The country

Cyprus (Republic of Cyprus) is an island State of 1 300 000 inhabitants located at the eastern extremity of the Mediterranean Sea. Its politics are very complex, since it is divided into three blocks: the Republic of Cyprus, the Turkish Republic of Northern Cyprus and the British sector. Although located outside Europe, the country is part of the European Union.

An onshore haven

Cyprus is an onshore European destination of choice due to its very favourable tax regime and its membership of the European Union. Thus It is possible, if based in Cyprus, to trade with Europe (due to the import/export system) and also to possess an EU VAT number. The country has adopted international Trust Laws, thus offering tax advantages to major enterprises located in Cyprus.

Cypriot law is modelled on British Common Law and onshore companies are regarded as IBC (International Business Companies) with limited liability, which must be established by a licensed lawyer, and the capital contributed must be at least EUR 1 000. It is possible for anonymity to be preserved by appointing a Director and shareholders. It is mandatory for an IBC to have its head office in Cyprus.

To avoid the taxation of profits, the management and control of the company must not be carried out in Cyprus. They will be treated as such if:

• Important decisions are made in Cyprus
• The majority of the members of the IBC live in the country more than 183 days per year

The country has 40 national and international banks, which are also operated on the British model, ensuring a good level of confidentiality.

Useful information

Cyprus is strongly discouraged for import-export operations in Europe because, given that the country is an island, products cannot pass through it in transit. Tax services still require transport documents. For any other activity, Cyprus is a destination of choice.

The different types of companies

6 different procedures and 8 days are needed to base a company in Cyprus.

Links:
Trade Register
Companies Register

Different tax rates

Cypriot companies are taxed at a rate of 10% and 20% for a company’s immovable property assets. Moreover, certain actions are not subject to tax, such as the sale of immovable property and income from interest and dividends.

There is also a 15% sales tax (VAT). This rate is reduced to 8% for hotel services, taxis and buses, and 5% for gas, newspapers, books and pharmaceutical products. With regard to income tax:

Reducing the amount of tax to be paid is quite simple, since there are deductions for donations to charities, rental income, insurance and life insurance contributions and premiums. With regard to the avoidance of double taxation, France and Cyprus signed an agreement in 1981.

Link: Cyprus Tax Office

Key points on the accounting system

The tax year in Cyprus year extends from 1 January to 31 December, and European Union accounting standards apply, together with international accounting standards.

It is mandatory for companies to keep accounts, prepare a balance sheet and send both to the Companies Register.

The accounts must contain: the sales and purchases of assets, debts and credits and payments and expenditure. An external auditor to the company must validate the findings of the annual general meeting of the company.

Links :
Cypriot Treasury
Companies Register
The Institute of Certified Public Accountants of Cyprus

Different tax rates

Cypriot companies are taxed at a rate of 10% and 20% for a company’s immovable property assets. Moreover, certain actions are not subject to tax, such as the sale of immovable property and income from interest and dividends.

There is also a 15% sales tax (VAT). This rate is reduced to 8% for hotel services, taxis and buses, and 5% for gas, newspapers, books and pharmaceutical products. With regard to income tax:

Reducing the amount of tax to be paid is quite simple, since there are deductions for donations to charities, rental income, insurance and life insurance contributions and premiums. With regard to the avoidance of double taxation, France and Cyprus signed an agreement in 1981.

Link: Cyprus Tax Office

Key points on the accounting system

The tax year in Cyprus year extends from 1 January to 31 December, and European Union accounting standards apply, together with international accounting standards.

It is mandatory for companies to keep accounts, prepare a balance sheet and send both to the Companies Register.

The accounts must contain: the sales and purchases of assets, debts and credits and payments and expenditure. An external auditor to the company must validate the findings of the annual general meeting of the company.

Links :
Cypriot Treasury
Companies Register
The Institute of Certified Public Accountants of Cyprus

Access to and functioning of the market

Cyprus has signed the Basel Convention on hazardous waste and the International Coffee Agreement 2001. Since Cyprus is part of the European Union, the customs rules of the EU are applied on Cypriot territory.

Specific licenses are required to import goods into Cyprus and the control of imports is stricter for some products, especially agricultural ones. If the merchandise arrives from a Member State of the European Union, Cypriot customs tariffs are void. On the other hand, products from foreign countries are taxed differently depending on their nature, but still at relatively low rates.

The rules of the Common Customs Tariff of the European Union apply. At the administrative level, an import declaration must be completed, as well as a goods exchange declaration or an Intrastat, for trade within the European Community. An Entry Summary Declaration may also be requested.

In Cyprus, large retail business is still weak in a country with 3 000 points of sale (60% of which are retail outlets). The main players are Woolworths, Metro and Marks & Spencers. The primary transport mode of products is by sea, with the ports of Limassol and Larnaca being the largest in the country. Today, Cypriot industry represents less than 20% of national GDP, with oil and gas being the largest sectors.

Links :
Cyprus Customs
European Union Customs
The Cyprus International Business Association
Cyprus Association of Businesses and Industries

Labour legislation

The average legal working week in Cyprus is 40 hours, for a minimum monthly salary of 700 Euros and a retirement age of between 63 and 65. The right to work in the country is based on the British standards in the Terminator Law (1967), which protects employees from unfair dismissal but which is, on the whole, more permissive than European law. The rate of union membership is 68%.

Labour legislation

Links :
Cyprus Employers and Industrialists Federation
Ministry of Labour and Social Insurance

Political data

The Cypriot political landscape is very special. The island is divided into three, with each zone governed by different administrations:

• The Republic of Cyprus is the southern part of the island (50% of the territory) and is the only internationally recognized authority. It has a seat at the United Nations. This Government is the one referred to when speaking of Cyprus: it is a member of the EU and, in theory only, controls the entire island.
• The Turkish Republic of Northern Cyprus, as its name suggests, governs the north of the Island (40%). This region is only officially recognized by Turkey.
• The British part, representing only 10% of the territory, in reality consists of military bases.

From the point of view of political organization, as with all information in this fact sheet, when we refer to Cyprus we are talking about the Republic of Cyprus.

Executive power is wielded by the President elected by universal suffrage (currently Dimitris Christofias), who appoints the Council of Ministers.

Legislative power is exercised by the House of Representatives, elected for five years under universal suffrage.

The major Cypriot political parties are :

• KISOS: Democratic Union of the Centre
• AKEL: Communist Party
• DIKO: Democratic Party
• DISY: Democratic Rally
• EURO.KO: European Party
• ADIK: Fighting Democratic Movement
• EDE: United Democrats
• Green Party of Cyprus