LAUNCHING IT BUSINESS IN CYPRUS
Cyprus is the EU silicon Valley
Over 3,500 developers from all over the world have chosen Cyprus as the permanent tax base for their company. More than 5,000 international development companies with a total of over 27,000 employees are registered in Cyprus. The reasons why Cyprus attracts the interest of these entrepreneurs are its special tax regime (IPBox), low dividend tax, access to the EU market and a high standard of living.
Advantages of opening an IT company in Cyprus
The advantages of opening a company in Cyprus include:
- Favorable climate and the conditions for working and living.
- Cyprus belongs to the EU and, accordingly, a company will have access to the EU market.
- Ease of the company registration.
- The legislative and judicial systems based on English private law.
- Low corporate tax rate – 12.5% and the possibility of low tax rate for IT companies – up to 2.5% (the lowest level in Europe). Favorable IPBox tax regime.
- Additional tax incentives for the income arising from the use of intellectual property assets such as software (Notional Interest Deduction -NID).
- 5-year amortization period for the capital costs associated with the acquisition or development of intellectual property.
- Availability of the agreements on the avoidance of double taxation with 66 countries of the world, including Russia, Ukraine, Belarus, Lithuania, Latvia, Switzerland, Armenia, Moldova and Malta.
- Low costs of opening and launching a business (from renting an office to purchasing equipment).
Requirements and guidelines for the companies incorporated in Cyprus
- Organizational and legal form of the company: private joint stock limited liability company (Ltd).
- Recommended minimum share capital of the company - 1,000 Euro.
- Shareholders and Directors:
A shareholder of a Cyprus company can be an individual or a legal entity. The minimum number of the shareholders - 1. According to Section 170 of the Companies Law a company must have at least 1 Director. The Director of the company can be either an individual or a legal entity. The Director manages the affairs of the company and is empowered to make decisions on all issues. There are no requirements regarding the nationality of the Directors in the Law.
A company in Cyprus must have at least one employee (usually this employee acts as the administrator). However, depending on the nature of the business and the organizational structure of the company, the minimum number of the employees may be increased. The company employees working in Cyprus must be recruited in accordance with the requirements of Cyprus legislation and must be registered with the social security authorities.
- Availability of the registered office and communication facilities:
The company registration address should not coincide with a mass registration address (i.e. it cannot be the address of the legal office providing legal support to the company). The company should have at least a properly equipped office (a separate room, telephone, fax, internet, computer and copying equipment, etc.) from which the management and coordination of its activities are carried out (there are certain exceptions to this rule depending on the corporate structure of the company).
- Accounting and audit:
The companies registered in Cyprus should maintain their accounting records and provide the tax authorities with the reports in accordance with the established international forms of financial statements. An annual audit of the company’s statements is required.
Opening an IT company in Cyprus
Opening an IT Company in Cyprus consists of several stages:
- Registration of an IT company in the State Register of Companies.
- Opening a bank account.
- Registration with the tax authorities.
- Registration with the social security authorities.
- Trademark protection.
I. IT Company registration
The process of registering a company in Cyprus takes from 10 to 30 working days and consists of the following sequential steps:
- Choice and registration of the company name.
- Search, rent (purchase) of the office premises and registration of the legal address of the company.
- Preparation of a set of documents for the shareholders and Directors of the company.
- Preparation of the Memorandum (Memorandum of Association) and the company Charter.
- Payment of the stamp duty.
- Registration at the Registration Department (State Register of Companies).
Issuance of the Registration Certificate means the beginning of the legal existence of the company.
II. Company bank account opening
Opening a corporate bank account is mandatory when registering a company in Cyprus as it is a part of the registration procedure.
The process of opening a corporate bank account in Cyprus is as easy as the setting up a personal bank account, except that the companies have to provide more documents. In order for a company to open a bank account in Cyprus the following documents should be submitted:
- The Charter, the Registration Certificate and the Certificate of Shares of the company.
- Certificates of the Directors and the Secretary, Certificate of the registered office.
- Confirmation of the registered office in Cyprus (utility bills, brochures and business cards, etc.).
- Passports, IDs, confirmation of the addresses of residence for each Director of the company in Cyprus, Certificate of No Criminal Record for each Director of the company issued by the state of which he is a resident, Tax Registration Number for the Directors of the company who are residents of Cyprus.
- Application form issued by the bank (each bank has its own application from).
- Information about the shareholders and the ultimate beneficial owners of the company.
Our lawyers will assist you in preparation of all the necessary documents and opening company bank accounts in Cyprus.
III. Registration with the tax authorities and systems
Registration with the Tax Office
Each company is required to register with the Tax Register. This must occur within 60 (sixty) days from the date of its creation. A Tax Identification Number (TIN) is issued when registering a company.
Registration with the VAT Department
In some cases the company must be included in the VAT Register:
- Mandatory registration:
The company is required to register as a VAT payer if the value of the company’s VAT-taxable operations exceeds €15,600. The volume of transactions is calculated for the previous 12 months and registration with the VAT Department should be made within the next 30 days.
- Voluntary registration:
As a rule, it is not related to the volume of the company’s operations subject to VAT. Voluntary registration is carried out by IT companies that transact outside of Cyprus (this is permitted provided that the management and control of these companies is carried out in Cyprus).
- Mandatory registration:
Registration in the VAT Information Exchange System (VIES)
A VAT payer IT company supplying software and services to the persons registered in other EU countries must register in the VIES in order to exchange VAT information and submit VIES forms monthly.
IV. Registration with the social security authorities
Every employer is obliged to register in the Employers’ Register of Cyprus Social Security Service and register all his employees there.
V. Trademark protection
Trademark registration is also important. This is necessary to protect the rights of the company and promote its products and services at the market.
As the result of all the above actions the company will receive a package of official documents and certificates.
Taxation of IT companies. IPBox regime
Corporate tax. IP Box regime
Over the past 15 years the government of Cyprus has announced its intention to reduce the dependence of the country’s economy on the tourism revenues. One of the measures taken in this direction was the creation of a favorable tax environment for the companies developing intellectual property products, and above all, software.
As a result, many international companies specializing in the creation of video games, investment platforms, CRM, mobile applications, payment systems, online stores and educational platforms, database software, cloud providers, robots, artificial intelligence, etc. preferred Cyprus as their tax base. To date, the largest foreign-owned company in Cyprus is Wargaming, a video gaming company with over 500 developers.
Why Cyprus IP Box regime attracts IT companies?
The advantage of Cyprus regime is that 80% of the profit derived from the use of intangible assets (including the software) is excluded from the tax base for the income tax. Thus, only 20% of IT revenues, after deducting the costs of their receipt, are taken into account when calculating the tax. Therefore the effective corporate tax rate for the IT company constitutes 2.5%, not 12.5%.
In addition to corporate tax, Cypriot companies pay the following taxes and fees:
- Fixed company annual levy - 350 Euro.
- Contributions to the Social Insurance Fund for the company employees in the amount of 8.3% of the employee’s salary increased by the amount of the contributions to the Holiday Fund.
- Contributions to the General Health System Fund - 2.9% of the employee’s salary increased by the amount of the contributions to the Holiday Fund.
- Value added tax – 19%.
- License and stamp duties.
Advantages of living in Cyprus
- Membership of the country in the European Union.
- Safety and low crime rate.
- Sunny weather more than 300 days per year.
- English and Russian language schools.
- More than 50,000 Russian-speaking immigrants permanently residing on the island.
- Organized Russian community (schools, churches, social clubs).
- The cost of living is not very high compared to other leading tourist countries.
Estimated costs of running a company and staying in Cyprus
Cyprus is one of the countries where the costs of starting and running a business are relatively low:
- Cost of registering a company (service packages) from €1,100.
- Cost of the registration of a trade name - €300.
- Cost of the logo registration - €300.
- Cost of the accounting and auditing statements from €2,500.
- Cost of the quarterly VAT reporting from €150.
- Employer’s liability insurance from €170.
- Office rent from €350 per month.
- Renting an apartment from €350 per month.
- Car insurance from €175 per year.
- Obtaining a work visa for an employee from €150 – depending on the case.
- Services for PinkSlip obtaining from €150.
Amazon Corporate&Immigration Services offers its clients the following services for organizing IT business in Cyprus:
- Consulting on the corporate structure.
- Consulting on the tax planning.
- Company registration.
- Sale of IT company with a clear tax history.
- Registration of the legal name of the company.
- The trade mark/logo/patent registration.
- Services of the nominee shareholders.
- Services of the nominee Director.
- Services of the company Secretary.
- KYC/ AML/Due Diligence services.
- Corporate governance services.
- Registration with the VAT service.
- Registration in the Tax Office.
- Registration in the Social Security Service.
- Providing accounting of the income/expenses based on IP Box.
- Registration of the patents (registration of the trademarks and patents).
- Preparation of the company’s annual audited statements.
- Full range of services for organizing office work.
- Obtaining a work permit.
- Opening a bank account.
- Obtaining a visa for you and your family (Pink & Yellow Slip).
- Financial analysis and preparation of the feasibility studies for the startups.
- M&A services.
- Obtaining bank financing.
- Obtaining the European grant.
- Insurance services.
- Employment benefits for unemployed scientists.
The first consultation is free.
The cost of services related to the company registration is from 1,150 Euro to 2,500 Euro. The list of services and the price list of our company can be found here.
Why clients choose us?
- 35 years of experience working with the businessmen from Russia and the countries of the former USSR.
- We have helped over 200 Russian, Ukrainian and Belarusian IT companies to relocate all or most of their operations to Cyprus.
- We have the most competitive prices at the market.
- We are deeply familiar with the legal systems of Cyprus and former Soviet Republics.
- We have extensive experience in obtaining patents and copy right protection (the European Union, the United States of America).
- We have consultants who are software developers themselves. Their opinion is an important guide for our accountants to correctly determine the income and expenses associated with the production of software. In this way, we help our clients achieve the maximum level of tax incentives.
- Our company employs former tax inspectors, government and banking officials as independent consultants who use their business contacts and valuable experience to advance the interests of our clients.