Subsidiaries in Cyprus

Cyprus is categorized as a high-income economy by the World Bank, making it a preferred destination to start a business. It is one of the most prosperous European countries and a hub for innovation. The nominal GDP of the nation is $26.705 billion, and it is expanding at a rate of 5.4% a year. Cyprus’s three main economic sectors are agriculture, industry, and services, accounting for 85.5% of the country’s GDP.

Cyprus, previously ranked 57th in the Ease of Doing Business Index, is now 54th. As a result, starting a business and investing in Cyprus is simpler. Cyprus’s thriving tourist, food and beverage, textiles, and wood industries make it possible for various corporations to establish a subsidiary business in Cyprus. 

The country is strategically located and is surrounded by countries like Turkey and Greece. Hence, you can also serve these geographies when you incorporate a foreign subsidiary in Cyprus. People in the country between the ages of 20 and 64 have an employment rate of 75.9%. 

Companies can take advantage of the country’s developing infrastructure and skilled workforce to expand their business here. The easiest way to enter Cyprus is to establish a subsidiary in the country. It is a separate legal entity from a parent company which requires less paperwork and provides tax benefits. 

Read on to learn about establishing a subsidiary business in Cyprus to expand your business efficiently. 

What are the Types of Subsidiaries in Cyprus?

When starting a subsidiary business in Cyprus, you have different options. You can select the business type based on your requirements:

Private Limited Company

• A private limited company is privately held, and the quantum of responsibilities of the shareholders is limited to the share capital they bring to the company. 
• A private limited company must compulsorily have one shareholder, and the maximum number of shareholders can increase to 50.
• This is the most common type of company formed in Cyprus. Their shares, however, are not offered to the public.  

Public Limited Company

• Similar to a private limited company, the liability of the members is limited to the share capital they bring into the company. 
• A public limited company’s shares are freely traded in the stock market, and even the general public can buy them.
• A public limited company in Cyprus must have at least seven members. 
• You need a minimum capital of € 25,629 to incorporate a public limited company in Cyprus. 

Variable Capital Investment Company

• A variable capital investment company is a limited liability company by shares.
• However, the shares of these companies do not have a nominal value. The value of these shares keeps changing. 
• You must get a license from the Cyprus Securities and Exchange Commission (CySec) to establish these companies.
• These companies might be public or private, depending on the type of Collective Investment Organization. 
• The company, if private, must have at least one member, and the maximum number of members can go up to 50. 

Limited Liability Company by Guarantee without Share Capital

• These companies are unique to Cyprus and do not have a minimum share capital requirement. 
• A limited liability company by guarantee without a share capital also does not need shareholders or members who act as guarantors. 
• According to the founding documents, each founder member’s liability is capped at the amount they agreed to contribute to the company’s assets in the event of its dissolution.

Limited Liability Company by Guarantee with Share Capital

• In this kind of company, the memorandum of association dictates the liability of the company’s members.
• The liability of the members ranges from their share of unpaid share capital to the amount they have agreed to contribute if the company dissolves. 
• This kind of business might be either private or public. The corporation may encourage the general public to subscribe for shares if it is publicly traded.

How to Set Up a Subsidiary in Cyprus?

There are some essential steps you must take to set up a subsidiary business in Cyprus. Let’s explore some of these steps. 

Step 1: Get the company name approved

• The first step of starting a subsidiary business in Cyprus is to decide on the company’s name and get it approved. 
• Reach out to a name service provider and fill in the name application form. Conduct a name search on the registrar’s website to ensure the name is available. 
• If your desired name is available, fill up the form and submit it on the registrar’s website. Also, pay the application fee online. 
• If you want some name recommendations, you can ask your name service provider to help you with some shelf names. 

Step 2: Prepare the Articles and Memorandum of Association

• You must follow a general template prescribed by the Company’s Law to prepare the Articles and Memorandum of Association. 
• You must contact a lawyer to prepare the documents and sign the declaration. 
• You need to state the company’s main objectives and brief description, along with the share capital and how it is divided. 
• To prepare the Memorandum and the Articles, you must also submit the names of the directors and the secretary along with their addresses and passports. 
• Create a chain of ownership that will be followed in the company and declare its ultimate beneficial owners. 
• The entire activity costs around €1,000 and takes a day to complete all the formalities. 

Step 3: Submit the necessary documents

• There are four forms that your legal representative must submit. These forms include:

1. 1. The Declaration Form (HE1)8
   2. The Declaration Form with the address of the registered office (HE2)9
   3. The form that contains the details of the directors of the company and secretary (HE3)10, and 
   4. The original Memorandum and Articles of Association should be duly signed by the subscribers and attested by a witness. 

• All forms and incorporation documents must be submitted to the Companies Section of the Department of Registrar of Companies and Official Receiver. 
• You must pay the registration fees, which amount to about €205 and 0.6% of the authorized capital.
• Once you submit all the documents, you will get a registration certificate. 

Benefits of Setting Up a Cyprus Subsidiary

There are several benefits of starting a subsidiary business in Cyprus. Some of the benefits include the following: 

• The corporate tax rate in Cyprus is 12.5%, which is relatively low compared to several other European countries. Hence, you will not have to shell out a lot in taxes if you register a subsidiary in Cyprus. 
• Cyprus requires significantly less documentation. Hence, incorporating a subsidiary in Cyprus is hassle-free. 
• The country is close to some prominent nations like Turkey and Greece. Hence, once you set up a subsidiary business in Cyprus, you can expand it to some of these neighboring countries. 
• In Cyprus, subsidiary entities also benefit from more than 60 double taxation agreements, making the nation’s tax system one of the most comprehensive and investor-friendly in the world.
• Cyprus has a workforce with a high level of education, and it offers an affordable business environment.
• A Cyprus subsidiary is subject to the same regulations as other Cyprus companies. As a result, the subsidiary employees enjoy the same rights as employees of other companies.

Documents to Prepare When Opening a Subsidiary in Cyprus

Before setting up a subsidiary business in Cyprus, you must collect essential documents and authorize them before submitting them to the registrar. Some of these crucial documents include the following:

• The original Memorandum and Articles of Association
• Statutory documents of the parent company
• Certificate of incorporation of the parent company
• Document stating the main objectives of the company
• The names, addresses, and passports of all the shareholders, directors, and company secretaries 
• Document stating the address of the office from where the company will operate 
• Document stating the chain of ownership
• KYC documents of all the essential members of the company
• A filled  Declaration Form (HE1)8
• A filled  Declaration Form with the address of the registered office (HE2)9
• The form that contains the details of the directors of the company and secretary (HE3)10, and 
• The original Memorandum and Articles of Association should be duly signed by the subscribers and attested by a witness. 

You must contact a lawyer to review and sign all the documents before submission. 

What Business Forms Can Cyprus Subsidiaries Take?

Cyprus is a country that supports different kinds of businesses. Hence, a subsidiary business in Cyprus can take different forms, like a partially or wholly owned subsidiary business in Cyprus.

Limited liability companies are pretty popular in Cyprus. These companies may or may not have a share capital depending on the type of limited liability. These businesses’ incorporation procedures are relatively easy.  The best thing about them is that the shareholders or partners have limited liability, which means they cannot use their money to settle the company’s debts. 

Cyprus Subsidiary Laws

For a Cyprus subsidiary to operate smoothly and to avoid severe fines, it is imperative to abide by all applicable rules and regulations. These rules are intended to keep the business environment in Cyprus organized. Additionally, these protect the rights of the personnel who work for various Cyprus subsidiaries.

You must submit the parent company’s certificate of incorporation and collect the subsidiary’s registration certificate. You must also receive the administrative fee slip to prove you have made all the payments.  To complete all financial transactions relating to your business, you must create a bank account. 

Post-Incorporation Compliance

It is vital to meet the post-incorporation compliance for a foreign subsidiary in Cyprus for smooth company operations. These include:

• All limited liability companies excluding the small-sized companies defined by Cypriot law, must submit their audited financial statements to the Registrar of Companies. The statements must be translated into English or Greek. 
• Businesses should contact the Cyprus Inland Revenue Department for a unique tax identification number. You must also make all the tax payments on your employees’ behalf on time. 
• You must also register the business with the authorities that manage VAT and with the employers’ register of social insurance services. 
• Every limited liability business incorporated in Cyprus must now pay a fee of €350 by June 30 of each year, which the Cypriot government introduced in 2011.

Taxes on Subsidiaries in Cyprus

A subsidiary business in Cyprus is considered a regular business operating in the country. Hence, the corporate tax remains the same throughout the country. The standard rate of Corporate Income Tax in Cyprus stands at 12.5%. All businesses tax residents of Cyprus must pay taxes on all income they earn or derive, domestically and internationally. A non-Cyprus tax resident firm must pay taxes on certain other income generated from sources in Cyprus and money accrued or derived from business activity conducted via a PE in Cyprus.

CFC rules are in effect as of January 1, 2019, and non-distributed profits of CFCs that are directly or indirectly managed by a corporation that is liable to tax in Cyprus may do so.

Tax Incentives for Businesses Setting up a Subsidiary in Cyprus

Cyprus offers several tax benefits to a Cyprus holding company. There are several exemptions for the following:

• Dividends received from foreign countries
• Foreign PE trading profits
• Profits from transactions in titles

Cyprus does not withhold taxes on international payments except for certain payments that the European Union blacklists. 

Other Important Considerations

A Cyprus subsidiary’s establishment takes time. You must take a few weeks off to focus on expanding the business and meet all legal obligations. If your parent company keeps you busy, you can delegate the duty to another business leader or work alongside them.

To complete each stage of creating a Cyprus subsidiary company, you must also adhere to a budget. Before establishing a foreign subsidiary in Cyprus, make a budget because it will keep you in check.

How Can Multiplier’s Employer of Record Help You Hire and Expand in Cyprus?

Any local or global business needs time and resources to plan its opening. You require assistance adhering to all relevant labor regulations and municipal ordinances while creating a subsidiary online.

Why not use a service partner like Multiplier to assist your company in overcoming this growth barrier?

Multiplier takes care of all the formalities in entering a new market, so you don’t need to worry. Our staff of legal professionals is well-versed in both domestic and foreign laws. We ensure that Cyprus’ labor laws and conventions are strictly followed. With the assistance of a Employer of record such as Multiplier, you can quickly assemble teams worldwide and capitalize on new market opportunities.