Cyprus is a popular choice for businesses as it operates with over 50 DTA’s (Double Taxation Agreements), it is an EU member country, and has one of the lowest corporate tax rates in Europe.
A company incorporated outside Cyprus may establish a branch or representative office in Cyprus, provided that within one month from the date of such establishment it registers itself as an overseas company with the Cyprus Company Registrar. This does not amount to the creation of a new legal entity in Cyprus; the entity incorporated abroad simply has a branch through the overseas company in Cyprus, and may operate through it for its international activities.
What is meant by a company branch?
Branches are permanent establishments of non-resident companies who do not operate as a separate legal entity, but instead as an extension of the parent company, carrying the same name and offering the same services. This means that the parent company is fully liable for all activities the branch undertakes – even if the branch has its own managers. The directors of the parent company are ultimately responsible.
This is different from a subsidiary, as they operate as a completely separate legal entity which has limited liability. Whilst the process of setting up a branch is very similar to incorporating a company in Cyprus, a subsidiary will officially be incorporated as a Cypriot company. This can take the form of a public or private limited liability company, which is not reliant on an international parent company.
It is important to understand the variance between the two when setting up your new office location, as whilst there are many similarities between the two setups, there are some differences, such as taxing and documentation.
How do I set up a company branch in Cyprus?
You will need a combination of documents to begin setting up your branch in Cyprus. The parent company will have to submit, with the Registrar in Cyprus;
- Incorporation certificate
- Completed AE 1, 2 and 3 forms
- Details of
- Information about the representative appointed by the parent company for the Cypriot branch
- Branch Name
- Registration Number
- Company Address for both the Cyprus branch and any other international branches
- Share Capital
- Nature of Business activities
All documents must be issued in Greek, notarised and apostilled, and it is essential for companies to submit the above documents one month before the branch begins its activities.
Within the first month of formation, the parent company must submit an application form with the Registrar of Companies, and the Cypriot branch of your company must name a local resident representative, who will be in charge of maintaining relations with the tax authorities.
Depending on the company’s activities, a permit from the Central Bank may be required. If the company plans on carrying out regulated activities, such as banking, insurance, investment, etc. This is not applicable if the company plans for standard commercial transactions.
A branch is required to file financial accounts every financial year, as well as a Directors’ and Auditors report. This is a legal requirement that applies to any other company registered in Cyprus. However, there is an explicit exemption in the Cyprus Company Law from these obligations for companies of a member state of the European Union which are exempted pursuant to the provisions of the Directives of the European Union 78/660/EEC, 83/349/EEC and 84/253/EE. These exempted companies must deliver to the Cyprus Company Registrar, a certificate signed by a director and the secretary of the company stating that it is an exempt company, and the law that provides for this exemption. Furthermore, a statement from the relevant authority of the home state providing that the said company is exempted pursuant to the provisions of the said law is also required to be filed.
What are the benefits of setting up a company branch in Cyprus?
Cyprus is seen as one of the most appealing investment destinations in the European Union, especially considering that (according to the UNCTAD World Investment Report) in 2018 Cyprus attracted 3.2 billion USD in foreign direct investments, and totalled over 220 billion USD in foreign investment stock. As well as being in the Top 50 countries worldwide in Starting a Business and Trading Across Borders, according to the World Bank’s Doing Business Report (2020).
Another benefit of using Cyprus as your primary location for business operations is utilising the low Corporate tax rates. If the management and control of the branch take place in Cyprus, then the profits of the branch are subject to the Cyprus Corporate Tax, which is one of the lowest in Europe at 12.5%. On top of this, Cyprus currently operates with over 50 double tax treaties, which provides ease of operations when doing business with international offices.
Speak to an expert
Our Cyprus offices are composed of an excellent team, with comprehensive knowledge of both incorporating a company in Cyprus, and setting up a branch or subsidiary. For more information on the best course of action for your company, get in contact with us today, where a member of our team will be happy to assist you.