International companies from all the corners of the planet choose to re-domicile in Cyprus in order to benefit from the local tax regime. Cyprus tax legislation provides a corporate tax rate of 12.5%, exemption of tax on the dividends, interests and royalties, zero taxation on profits of foreign permanent establishments and many other as you will read below.
Company re-domiciliation.
Many countries allow foreign companies to change their jurisdiction of incorporation. This kind of legislation permits the “re-domiciliation” of a company, meaning changing the “seat of incorporation” into or out of the jurisdiction. There is an alternative to this process of course and is the liquidation of the existing company and the transfer its portfolio of assets to an entity incorporated for the purpose in the new jurisdiction.
Cyprus is among the few jurisdictions that allow the re-domiciliation of entities, in and out of the country.
The legislation and additional regulations provide great opportunities to international companies, investors and traders since they can become tax residents of Cyprus and take advantage the favorable features and benefits of the local jurisdiction, which is known as one of the most business minded in the European Union.
Some of the benefits are.
- One of the lowest corporate tax rate in Europe – 12,5%
- Tax‐exempt dividend income (subject to non‐stringent conditions)
- No withholding taxes on payments of dividends, interest and royalties irrespective of recipient
- No taxation on profits from the sale of securities (no minimum holding period, percentage etc.)
- No taxation on profits of foreign permanent establishments
- No taxation on the liquidation of a Cypriot company
- Wide tax treaty network
- Unilateral tax credit relief irrespective of the existence of a tax treaty
- No substance, debt‐equity and thin capitalization rules
- Full adoption of the EC Directives and many more
Foreign companies use the tax regime of Cyprus without the need to fully restructure – for example, to transfer their assets and liabilities to the new incorporation and liquidate the former one. This provides possible tax avoidance to the original country. Another important advantage is the smooth continuation of operations of the businesses during the whole process.
Application for re‐domiciliation.
A foreign company registered in a country which allows re‐domiciliation and whose
Memorandum and Articles of Association provide for the possibility of re‐domiciliation, may apply to the Registrar of Companies in Cyprus to be registered in Cyprus as a continuing company.
The process from a practical perspective is really simple and is summarized as follows:
- The company needs to appoint a local approved representative to deal with the re‐domiciliation process in Cyprus.
- The approved representative will prepare an application for re‐domiciliation
- (form “ME 1”) and shall list the accompanying documents to be filed with the application as described below.
- The approved representative or a duly appointed director of the company will also file an affidavit confirming the following:
(a) the current company name of the foreign company and the name under which it will continue its existence in Cyprus
(b) the country or jurisdiction where the foreign company is registered
(c) date of registration of the foreign company
(d) the resolution, or other similar document, authorizing the registration and continuation of the existence of the foreign company in Cyprus
(e) that the foreign company gave an official notice to the authority of the country of its incorporation of its decision to be re ‐domiciled in Cyprus. Proof of such official notice should be provided with the affidavit.
(f) that no criminal or administrative proceedings have been initiated against the foreign company with respect to the infringement of the laws of the country where it was incorporated
This document is named “ME A” and should be filed together with ME 1 in order to commence the procedure of re‐domiciliation.
- There is a minimal government fee of €187,95 (€102,52 for ME 1 and €17,09 for ME A) and an additional €85,43 for the accelerated procedure payable with the application form.
- Once the application and its accompanying documents are approved by the Registrar of Companies, the foreign company will obtain a temporary certificate of continuity and will be able to continue its business activities subject to the Cypriot Companies Law and Tax legislations.
Documents to accompany the application.
The following documents should be submitted by the authorized representative together with the application form for the re‐domiciliation of the foreign company into Cyprus:
- Resolution, or other similar document of the foreign company, authorizing the foreign company to obtain registration in Cyprus as a continued legal body
- copy of the amended Memorandum and Articles of Association of the foreign company in accordance with the provisions of the Cypriot Companies law
- certificate of good standing, or other similar document as the case may be, issued by the appropriate authority in the country of incorporation in original form duly certified and apostilled. The document should be translated in Greek by filing an affidavit at the district court, which should then be submitted to the Registrar of Companies
- document ME (A) as described above
- affidavit by a duly authorized director or representative of the foreign company confirming the financial good standing and solvency of the foreign company
- list of directors of the foreign company and/or the secretary and/or the managers of the foreign company (name and surname/ registered name and any previous names, profession/ business activity, passport or ID number/ incorporation number, DOB/ date of registration, citizenship/country of incorporation, address ‐ depending on whether it is a legal entity or an individual)
- list of the current shareholders/members of the foreign company (same details as in the case of company officials as above), such list being certified in such a manner as the Registrar may require and may accept to be sufficient for the purposes of compliance with the requirements of this Law
- documents illustrating that re‐domiciliation is possible in the country of origin and confirmation that the re‐domiciliation has been approved by the minimum % of stakeholders (shareholders, employees, creditors etc.) as prescribed for in the country of origin.
- any other document as may be requested by the Cypriot Registrar of Companies.
Should you require more information about the re-domiciliation of your entity in Cyprus please feel free to ask our experts anything. We will be happy to answer your queries.
