Cyprus Law permits the redomiciliation process which allows a company to transfer its jurisdiction of incorporation to Cyprus, in accordance with Companies (Amendment) Law of 2006, Law No. 124(I)/2006).
Directors and shareholders of foreign companies aiming to take advantage of Cyprus’ pro-business tax regime, E.U. status, global economic links, and lifestyle should start considering the redomiciliation of their company to the Republic of Cyprus.
Cyprus is included in the list of very few countries that permit the redomiciliation of Non-EU companies into and out of the Republic of Cyprus.
Redomiciliation into Cyprus: What does it mean?
Redomiciliation is the procedure where a company transfers its registration from one country to another. This allows an existing company to transfer its registered office and address it to a new jurisdiction by acquiring all the benefits there. This differs from a company incorporating a subsidiary in a foreign country or setting up a branch overseas.
For example, when a BVI registered company aims to become a Cyprus company, this is possible through redomiciliation, and essentially, they are converting the BVI company into a Cyprus-registered company with the former ceasing to be active. This results in all rights and liabilities of the BVI company transferring over to the Cyprus company, with the newly domiciled company being regulated by Cyprus law.
Redomiciliation into Cyprus: What does it achieve for your company?
Companies redomicile from a commercial perspective as redomiciliation allows a company to continue their business with only its place of incorporation shifting.
The total continuity of the business results in matters such as goodwill, bank accounts, credit ratings, assets, liabilities, and performance records remaining intact and thus avoiding the administrational headaches of ‘starting again’ in a new jurisdiction.
Special purpose vehicles (SPVs) holding property will only need a certificate of continuation to inform their local authorities of the change of jurisdiction.
Cyprus’ corporate tax is at an attractive rate lower than many other developed countries.
The increase of stringent rules on the taxation of cross-border transactions between companies in the same corporate groups has heightened the demand for redomiciliation.
If, for example, your company’s original place of jurisdiction has started to impose stricter and unfavourable regulatory conditions, such as a higher corporate tax rate and increased administrative requirements, resulting in a detriment to your business, then redomiciling to Cyprus could allow your company to avoid having to abide to those requirements.
Cyprus offers many tax advantages and incentives, for companies and individuals, making it extremely attractive to redomicile into Cyprus.
Cyprus companies benefit from:
- Low corporate tax rate of 12,5% on profit, one of the lowest within the EU with the possibility to enjoy a much lower effective tax rate
- Simple, transparent and EU harmonized tax system following recommended OECD practices
Cyprus holding companies benefit from:
- No withholding tax on dividends, royalties, and interests paid to non-resident shareholders, whether corporate or individuals
- Tax exemption when a company receives dividends from another Cyprus company
- Tax exemption on dividends Cyprus companies receive as shareholders of other subsidiaries situated abroad
- Tax exemption on any income arising from trading in securities such as shares, bonds, etc
- No withholding tax on royalties paid from Cyprus based companies in respect of intellectual property exploited outside of Cyprus
- 80% tax exemption on any qualifying profits generated by intellectual property owned by companies in Cyprus
- Group relief laws allowing for Group to carry forward losses
- No Capital gains tax from the disposal of any immovable property held by the Company outside of Cyprus or disposal of shares in companies situated outside Cyprus
- Extensive Tax Treaty network with more than 60 countries
Individuals will benefit from:
- Being considered non-domiciled in Cyprus for a maximum of 17 years once they relocate to Cyprus
- No Special Defence Contribution Tax for non-domicile personnel who become tax residents
- Tax exemption on dividends and interests earned by non-domicile individuals
- The first €19,500 of taxable income being tax-exempt for individuals
- 50% exemption for the remuneration of individuals from employment in Cyprus who were residents outside Cyprus before the commencement of their employment. The exemption applies for 10 years commencing from the year of employment if such income exceeds €100,000 per year
- 100% exemption on lump sum repayments from life insurance schemes or from approved provident funds
- No Capital Gains Tax on the sale of immovable property located outside Cyprus
- No Wealth-tax for High Net Worth Individuals
Redomiciling to an E.U. member state, like Cyprus, allows companies to benefit from the single market, freeing up the trade of goods and services and the movement of people between E.U. countries.
The aim of the E.U. is that doing business with other EU countries is like doing business within your own country.
Cyprus has access to more than 40 E.U. trade agreements with countries outside the Union.
Standard of Living
Cyprus enjoys a very safe and high standard of living that includes:
- One of the EU’s best all-year climates and one of the best worldwide
- Over 65 Blue Flag status beaches for all tastes (highest % per capita) sports, entertainment, etc
- High level public & private healthcare services
- Short distances: Can travel from one side of the island to another in 2 ½ hours
- One of the world’s safest countries with one of the lowest crime rates in E.U.
- Reasonable cost of living
- Real Estate available to cater to all needs – city centre, beach, countryside etc
- High Level of Education: Private schools and private institutions offering a high level of education in English
Brexit & the U.K. Connection
U.K. – Cyprus trade relations existed before the E.U. and will continue strongly after Brexit as Cyprus belongs to the Commonwealth and has sovereign British.
Cyprus being an ex-British colony, the judicial and legal system is very much aligned with that of the United Kingdom.
Key legislation such as the Companies law, Contract law, and Tort law are modelled on British law. The Cyprus courts follow the precedents of the English courts and in general, Cyprus can be characterized as a UK-friendly country, this results in more clarity and certainty in the legal system and a preferred jurisdiction for U.K. companies.Lower Costs
Moving your company to Cyprus reduces your overall set-up costs compared to other EU countries, with lower labor costs compared to other E.U. countries, lower office rental costs and a pool of highly skilled support services such as legal and accounting services at lower fees than other E.U. countries.
Redomiciliation into Cyprus: Is your company allowed to redomicile?
Before deciding on redomiciliation it is a necessary precondition that the legislation of the initial jurisdiction allows your company to transfer to Cyprus and that the company’s memorandum of incorporation permits the possibility of its continuation under the legal system of another approved country or jurisdiction such as Cyprus.
Furthermore, it is a condition that no procedures must have commenced for the dissolution of the company, nor any insolvency proceedings, arrangements or compositions, or proceedings for the execution of a court judgment or other similar procedures against your company, in the initial jurisdiction.
In case where your company wishes to enter into an activity where a special license is required under Cyprus legislation such as Financial Services Companies, insurance Companies etc. , then such license must be obtained by the relevant authorities in Cyprus. Also your company must produce a consent authorising the redomiciliation by the respective authorities of the initial jurisdiction.
The above are the key conditions that need to be met, to be granted consent to redomicile, with other administrative requirements also required to be followed also.