The Companies Law, Cap 113, as amended from time to time (Law), enables an overseas company incorporated under the laws of an approved jurisdiction to transfer its seat of incorporation to Cyprus. As a result, the company is not liquidated and may continue its activities without interruption.
In order to initiate the transfer of the domicile of an overseas company to Cyprus certain preliminary matters must be considered:
The laws of the country of incorporation of the company must allow re-domiciliation (local legal counsel advice may be required).
The articles and memorandum of association of the company must provide for the possibility of re-domiciliation. If not, the statutes of the company must be amended to include a “continuation” provision.
If the company is carrying out a licensed activity; it is required to obtain the relevant license or permit from the competent Cyprus authority before commencing any business activity in Cyprus as required under applicable laws and regulations.
The Law does not recognize bearer shares; therefore, if the share capital of the company consists of bearer shares these must be converted into registered shares.
If the existing name of the company has the word “Limited” at the end, then it may be possible to continue to exist under the same name in Cyprus. In this case an application must be submitted in advance to the Cyprus Registrar of Companies to confirm that the name may be used and is approved. If not, then another name under which the company may continue to exist once re-domiciled to Cyprus must be chosen and approved by the Cyprus Registrar of Companies in advance.
Application for Registration
The application filed by an overseas company to the Cyprus Registrar of Companies for its registration as a company continuing in Cyprus must be accompanied by the documents required by Law.
The Cyprus Registrar of Companies after being satisfied that the application and supporting documents comply with the provisions of the Law, shall issue a temporary certificate of continuation. From this moment the company is temporarily registered as a continuing legal entity in Cyprus. The company must then, within a period of six months, submit to the Cyprus Registrar of Companies satisfactory documentation evidencing that the said company is no longer registered in the country where it has been originally incorporated. If the Cyprus Registrar of Companies is satisfied, then it will issue the permanent certificate of continuation certifying that the company has been registered in Cyprus as a continuing company pursuant to the provisions of the Law.
Following the issue of the permanent certificate of continuation, the company may be taxed as any other company established, managed and controlled in Cyprus and as such any taxable profit generated will be subject to a 12.5% corporate tax.
At the same time, the company will enjoy the following tax benefits:
Wide network of treaties for the avoidance of double taxation;
Dividend income is exempt from Income Tax*;
Tax on profit from the disposal of securities is exempt;
80% of income from royalties is exempt from Income Tax*;
Profits from permanent establishments outside Cyprus are exempt from Income Tax;
Taxable losses are carried forward up to 5 years*;
Group relief for utilisation of tax losses*;
Dividends paid to foreign tax resident shareholders are free from withholding taxes or any other taxes;
Interest paid to a non-resident company is exempt from withholding taxes.
Following the issue of the permanent certificate of continuation, the company will be required to comply with all local legislation and amongst others:
1. prepare financial statements in accordance with the International Financial Reporting Standards (IFRS) which must be audited by an independent auditor in Cyprus;
2. complete and submit an Annual Income Tax Return to the Inland Revenue Department;
3. complete and submit an Annual Return (HE32 form) to the Registrar of Companies.
For more information please contact firstname.lastname@example.org.
The author of the article is Leonora Chagianni.
Leonora is the Head of the Legal Department in the firm. She achieved an LLB from the Democritus University in Thrace in 2010 and upon completion also got an LLM in International Business and Commercial Law from the University of Manchester. As from 2012 Leonora is admitted to the Cyprus Bar Association.
* Subject to certain conditions.