The predominant advantage of setting up an offshore business entity in Cyprus, whether in the form of a company, partnership or branch of a foreign corporation, is the generous tax allowances available locally coupled with the extensive network of double tax treaties that Cyprus is signatory to.
The Different Types of Available Business Entities
Companies
Ownership of offshore companies in Cyprus is by way of shares which must be owned either directly or indirectly by non-Cypriots. The Central Bank of Cyprus requires that the offshore company has a minimum paid-up share capital of CYP1,000. If the company wishes to set up offices in Cyprus or to take advantage of the duty free allowances, its paid-up share capital must be at least CYP 10,000.
One shareholder is required by the Cyprus Companies Law and arrangements can be made for ownership to be through the nominee or trustee shareholders.
Although the Central Bank of Cyprus requires full details of names, addresses, nationality, occupation and number of shares to be held by each member of the company, the anonymity of the owner of the shares in the company can be protected, if this is required, in most cases by the use of nominee shareholders.
The company is obliged to have a minimum of two officers, a Director and a Secretary; these officers may be Cypriots, usually service companies, who act on the instructions of the offshore company's ultimate owners.
The company, regardless of whether it operates from Cyprus, is required to have a registered address in Cyprus. The purpose of this is to allow the official receipt and acceptance of any documentation on behalf of the company.
An offshore company can operate bank accounts in Cyprus as well as abroad in any of the major currencies.
Offshore Branches
Offshore branches on non-Cypriot or foreign companies can be registered in Cyprus by filing a Greek translation of the company's constitution or memorandum and articles of association, particulars of the directors, the name and address of a person in Cyprus who can accept any official documentation on the parent company's behalf, and bank references for the parent company.
Offshore Partnerships
Offshore partnerships can be registered upon presentation of bank references of the partners to the Central Bank.
Taxation of Offshore Businesses
Offshore Companies - General
A Cyprus offshore company is taxed at only 4.25% of its net taxable profit in Cyprus and may pay none in most of the countries Cyprus has a double tax treaty with. These countries include India, China, Britain, USA, Canada, Russia, Bulgaria, Romania, Hungary and Yugoslavia.
Ship Owning Companies
If the company is a ship owning company, then it is exempt from paying any tax.
Offshore Branches
If the branch is managed and controlled in Cyprus, it pays tax at 4.25% of its net profits. No tax is payable if it is managed and controlled from outside Cyprus.
Offshore Partnerships
Offshore partnerships are also exempt from paying tax.
Taxation of Ex-patriot Employees
The beneficial tax treatment is also extended to the non-Cypriot employees of offshore businesses who only pay tax at rates varying for employees working abroad 0%-4% and for employees working in Cyprus 0-20%.
The offshore business and its employees may also enjoy duty-free status with regard to cars, office equipment and domestic appliances.
The main prerequisites for the offshore business to enjoy the above benefits are that it does not borrow from a Cyprus Bank nor does it carry on any trade with Cyprus nationals or Cyprus onshore businesses