Cyprus offers the most attractive corporate taxes within the European Union.
Cyprus is best known for its low corporate tax rate—at 12.5%, Cyprus has one of the lowest corporate tax rates in the European Union. There is no business tax.
For a Cypriot limited company to be taxed in the Republic of Cyprus, at least 50% of the directors must be resident in Cyprus. This requirement is formally met by appointing a Cypriot nominee director.
Tip 1: Be careful with start-up agencies
Managing a Cypriot limited company always requires a local tax advisor. Many online providers lack local contacts and little knowledge of Cypriot law. Those who rely on such agencies risk making serious mistakes that can often only be remedied by establishing a new company. Incorrect advice regularly leads to irreparable damage, which can result in high follow-up costs. Therefore, rely on a reputable partner in Cyprus who has many years of experience in establishing and managing Cypriot companies and who provides personalized advice.
Tip 2: Choose the right bank for your business
In Cyprus, balances up to EUR 100,000 are legally protected, but choosing a solid bank is crucial. Fair fees, good accessibility, and stability are essential. You can also hold an account outside of Cyprus to minimize risk. Recommended banks in Cyprus are Hellenic Bank, USB Bank, and Russian Commercial Bank. Outside of Cyprus, Valartis Bank, RIETUMU, and Barclays are good choices. Banks such as Alpha Bank, Eurobank, or Bank of Cyprus are not recommended for various reasons.
Tip 3: Obtain tax advice in your own country
To ensure your Cypriot limited company complies with all tax obligations, consultation with an expert in your country of residence is essential. A Cypriot tax advisor may only advise on the company itself, not on the owner’s personal circumstances. An internationally experienced tax advisor in your country of residence will assess whether any tax disadvantages arise or whether additional declarations are required. This is the only way to avoid unexpected tax burdens and ensure that your tax structure is optimally structured.
Tip 4: Avoid VAT risks
VAT errors are expensive and avoidable. A review of the tax situation is essential, as the company’s location in Cyprus alone does not determine tax liability. A specialist in the target market can provide a brief assessment to determine whether local registration is necessary. Merchants selling to consumers in other EU countries must comply with the VAT thresholds in those countries to fulfill their tax obligations in a timely manner. Without proper registration, additional payments and fines may be imposed.
Tip 5: Demonstrate substance and genuine leadership
A pure mailbox company carries tax and legal risks. For your limited company to be recognized in Cyprus, a permanent establishment is required. A virtual office or rented office space is possible. A managing director should also be located locally. The Cypriot authorities confirm the local permanent establishment with a tax residency certificate. Banks are also increasingly demanding proof of financial assets, failing which they will close accounts. Seek advice early to avoid problems.