What is an International Business Company

8/2/2019 What is an International Business Company

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What is an International Business Company (IBC) / Cyprus Offshore

Company?

There is no distinction in the Cyprus law between IBC's and local companies. The term"offshore" does not exist anymore. The companies are now known as "Cyprus Companies".

The only reason that they are described as IBC's/ Cyprus Offshore Companies in this

website is because their share capital is owned by non-residents either directly orindirectly.

About Cyprus

1. Cyprus Generally

1.1. GeneralCyprus is a European country with all the facilities that are available in modern countries.

The residents are very hospitable and friendly and business activity with the rest of the

world is flourishing. There is availability of highly educated professionals and there areexcellent transport and telecommunication channels.

1.2 Geography, Climate, Population and Language

Cyprus is situated in the Eastern Mediterranean. There is a very good climate here with

about nine months of Summer and three months of Winter. The population is 746,000. Theofficial language is Greek, but English is widely spoken.

1.3 Government and Legal System

As of 1st of May 2004, Cyprus is a member of the EU and almost all its directives havebeen incorporated in Cyprus laws.

The structure of government is similar to that in western democracies, where human rights,

political pluralism and private property are safeguarded. Cyprus is a member of the United

Nations, and its specialized agencies, the council of Europe, and the BritishCommonwealth. The law in Cyprus is based on more or less the same principles as those

applicable in the United Kingdom and statutes regulating business matters and procedures

are similar.

1.4 The Economy


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Cyprus has an open free market economy. The performance of the economy has been such

that it has combined, high real growth, with low inflation and low unemployment. Trade

and tourism are the most important sectors. Professional services are also thriving.

1.5 Transport and communication

There is a wide network of air routes connecting Cyprus with Europe, Africa and Asia. The

island has two international airports. Cyprus has an excellent telecommunications service.

2. Why shall I choose Cyprus?

2.1. People

The people of Cyprus are known for their hospitality and friendliness. The crime in Cyprusis almost non-existent.

2.2. Infrastructure for international businesses

Cyprus has set up everything that is necessary to accommodate international businesses.

The government is willing to provide all necessary assistance. Cyprus is a trustworthyEuropean IBC's center. It is not considered as a tax haven. It is considered as a respectable

International Business Center. It is internationally acceptable, that serious businesses from

all over the world set up companies in Cyprus to access other markets of the world.Cyprus has complied with the OECD and EU regulations, regarding the issue of harmful

tax competition and complied with the criteria set by the Financial Action Task Force, theInternational Monetary Fund (IMF) and the Council of Europe (COE) in the fight against

money laundering.

2.3. Low or zero taxes and double tax treaties with other

countries (please see Taxes)

2.4. Exchange ControlsAn international business company or an international trust is not subject to any exchange

control. Bank accounts can be opened in any currency, in cyprus or in any other country.

2.5. Banking Facilities
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There are excellent banking facilities and banks in Cyprus have set up the necessary

infrastructure to assist international business to open banks accounts within Cyprus or

anywhere in the world and make transfers of funds through simple instructions, by fax orthe Internet with quick execution.

Registration Procedure

1. Incorporation decisions and Memorandum and

Articles of Association.

The following decisions have to be taken:

1.1. Value of share capital

There is no minimum share capital requirement. However, a suggested minimum is CYP1000. If the company will operate fully fledged offices there are special regulations only

for nonEU citizens.

1.2. Shareholders

A minimum of one up to fifty shareholders can hold the share capital.

1.3. Directors

A minimum of one director is required.

1.4. SecretaryA secretary of the company must also be appointed.

1.5. Registered office

A registered office address must be decided, where all legal documents can be served.

After the above (1.1. - 1.5.) the Memorandum and Articles of Association must be drafted

and printed.

2. Application to the Registrar for company name.

The Registrar is unlikely to accept a name if:

It is too similar to that of an existing company.

It is considered misleading, too general, or pompous.It suggests a royal, national or international connection.

It includes certain words such as "co-operative", "insurance", "bank", "financial


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services", unless this

is justified by the company objects.

It is advisable to submit to the Registrar 2 or 3 different names, to provide moreflexibility.

3. Registration of the company at the Registrar of

Companies.

The Memorandum and Articles of Association must be signed by a lawyer and deposited tothe Registrar together with the first directors and registered offiece address declarations.

The Registrar then issues all incorporation documents, in Greek or English.

Legal Framework for InternationalBusiness Companies

International businesses can register in Cyprus as limited companies.

Limited companies are companies with share capital, and the liability of their

shareholders in case of winding up, is limited to the nominal value of the shares they hold.The letter "LTD", which stands for "Limited", appears at the end of their name - for

example "Aliera LTD". Limited companies can be owned by a small number of investors in

which case they are "private" or their shares can be registered on the stock exchange and

therefore available to the public, i.e. "public companies".

A private limited company

A private limited company means a company which by its Articles:

Prohibits an invitation to the public to subscribe for its shares or debentures.

Limits the number of its member to 50.

Restricts the right to transfer its shares and prohibits the issue of bearer shares.

Liability of shareholders

The liability of the members of an International business company is limited to the nominal

value of the shares they own.

Memorandum and Articles of Association


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A memorandum and articles of association must be drafted and printed.

The memorandum defines the company's powers, particularly regarding it's dealings with

it's external environment.The articles of association set out the rules governing the company's internal affairs, such

as meetings and voting rights.

Income and place of activities

The income of the company can be derived from Cyprus or anywhere in the world.However, the management, control and administration of the company has to be from

Cyprus.

Registrar of Companies requirements

Statutory documents regarding the following matters must be filed at the Registra's office

and are available for public inspection:

Directors

Secretary

Shareholders

Registered address

Audited Financial Statements

Alteration of Articles and Memorandum of Association

Alteration of the name of the company

Increase of capital

Allotment of shares

Particulars of charges and mortgages Annual return stating the directors, sharholders, secretery and registrered address.

Statutory books

The following registers and books must be kept at the registered office address:

Register of directors and secretary

Register of members /shareholders

Minute book of general meetings and directors' meetings

Register of all specific and floating charges on the undertaking or any property ofthe company

Register of directors share holdings

Register of debenture holders

Proper accounting books must be kept and financial statements in accordance with IFRS's

& IAS's must be prepared and audited by qualified accountants.


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Exchange control

International business companies as well as their expatriate employees are exempt from

exchange control.

Prohibition of money laundering activity

Strict anti-money laundering provisions apply to international business companies under

the Prevention and Suppression of Money Laundering Activities Law.

Tax Incentives for International Business

Companies

The worldwide income of an international business company is taxable in Cyprus,

provided that its management and control is from Cyprus. Please see related article and be

advised on this very important topic.Tax is calculated on net profits as adjusted for tax purposes every calendar year.

Corporation tax

International business companies are taxed at 10% on their worldwide profits, provided

that the share holder is a non- resident.Please be advised on this topic.

No tax needs to be paid when an international business company makes payment fordividends, interest and royalties to overseas tax residents.

No tax is payable on dividends received under certain relaxed conditions. Interest received

is taxable.Please be advised on this topic.

Capital Gains Tax and Inheritance Tax

No capital gains tax needs to be paid in Cyprus on the sale of assets which are property ofan international business company, provided the property is outside Cyprus (eg. land).

There is no capital gains tax on the transfer, or sale of the shares of an internationalbusiness company.Also there is no inheritance tax.

Estate Duties

No estate duty is payable on property situated outside Cyprus.


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VAT

Please be advised on this very important topic.

An international business company can register with the VAT authorities in Cyprus and

claim VAT refunds on expenses and purchases made in Cyprus.In certain circumstances registration might be desirable and therefore voluntary and incertain circustances it may be obligatory.

In many cases there is no VAT on the sales of International Business Companies but thereare cases where VAT rules have to be followed and cases where VAT output has to be

charged. There are also cases where there is an obligation to register with another member

state.

Inland Revenue Requirements

All companies registered in Cyprus are required to submit a company income tax retrun

and tax computations to the income tax service for every calendar year, based on audited

financial statements which must be kept at the registered office of the company available

on demand for inspection by the income tax authorities.

The corporation tax of 10% on net profits is payable:

By provisional self assessments during the accounting year in 3 equal instalments

By self assessment seven months after the end of the accounting year

Double Tax Treaties / Agreements for the avoidance of

double taxation

A double tax treaty is an agreement between two countries, mentioned in the agreement as

contracting states, so that income earned in country "A" by a resident in country "B" is nottaxed in country "B" without any regards to the tax already paid in country "A". For

example if a person from country "B" has income from country "A" and already paid 10%

tax on this income in country "A", and the tax on this income in country "B" is 30%, he

will pay only the difference to the tax authorities of country "B", in other words only 20%.This is the main aim of the double tax treaties, but for economic development reasons one

may find out that the total taxes can be further reduced. The double tax treaties also include

provisions for tax fraud, and exchange of information and in certain circumstances includeprovisions which exclude certain persons from the benefits of the agreement.


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By the time of writing Cyprus has concluded double tax

treaties with the following countries:

Armenia, Austria, Belarus, Bulgaria, Canada, China, Czech republic, Denmark, Egypt,

France, Germany, Greece, Hungary, India, Ireland, Italy, Kuwait, Kyrgyzstan, Malta,Moldova, Norway, Poland, Romania, Russia, Slovakia, South Africa, Syria, Sweden,

Tajikistan, Thailand, Turkmenistan, Ukraine, United Kingdom, United States, Uzbekistan,Yugoslavia, Singapore, Mauritius, Lebanon and Seychelles.

New laws, regulations and practices in the EU environment

1. The prestige of Cyprus as an International Business Center has been enhanced and

Cyprus became more attractive to investors. The infrastructure has been improved and the

procedures became faster through automation and more personnel. Cyprus has compliedwith the EU and the OECD regulations regarding harmful tax competition, and with the

regulations of the Financial Action Task Force, the International Monetary Fund, and the

Council of Europe in the fight against money laundering.

2. The term Offshore has been removed from the legislation and all companies are now

known as Cyprus companies.

3. The Management and Control Principle was incorporated in the Cyprus tax law as from

1st January 2003 in order to determine whether a company is Cyprus tax resident. In otherwords a company can not be considered Cyprus tax resident merely because of registration

in Cyprus (see related article).

4. EU directives were incorporated in Cyprus Law, for example Parent-Subsidiary

Directive; Merger Directive; Savings Directive; Interest and Royalty Directive; MutualAssistance Directive on Taxes; the Vat Directives; and the Convention for the Elimination

of Double Tax in connection with the adjustment of profits of associated enterprises.

5. The audited financial statements have to be prepared under the International Financial

Reporting Standards, by requirement of the Company Law. This was applied previously,as well, but now it became obligatory under the Company Law.

6. The audited financial statements have to be filed with the Registrar of Companies in theGreek language and be available for public inspection. However there are proposals that

the English lanquage be acceptable.

7. Companies which have subsidiaries are obliged to prepare audited group financial

statements which are also filed with the Registrar of Companies and are available for

public observance. However there are proposals so as to exclude small groups from

preparing audited group financial statements.


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8. The ultimate beneficial owner either EU on non EU national has to be disclosed to the

commercial bank that opens the bank a/c as before, and this information is kept

confidential. This disclosure applies to all jurisdictions after the 11th September, otherwisethe bankers refuse to open a bank a/c.

9. The corporation tax rate is 10% as from 1st January 2003.

10. The Mutual Assistance Directive on direct taxes for exchange of information on all

forms of taxation including VAT with other EU member states has been incorporated inCyprus Law. This Law also provides for collection of tax debts (in Cyprus and on behalf

of the other Member State) created by Cyprus tax residents in other EU Member States,

and vice versa. Exchange of information provisions exist in all the agreements for theavoidance of double taxation currently in force. An example of such an exchange of

information is whether purchases or expenses declared in one country were declared as

sales or income in Cyprus, and whether they were declared at the same amounts. A second

example is whether the recipient of royalties, fees, profits, etc, is in fact a tax resident of

Cyprus and the beneficial owner of the royalties. A third example is the exchange ofinformation on transactions between related companies ie. for how much the goods were

purchased by the Cyprus subsidiary and sold to the holding company overseas etc.The exhange of information as regards VAT is done through the VIES system

(Vat Information Exchange System). The companies are obliged to report their EU sales of

goods (both normal sales or triangular sales) and this information is made available to theother Member States.

11. Auditors in Cyprus are now being monitored by control visits by the Institute of

Certified Public Accountants of Cyprus in cooperation with the Association of Chartered

Certified Accountants of UK. In other words auditors have to accept a visit by a committee

which reviews audit files to express an opinionon whether proper audits are performed and reports back to the Institute for

misconduct.

12. The Director's Report which is included in the financial statements has to mention 11points by Company Law requirement and the auditor has to include in his report whether

the directors report is consinstent with the financial statements.

13. The names of Shareholders, Directors and Secretary of the Company are available to

public inspection at the Registrars office, as before.

14. There is another form of taxation which is called Defence Tax and is approximately9.45%, and it is levied on companies with Resident Shareholders only. The Defence Tax is

payable two years after the end of the tax year concerned. In the case where a company is

using a resident (Cypriot) Trustee Shareholder, a declaration by the Director of thecompany has to be made to the Income Tax Service in Cyprus, so as to avoid this tax. The

declaration by the Director states that he is in possession of sufficient evidence to justify

the fact that the Beneficial Shareholder is not a Cyprus Resident and that he undertakes theobligation to submit this evidence, in case it is required by the Cyprus Income Tax Service.


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If the company has a Non-resident Shareholder, then the Director does not have to make

this declaration and the company does not have to pay this tax.

The purpose of this article is not to list all changes but to give an indication of the main

ones. Also please note that the content of each paragraph is not exhaustive.

Cyprus International Business Companies

Main features of Cyprus International Business Companies (IBCs)

Examples of the use of Cyprus as a basis for operations

Forms they can operate

Advantages of International Business Companies

Types Of International Business Companies

Registration Procedure

(1) MAIN FEATURES OF CYPRUS INTERNATIONAL BUSINESS COMPANIES(IBCs)

We would like to point out at the outset, that as you may know, an InternationalBusiness Company, is a private company limited by shares, governed by theprovisions of the Companies Law Cap 113, which is identical to the EnglishCompanies Act of 1948.

For our clients, we have already reserved a number of company names with theOffice of the Registrar of Companies in order to facilitate immediateestablishment/incorporation of such an IBC. The available names are:

- The activities of IBCs, other than management are confined worldwide.

- The share capital may belong to shareholders of any nationality.

- Any profit made can be derived from activities anywhere in the world

- Minimum capital of a Cyprus IBC is CYP 1,000 or CYP 10,000 in case a fullyfledged office is required. From 01.01.2008 the capital of an IBC should beexpressed in Euro only.

- the tax regime applicable form whatever sources is at the rate of 10% on thenet profits of the company.

- Dividends paid out of profits taxed at the reduced rates are not liable to any
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further tax, neither can a refund be made.

- Cyprus IBCs must have a registered office in Cyprus. They are usuallystructured with nominee directors, secretary and shareholders. Thebeneficiaries details are confidential and are not placed on any public file. Thebeneficiaries could be natural persons or corporate bodies. It is through these

confidentiality requirements that Cyprus companies enjoy a greaterinternational reputation amongst business persons than companies in otherjurisdictions.

- Foreign employees pay income tax at rates from 0 to 6% if working outsideCyprus and receive the salary through Cyprus, and from 0 to 30% if working inCyprus. Foreign employees working outside Cyprus are totally exempt fromCyprus income tax as long as they receive their salaries in Cyprus.

- No exchange control restrictions regarding movement or operation of foreigncurrency accounts.

- Duty free allowances are provided to Cyprus IBCs so as to import duty freevehicles, office equipment and other items necessary for their business.

- Like all other Cyprus companies, Cyprus IBCs , are required to have theiraccounts audited by auditors authorized by the Minister of Finance. Theaforesaid audited accounts should be given out to the Income Tax authoritiesand to the Central Bank of Cyprus.

- Management services of the company including provision of nomineeshareholders, directors, secretarial services, as well as special Banking servicesincluding operation of bank accounts, arranging letters of credit, invoicing e.t.c.

(2) EXAMPLES OF THE USE OF CYPRUS AS A BASIS FOR OPERATIONS

The presence of Cyprus for registered IBCs may take a variety of forms whichcould differ from case to case. Cyprus may be simply used for the incorporation ofa company, without locally residing directors and with only a registered office,required by law.

A more usual usage of Cyprus appears in the occasions that local management andcontrol are being made in Cyprus, by holding board meetings so as to appear thatdecision-making occurs in Cyprus and therefore a genuine and effectivemanagement from Cyprus is established. Genuine and substantial localmanagement and control, can be also established by the operation of a fullyfledged and equipped office consisted of foreign managers and employees. Cyprusoffers for this purpose a great degree of stability and respectability derived fromits fastest growing economy, and offers the required infrastructure in addition toother advantages such as its geographical position, low operational costs , taxadvantages to foreign employees, excellent relations with the European Unionestablishing Cyprus into an attractive basis for operations of this kind.

Examples of the use of a Cyprus IBCs

A)The provision of different sorts of services or offering of goods to companies orindividuals in various countries of the world through Cyprus could mostimportantly enjoy the very Low Corporate Tax benefit.The aforesaid benefit occurs because the taxable profits of these companies are


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only taxed in Cyprus at the rate of 10%. The sales invoices are issued and paid onthe name of the Cyprus IBC but the services are rendered by the non-Cypriotcompany, its profits though aretaxed on the name of the Cyprus company at theminimal rate of 10%.

Country X(origin of non Cyprus Company)

Country Y(provision of services by non-Cyprus

company)

Cyprus(Cyprus IBC's

invoice)

B) International general trading can also enjoy the very Low Corporate TaxBenefit. In such an occasion the engagement of the Cyprus offshore company ininternational trading does not require for the goods be transported throughCyprus, but can be transported directly from the supplier to the purchaser.

The goods are transported directly from the supplier to the purchaser and therelevant purchase/sales invoices shall be issued on the name of the Cyprusoffshore company, and the profits made under the agreement shall be taxed at therate of 10%.

The money transactions relating to the aforesaid business actions are being madevia Bank Accounts belonging to the Cyprus offshore company, held in (interest isnot taxable on money deposited and held in Cypriot Banks) or outside Cyprus and

can be transferred by

Cyprus(Cyprus IBC's invoice)

Country X(origin of non-Cyprus Company)

Country Y(supplier/purchaser of thenon-Cyprus Company)

(3) FORMS THEY CAN OPERATE

A) International business companies in Cyprus can operate in the following legal

forms:

a) Limited liability company.

Under the Companies Law Cap 113 which is almost identical to the UnitedKingdom s former Companies Act 1948, there are two main types of limitedliability companies public and private. Private companies are by far the mostpopular form of incorporation both for local and international investors basicallydue to their less onerous disclosure, simplicity regarding its registration as well as


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to other requirements.

A Private company is one which by its articles:

- the liability of its members is limited up to the amount unpaid for theirsubscribed shares.

- the word "limited" must appear at the end of the name of the company.

- any invitation to the public to subscribe for shares is prohibited.

- companies can be formed by even one shareholder as subscriber. This legalentity can be a legal entity or an individual. If there are more than oneshareholders they could be either a legal entity or an individual or both.

- meetings of the board of directors can be held either in Cyprus or abroad.

- The minimum number of directors is one and there is no maximum. Directorsmay be local or foreign. Alternative directors may be also appointed. It is notnecessary for directors or the secretary to be shareholders. The appointmentand removal of directors is made by the shareholders. Cyprus IBCs companiesmust have at least one local director unless the secretary is local.

- The minimum number of shareholders is one. However provision of nomineeshareholders can be arranged on request free of charge where anonymity isrequired.

- Bank accounts of any kind may be opened, in any currency, either in Cyprus orabroad. Those opened in Cyprus may be operated without any exchange controlpermission.

- The company must have a Memorandum and Articles of Association.

Memorandum and Articles of Association

I.The Memorandum of the company is consisted of:

- the company s name, the address of the registered office which must be inCyprus, the main objects for which the company is formed, the amount of theauthorized and paid up capital which must be of a minimum CYP 1,000.00 (if noadministrative office is required) or CYP10,000,00 (if an office will be required)the names, addresses and description of the subscribers together with the numberof shares for which they could describe.

II. The Articles of Association consists of the maters regulating:

- the internal management of the company, provisions as to dividends,debentures, accounts and audit, voting rights, general meetings of the company,appointment-removal of directors, powers and general meetings of directors,winding up of the company.

b) A branch of an overseas company.

A company incorporated outside Cyprus (overseas company) is able according to


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s.347 of the Companies Law Cap.113 to register in Cyprus under the legal form ofa branch.

For the registration of a branch according to s.347 of the Companies Law Cap.113,the following documents duly transferred in Greek are required:

(i) A certified copy of the Memorandum and Articles of Association, or the charter.

(ii) Particulars of the directors and the secretary of the company.

(iii) he name and address of at least one person residing in Cyprus authorized toaccept on behalf of the company any notices required to be served to thecompany.

Taxation of branches of oversea companies managed and controlled in Cyprus isidentical to the same rate as the offshore companies, at 10% on their net profits.In the case that their management and control is conducted outside Cyprus theprofits of the branch are exempted from all taxes. The same advantages foroffshore companies apply also for the offshore branches.

c) A Partnership

Partnerships Law Chapter 116 provides for two general types of partnerships

1. General Partnership. In the General Partnership every partner is liable jointlyand severally with all the other partners for an unlimited amount for the debts andobligations of the partnership. Partner can also be a company with limited liabilityor another partnership.

2. Limited Partnership. The Limited Partnership is a Partnership in which at leastone of the partners must have unlimited liability for all the debts and obligationsof the Partnership, whereas the remaining partners may have limited liability.

Cyprus offshore Partnerships enjoy full tax exemption in Partnership profits. Aninvestor may enjoy the advantages of the tax exemption position of thePartnership and at the same the limited liability of the Partnership. The minimumnumber of Partners required for Partnerships (whether general or limited) is twoand the maximum is twenty.

Registration of a Partnership

The procedure for registration of a partnership is as follows:

- Securing the Partnership s name

- Preparing the Partnership contract.

- filing with the Registrar of Companies a special form in which certain informationis given as to the names, addresses, description of the Partners, the unlimited orlimited liability of each partner, the duration of the partnership, the personauthorized to sign and bind the company etc.

- filing a copy of the exchange control approval of the non-resident partners.

(4) ADVANTAGES OF CYPRUS International Business Companies (IBCs)


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a) a great degree of respectability amongst companies registered in other taxincentive or tax haven countries. (Cyprus is not black listed in any country in theworld)

b) Cyprus is not considered to be a tax haven or "laissez faire" country but a taxincentive country

c) no withholding of tax on dividends

d) no capital gains tax (except on sale of immovable property situated in Cyprus)

e) freely transferable accounts of any currency may be kept either in Cyprus oranywhere abroad without any exchange control restrictions

f) no exchange control restrictions

g) all expenses incurred for the earning of income as well as annual allowance onfixed assets are allowed as deductions

h) company's foreign employees working in Cyprus are liable to personal incometax at a rate from 0 to 20% and if working outside Cyprus but receiving theirsalary through Cyprus at a rate from 0 to 2%

i) the foreign employees are exempt from social insurance contributions

j) the net profits of the company are subject to a corporate tax at the flat rate of10% and if such profits are derived from dividends received from another CyprusIBC, then no further tax is payable other than the flat rate of 10% paid only by thedistributing company.

This rate is paid irrespective of whether they are managed and controlled fromCyprus or elsewhere

k) shareholders are not liable to an additional tax on dividends over and above theamount of corporate tax paid by the company

l) exemption from stamp duty on any contracts entered into by offshore entities

m) no estate duty on the inheritance of the shares provided the deceased was notdomiciled in Cyprus

A Cyprus IBC is entitled to open any external accounts in any currency with anybank in Cyprus but it should open and operate the so called local disbursementaccount wherefrom all payments of the company in Cyprus (if any) should beeffected. Our Firm can arrange the opening of such A/C (or A/Cs) with ANYCypriot Bank

Alpha Bank

Bank of Cyprus

Popular Bank

Hellenic Bank

The National Bank of Greece

Universal Bank


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Arab Bank

We are also at your service to arrange the opening of bank accounts with anyother Offshore Banking Unit operating in Cyprus.

(5) TYPES OF INTERNATIONAL BUSINESS COMPANIES

Offshore Banking Units (O.B.U.S)

Offshore Banking Companies as subsidiaries of foreign banking corporations oroffshore branches of such corporations may be registered in Cyprus. Internationalenterprises or their subsidiaries, established in countries where there is goodbanking supervision, could obtain a license from the Central bank of Cyprus tooperate in Cyprus as an OBU.

Today in Cyprus are operating 28 Offshore Banking Units, 2 Administered BankingUnits and 2 Cyprus representative offices from oversea Banks.

A captive Insurance Company is a wholly owned or controlled subsidiary companyformed by a non-insurance parent (or association of companies or individuals) forthe purpose of participating in the risks of the parent enterprise or its group(subsidiary or associate). The risks assured can be those that can be insured inthe normal way, or those for which insurance coverage is difficult to obtain orhighly costly.

Captive Insurance Companies

They are regulated by the provisions of the Insurance Companies Law, and may beregistered in Cyprus as offshore companies under certain provisions andrequirements imposed by the Central Bask. In addition to the usual conditionsimposed by the Central Bank to offshore companies the Captive Insurance

Companies must also comply with the Insurance Companies Law and in particularwith the following:

(i) The minimum paid up share capital must be CYP 10,000.00

(ii) Full compliance with the provisions of the Insurance Law as to the filing of theaccounts and other relevant documents (the Council of Ministers may allowcertain modification of this requirement)

(iii) Proof no financing from local sources

(iv) Adequate cover to the satisfaction of the Super-intendent of Insurance,regarding claims from third parties, that these claims shall rank in priority to the

claims of any other company in the group.

(v) All local expenses incurred must be covered by funds to be imported fromabroad. The captive insurance company shall advise the Central Bank annually ofall funds imported into Cyprus from abroad.

Besides the usual benefits and advantages available to offshore companies,Captive Insurance Companies may gain the benefit of obtaining insurance atlesser net cost and have a flexibility which can be related to all aspects of the


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sponsor s risk management programme.

Shipping Management Companies

Cyprus has been for years now a very attractive destination for the registrationand management of Shipping and Maritime operations Companies .Since 1963

Cyprus created the legal infrastructure for the establishment of Cyprus as amaritime center aiming at the registration of vessels under Cypriot flag. NowCyprus ranks 6th in the world regarding the number of ships registered under theCypriot flag with over 2.600 ships and exceeding 26 million Gross Tonnage (GT).For more information o Shipping Companies click Hyperlink on ShippingCompanies

Construction and Engineering Companies

They are particularly advisable for operations anywhere in the world, andespecially for operations in the Middle East countries, and have been alreadyconducting enterprises for American, British, Dutch, and Greek Interests. Cyprusas the country which offering a high degree of stability amongst the neighboringcountries could be used as a set up for minimum taxation on potentially maximumoperations especially derived from the establishment of the benefit of double tax-treatie.

Employment Companies

Proved to be very attractive as they have been extensively used for American,Dutch, Austrian and British employment of expatriate staff, and by paying a lowCyprus tax will avoid the higher taxation in their home country, providingrecruitment of labor for contract or other work undertaken outside Cyprus.

They can be also very beneficial in the occasions of countries whose national taxlaw allow, in the event of payment of tax in another country, to remit theirsalaries to their home countries without payment of any further local income tax,

like in the case of Australian, Austrian, and French residents. Quite advisable ofthe above advantages a fully justified commercial justification could be applied inthe case of provision of foreign labour in the South Mediterranean and Middle-Eastern countries.

Finance Companies

Particularly advisable as they can be actively involved in the dealing andmanaging investments, providing investment advice or establishing and operatingcollective incentive schemes and financing of joint ventures or other attainmentsin countries with which Cyprus has a double tax treaty, in which withholding tax iseither nil or very low.

In addition to that the benefit of an offshore finance company could be used indecreasing the taxable profits made by the subsidiaries by way of interest chargesmade on loans obtained or to on-lend funds to entities which belong to the samegroup as well as to non related parties.

Holding and Investment Companies

They can be used in conjunction with Cyprus treaties and could provide extremelyadvantageous results by centralizing group s investments through a central non-


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Cypriot company used as a basis for holding and managing their own investmentsworldwide. They could be also advantageously used with effective tax planning inconjunction or not with the use of treaty countries.

Companies of this kind are mostly used for holding participation in jointures orother acquisitions in countries of Eastern and Western Europe and the Middle East

as well as to countries in Africa India and China reducing to the minimum level thedividend withholding taxes as well as avoiding any tax credits imposed on thegroup the company belongs. In addition to that the dividends derived from thenon-Cypriot (offshore) company could be well used for reinvestment in othersubsidiaries avoiding in this way any tax liabilities arising for the parent companyaccording to the domestic taxation system, especially for services such as invoicefactoring, staff recruitment, construction contracts, joint ventures, patentexploitation, e.t.c.

Trading Companies

These account by far the greatest amount of Cyprus offshore companies. This kindof companies could be utilized for transit trade via the Cyprus seaports, as well asfor activities in connection with trading in the geographical area of Cyprus oranywhere else in the world. They may also store maintain, break bulk orrepackage their own transit goods in rented private or public warehouses. Tradingcompanies are also allowed to derive income from portofolio investments inshares traded on the Cyprus Stock Exchange.

Moreover another advantage of trading companies is offered by extractinguntaxed profits form countries which Cyprus has a double tax-treaty. In somecases they are used (especially by European-based companies) for undertakingthe whole overseas trading and marketing activities entrusted to a Cyprussubsidiary. (company-branch) In general a very wide scope of for companies ofthis kind can be secured and serve interests for countries in any part of the world.

In case that a foreign company wishes to sell or manufacture its products in the

Cypriot market must do so through a wholly or partially owned local company.

Headquarters Companies

Particularly attractive for multinational as well as national companies aiming atcentralized management control as well as for companies incorporated in distanttax heaven countries. The entrepreneurial environment, the developedinfrastructure of Cyprus and the considerable tax advantages serve interests forEastern and Western European as well as Middle and far Eastern regions.Moreover the growing management of overseas affairs of business or therendering of services abroad from Cyprus, by expatriate executive gave Cyprus thereputation of an international business center with more than 2,000 InternationalBusiness Companies maintain fully fledged offices.

Invoicing Companies

This type of companies could be utilized for re-invoicing of goods, fabric andservices from any region in the world for any intention and to any destinationenjoying the low taxation status. They can be also very easily managed since allthat is required for their maintenance is a registered office and capable personnelor accountants to organize invoices and transactions.


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Royalty Companies

The Cyprus national tax systems in accordance with the laws relating to theoperation of double tax treaties, create opportunities for efficient tax planningrendering Royalty companies (concerning the income received from the transfer ofexploitation of intellectual and industrial property rights) extremely attractive.

There is a variety of schemes and arrangements applicable so as to widen thenumber of countries from which royalties may be received untaxed or reduced tax.I addition to those operating from fully fledged offices in Cyprus, there are manyRoyalty Companies which maintain only a register ed address in Cyprus, andCypriot or foreign directors.

Real Estate Companies

These companies may be very advantageously used both for investment and fordealing in land, especially from the effective application of the network double taxtreaties. In the case of European countries exceptionally interesting arrangementsmay be made as there are already quite a number of companies related to realestate, representing a wide variety of interests, however Asian real estatecompanies have been incorporated in a quite large scale, recently.

Trust Companies

Trust Companies may be used especially in conjunction with other tax advantagesfor managing trust funds or pension funds outside Cyprus, or Cyprus trusts on aprofessional level. There is no minimum capital requirement, and for the operationof such company prior authorization from the Central Bank of Cyprus must beobtained.

Internet and E-Commerce Companies

The beneficial tax regime applicable for IBCs can be also applied in the case ofinternet and e-commerce companies. The developed infrastructure of Cyprus and

telecommunications are also important reasons for the attraction of a fat growingnumber of companies being incorporated with intention to host their e-commercesites or ventures. The advantage of Cyprus double tax treaties can be also appliedon the income derived from the activities of these companies which may finallyachieve total avoidance of tax in both countries.

Manufacturing Companies

They usually operate both in the form of corporate entities as well as participatingby forming a subsidiary in manufacturing activities, particularly in the Cyprusregion, where a variety of tax and other important incentives are offered tocompanies of this kind, as well the benefit applied under the relevant double taxtreaties.

Printing and Publishing Companies

Printing of books and journals in Cyprus by IBCs for sale and distribution above isconsidered to be an onshore business and apart from the usual tax advantages ofan onshore company the low cost of local printing as well as the excellentinfrastructure and good telecommunications make Cyprus an ideal place for theincorporation of a company of this kind. However Printing and Publishingcompanies incorporated and operating abroad may always use the benefits of the


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very low Cyprus taxation and double tax treaties by forming a subsidiary inCyprus.

(6) REGISTRATION PROCEDURE

- The registration procedure commences with the submission to the Registrar ofCompanies of a proposed business name fro approval. takes approximately from2-4 days. In this respect we have already "off the shelve" a number of names,which you may select one, unless you have in mind a particular name you maywish to use.

- Soon after the approval of the name, the Memorandum & Articles of Associationof the company are being drafted.

- After this the memorandum and Articles of Association are filed with the

Registrar of Companies together with forms H.E.1., H.E.2., H.E.3. ., H.E.1. is anaffidavit prepared and duly signed by the lawyer of the company. H.E.2 providesfor the registered office of the company and H.E.3. provides for the appointment ofthe directors as well as for the secretary of the company.

- As soon as registration of the company is effected the Registrar of Companies heissues a Certificate of Registration together with certified copies of the list ofdirectors and secretary, shareholders, registered office address, Memorandum andArticles of Association, a copy of the Certificate of Registration and Incorporationin Greek, and English will be required as well as in any other language requestedon payment of a translation fee.

- The relevant procedure for registration of the company can be completed within

a period of 10 days whereupon the company can start operating immediately .

- In the occasion that a company is urgently required we have ready maderegistered companies the whole procedure could be completed within a period of48 hours.

Relevant Documents needed for registration

At the same time we submit various other documents and information including:


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1) Secondly a copy of the shareholders passport shall be also sent to us as proofof who these persons are.

2) If they require us to act as their nominee shareholders and register the

company and hold their shares on behalf of the beneficial shareholders withoutthem having to come to Cyprus a Special Power of Attorney prepared by us wouldhave to be signed so as to allow us to carry on the aforesaid action

What is an International Business Company

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