the following countries:

Australia Austria Barbados Belgium

Belize Bulgaria Burundi Cameroon

Canada Central African Republic China Colombia

Costa Rica Croatia Cuba Czech Republic

Denmark Ecuador Egypt Estonia

Finland France Germany Greece

Greenland Guyana Hungary India

Indonesia Irish Israel Italy

Jamaica Latvia Lebanon Liberia

Luxembourg Malta Moldova Monaco

Nepal Netherlands New Zealand Norway

Palestine Papua New Guinea Peru Philippines

Poland Portugal Qatar Romania

Russia San Marino Serbia Seychelles

Slovakia Slovenia Spain Sweden

Switzerland Syria Thailand Uganda

Ukraine United Kingdom United States Uruguay

Are mixed boards of directors allowed?

Mixed boards are allowed, but for tax residency purposes, it is recommended to have a majority

of Cypriot directors. Tax residency is determined by management and control not by country of

registration. Therefore if the majority of the directors are foreign, the foreign tax authorities

could argue that even though the company is registered in Cyprus, it is a tax resident of the

foreign country. If you have no Cyprus directors than the company is not tax resident in Cyprus

and would be resident of the country from which the director resides.

What documents are required from the client to complete the due diligence process?

From the ultimate beneficial owner we must receive:

Passport copy

Bank reference letter

Utility bill (or other comparable proof of address)

KYC form

BO consent letter

If I am working with professional clients, what is the alternative to the above due diligence

requirements?

We can enter into an administration agreement to resolve KYC and DD issues. An

administration agreement allows us to not require a letter of consent from the beneficial owner,

but it does not bypass due diligence requirements. By law, we need these documents (passport

copy, proof of address, bank reference letter and KYC questionnaire). One option is if a trust

company has a trustee they put as the owner and supply us with that person’s documents, they

(the trust company) would then have their own agreement between themselves and the ultimate

owner.

What are the name restrictions for Cyprus IBCs?

Names of Cyprus IBCs can include majuscule (upper case) or miniscule (lower case) letters.

Names can also include foreign characters as long as the Registrar knows the meaning of the

name and the activity of the company.

What is the suffix of CyprusIBCs?

Cyprus companies end with the term “Limited”.

Does the Cyprus registry have a website where directors and shareholders can be viewed

online?

Yes, but it is fee-based access costing EUR 9.

What does the corporate package include?

- Certificate of Incorporation

- Certificate of Directors/secretary

- Certificate of Shareholders

- Certificate of Registered Address

- Memorandum and Articles of Association

- Appointment of the First Directors

- Resolution of the Directors (Inaugural meeting)

- Declaration of Trust (only if we are nominee shareholders)

- Instrument of Transfer (only if we are nominee shareholders)

When must a company acquire a VAT registration?

In accordance with EU VAT legislation effective from 1 January, 2010, all entities inside the EU

which provide services, import/export goods (regardless of the amount) to entities which are

registered for VAT in other EU member states must register immediately at the VAT authorities

in Cyprus and obtain an EU VAT number as well as be entered in the VAT Information

Exchange System (VIES). Furthermore, entities which receive services either from within the

EU of from outside the EU may also have to register for VAT purposed in Cyprus. The law

applies in cases that the company has already started the activities, received services from abroad

(EU and non-EU), exceeded the threshold of EUR 15,600 and the services received were paid

for. The company must prove to the VAT authorities that the services were actually paid for.

If a company is simply holding a bank account or an asset without any other activity, that

company does not have to register with VAT authorities.

When is the annual return compulsory for a company?

The annual return is always compulsory. If the client does not file there is an accumulative

penalty of EUR 100 per year. If the company has annual returns outstanding for many years, the

registrar may refuse to issue certificates until the returns are filed.

When is the annual return due?

The first annual return is due within 18 months of incorporation and every 12 months after that.

Must a client use our office for their accounting?

No, a client can use any accounting firm they wish. The process is faster and less expensive if

they use our services since we already have the documents required and if we are providing

secretarial and director services we would need to sign the accounts before they are filed

How do you ensure that your clients pay the annual maintenance fee if the compulsory

annual return filing is not enforced?

There are several ways. If the company has a power of attorney issued, we only will issue it for a

one-year period, so when a client comes back for a new POA we make sure they have settled

their annual fees. We also have an internal document we require from all clients called a Letter

of Consent. The letter allows us at our discretion based on certain conditions (one of which being

non-payment of fees) to appoint the beneficial owner as director and/or shareholder of the

company. This would mean that their name would appear on the public registry in Cyprus. In the

vast majority of cases, the client does not wish for this to happen, as they would then be

responsible for all filings and dealings with authorities and most importantly, they would lose

their confidentiality.

If a client runs into financial difficulties and for some reason cannot continue with the company,

we offer them several options. They may liquidate the company, in some cases strike the

company, or, we are willing to arrange some form of payment schedule – particularly for clients

who have a number of companies.

Also, we do not do additional work for clients who have not paid their annual fees.

What is the process of opening a bank account in Cyprus using a Cyprus company?

To open a bank account in Cyprus, the bank requires the following documents:

- Bank forms fully completed and signed

- The certificates of the company

- Passport copies of all beneficial owners, signatories, cardholders, internet banking users,

Director and Secretary

- Bank reference letter for all beneficial owners, signatories, cardholders, internet banking

users, Director and Secretary

- Proof of address for all beneficial owners, signatories, cardholders, internet banking

users, Director and Secretary

When we receive the completed bank questionnaire, we (MF Cyprus) complete the bank forms

and send them to the client to sign. The signed originals must then be returned to MF Cyprus. A

scanned copy of the above documents and the bank questionnaire is sufficient.

We do not need the documentation for Director, Secretary or Signatory if our office is offering

these services, however the other documentation is still required.

If MF Cyprus acts as the signatory of the bank account, the account can be opened in

approximately three days. If the client is the signatory, the bank account will be opened in

approximately two days of the reception of the original signed bank form.

For clients who have bank accounts in Cyprus (a significant majority of companies do), as

nominee directors we are in a position to place significant pressure on the bank not to accept any

transactions until our fees are settled. In extreme cases, we are able to ask that the bank request

from the company a certificate of good standing. If the bank did not receive said certificate they

can block the company’s bank account. As we would not be in a position to obtain any

documents for clients who have not settled their fees, the client would have to settle outstanding

fees to enable the bank to unblock their account.

How can a company apply for a strike-off to the registrar of companies?

This option can be considered when the company has no assets and liabilities and carries no

business. Hence it follows the company must be completely clean before its application and the

directors/beneficial shareholders need to be in a position to certify such position (i.e., no assets,

liabilities, litigation, business). If the company had taxable income in prior years it is advisable to

obtain before the application a tax clearance certificate and in order to do so, up-to-date financial

statements must be prepared and filed. The advantage is that the procedure for the strike-off is

simple. The disadvantage is that under certain circumstance an “interested party” may make an

application to restore the company and make a claim within 20 years. It takes about 8-12 months

for the registrar to strike-off the company and the annual fees (pro-rated) need to be paid until

the actual strike-off of the company. The fees would not apply in the case we are not providing

directors or secretary for the company.

How can members voluntarily liquidate in accordance with the Companies Act?

In this case, a liquidator needs to be appointed. In order to shorten the time required for the

winding-up and minimize the costs involved before the appointment of the liquidators, the assets

of the company may be liquidated and creditors paid off, audited financial statements prepared

and taxes paid. Then the liquidation procedure may start and may take about 3-4 months to file

final returns. The advantage of this procedure is that it is formal and that it does not carry the

disadvantage mentioned in the strike-off procedure.

The fees for the preparation of audited accounts depend on the activity of each company and on

whether the company is being liquidated or stricken-off. The documents required for liquidation

are dependent on whether the financial statements have been finalized and if the company has

any creditors.

Whom do I contact if I have other questions that have not been answered?

For detailed information pertaining to specific cases, please contact:

In Cyprus:

Geoffrey Magistrate: gmagistrate@mossfon.com

Olga Papadopoulou: opapadopoulou@mossfon.com

Theano Polydorou: tpolydorou@mossfon.com

General Email: cyprusrep@mossfon.com

In Panama:

VeronicaVelasquez: vvelasquez@mossfon.com

Tomas de Leon: tdeleon@mossfon.com

General email: Cyprus-panamaoffice@mossfon.com