The Cyprus Companies Law (Cap. 113), largely based on the English Companies Act of 1948, provides a familiar and transparent legal environment for company formation and operation. Key features include:

• Diverse Company Types: From private limited companies (Ltd) – the most common choice for SMEs due to limited liability – to public limited companies (PLC), partnerships, and branches of foreign companies, Cyprus offers flexible structures to suit various business needs.
• Efficient Incorporation Process: Setting up a company in Cyprus is generally straightforward and can be completed relatively quickly. The process involves name approval, drafting of Memorandum and Articles of Association, and registration with the Department of the Registrar of Companies and Official Receiver.
• Minimal Capital Requirements: There are no minimum share capital requirements for private companies, offering flexibility for entrepreneurs.
• Sound Corporate Governance: The law emphasizes clear duties and responsibilities for directors, promoting transparency and accountability. Annual audits by licensed auditors are mandatory, ensuring compliance with International Financial Reporting Standards.
• Repatriation of Profits: Cyprus’s non-discriminatory legal framework ensures that foreign investors can repatriate profits without hindrance, fostering a business-friendly environment.

Cyprus has an increasingly sophisticated framework for trusts and investment funds, making it an appealing choice for wealth management and collective investment schemes.

• Cyprus International Trusts (CITs): Governed primarily by the International Trusts Law of 1992 (as amended), CITs are powerful tools for asset protection, tax planning, and estate planning. They offer: 
  • Asset Protection: Strong protection against creditors, provided the trust was not created to defraud them (with a two-year limitation period for challenges).
  • Flexibility: No limitations on duration (unless specified in the trust deed) and the ability to reserve certain powers to the settlor.
  • Tax Efficiency: Non-resident beneficiaries of CITs are generally exempt from taxation on worldwide income, and dividends received by a CIT are not subject to withholding tax in Cyprus.
  • Confidentiality: The register of beneficial owners of express trusts, maintained by CySEC, is closed to the public and accessible only by government statutory authorities.
• Investment Funds (AIFs & UCITS): Cyprus has successfully transposed key EU directives (AIFMD and UCITS) into national law, establishing a robust regulatory environment for investment funds. 
  • Types of Funds: The Alternative Investment Funds Law of 2018 defines various AIF structures, including Mutual/Common Funds (C.F.), Fixed Capital Investment Companies (F.C.I.C.), Variable Capital Investment Companies (V.C.I.C.), and Limited Partnerships. Registered Alternative Investment Funds (RAIFs) offer a fast-track registration process.
  • Regulatory Oversight: The Cyprus Securities and Exchange Commission (CySEC) is the competent authority for authorizing and supervising investment funds, ensuring compliance and investor protection.
  • Attractive Tax Regime for Funds: Investment funds in Cyprus benefit from numerous tax advantages, including: 
    • No capital gains tax on the sale of securities.
    • No tax on dividends received by the fund.
    • No subscription tax on net fund assets.
    • The standard 12.5% corporate tax rate applies.
    • Notional Interest Deduction (NID) for new equity contributions.
    • Each investment compartment within an umbrella structure is treated as a separate taxpayer.

Cyprus’s strategic location, EU membership, and adherence to international legal standards make it an ideal hub for cross-border transactions and M&A activities.

• Legal Framework: M&A transactions are governed by the Companies Law (Cap. 113), the Takeover Bids Law, and the EU Cross-Border Mergers Directive, ensuring transparency and investor protection.
• Acquisition Methods: Companies can be acquired through share purchases, asset purchases, joint ventures, or various restructuring methods, including court-sanctioned schemes of arrangement.
• Due Diligence: A thorough due diligence process is crucial to evaluate financial health, legal standing, and tax implications before a transaction.
• Regulatory Approvals: Transactions involving public companies require approval from CySEC, and mergers exceeding certain turnover thresholds may require clearance from the Cyprus Competition Commission (CPC).
• Favorable Tax Implications: Cyprus offers significant tax advantages for M&A, including: 
  • The low corporate tax rate of 12.5%.
  • Exemption from capital gains tax on share transfers (with the exception of real estate located in Cyprus).
  • Participation exemption for dividends received by Cypriot holding companies under certain conditions.

Establishing corporate structures in Cyprus offers a compelling array of benefits:

• Strategic Location: Bridging Europe, Asia, and Africa, Cyprus provides a unique geographical advantage for international trade and business expansion.
• Competitive Tax Regime: 
  • Lowest Corporate Tax Rate in the EU: A flat rate of 12.5% on taxable profits, one of the most attractive in the European Union.
  • Extensive Double Tax Treaty Network: Over 65 double tax treaties reduce tax liabilities on cross-border transactions and prevent double taxation.
  • Dividend Income Exemption: Generally, foreign-sourced dividends are exempt from tax under certain conditions.
  • No Capital Gains Tax on Securities: Profits from the disposal of shares and other qualifying titles are typically exempt (excluding immovable property located in Cyprus).
  • IP Box Regime: An effective tax rate as low as 2.5% on qualifying intellectual property income, encouraging innovation and attracting tech companies.
  • No Withholding Taxes: Generally, no withholding taxes on payments of dividends, interest, and royalties to non-residents.
  • Notional Interest Deduction (NID): Provides a tax deduction for new equity contributions, reducing the effective tax burden.
• EU and Eurozone Membership: Offers access to the European single market, a stable currency, and compliance with EU directives, ensuring a secure and predictable business environment.
• Robust Legal System: Based on English Common Law, providing familiarity and reliability for international businesses.
• Skilled and Multilingual Workforce: A highly educated labor pool proficient in English, facilitating seamless international operations.
• Developed Infrastructure: Modern telecommunications, a robust banking sector, and comprehensive support services cater to corporate needs.
• Holding Company Advantages: Cyprus is an ideal location for establishing holding companies due to the favorable tax treatment of dividend income and capital gains.

Our law firm is committed to providing expert legal guidance and tailored solutions to help you navigate the complexities of Cypriot corporate law and fully leverage these significant advantages for your business.