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Starting Up in Business. How to Start a Business in Cyprus

CYPRUS COMPANY FORMATION. INCORPORATE OFFSHORE COMPANY IN CYPRUS, Welcome to Coddan online Cyprus Companies formation agent. Better tax planning is one of the many reasons why so many thousands of businessmen have chosen Cyprus for the purpose of establishing an International Business Company. Cyprus, unlike many offshore jurisdictions is not a 'tax haven' and does not offer 'brass plate' companies. Instead, Cyprus offers great tax incentives due to its favourable tax regime and its wide network of double tax treaties. These tax incentives together with so many other incentives offered by Cyprus, render Cyprus the ultimate international business centre of our planet! Many of the well known offshore tax jurisdictions impose low or nil income tax on the company profits. However the problem with those jurisdictions is that they do not have double tax treaties. Cyprus offers a basket of incentives including the low tax on the net profits and the double tax treaties. We recommend reviewing this site in its entirety, so that you are knowledgeable of Cyprus jurisdiction and the powers granted to Cyprus companies. We will guide you through the process of registering your company and establishing your registered identity. Complete and submit our application form online. Adequate completion and submission of this form, along with the provision of payment, will enable Coddan to incorporate your proposed company within seven business days. We will express mail your corporate documents to the mailing address you specify in your incorporation order. If you want to become familiar with the description and the contents of Cyprus companies incorporation packages, offered by Coddan and to find above, what kind of service is included in this or that Cyprus companies registration package, to get an idea about the price of annual renewal of the service, and about the general legal requirements to the company incorporation within Cyprus, please, select the package you need from the list, situated below the banner. The information in the banner will be renewed according to the package you've chosen.

1. A uniform corporate tax rate of 10% is introduced for all companies. 2. Dividend income is exempt from tax in Cyprus irrespective of its source, provided certain conditions are satisfied. Where the exemption does not apply, 15% defence tax is payable but credit for foreign tax suffered is given irrespective of the existence of a treaty. 3. Interest income is 50% exempt from corporate tax, unless it is received in the ordinary course of business in which case it is taxed like normal trade income. That portion of interest income which is exempt from corporate tax, is subject to defence tax at 10%, but credit is given for foreign tax suffered irrespective of the existence of a treaty. 4. Profit from the disposal of securities is exempt from tax in Cyprus. 5. Profits of a permanent establishment maintained abroad by a Cyprus company are exempt from tax in Cyprus. 6. There is no withholding tax on dividends paid to non-resident shareholders. 7. There is no withholding tax on interest payments made abroad. There is no withholding tax on the payment of royalties derived from outside Cyprus. 8. Corporation or physical person of any nationality may act as directors. Minimum of one (1) director. A registered office in Cyprus is required. 9. Cyprus has concluded over 34 Double Tax Treaties. 10. All Cypriot companies must appoint a company secretary, who may be a natural person or body corporate. It is advisable to appoint a resident company secretary. +44 (0) 207.637.3802 +44 (0) 289.099.8744 +44 (0) 800.081.1510 info@ukincorp.co.uk

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Please note » The prices payable for the items that you order are clearly set out in the web site. There will be no contract of any kind between you and us unless and until we receive payment from you. We act as your agent in the incorporation of offshore companies. We are not able to guarantee that any such filing will be acceptable to Companies Registrar, nor are there any contractual obligation upon us to do so. If Companies Registrar rejects incorporation or other filing, we will credit your account with a full refund and the contract between us will be made void. Companies Registrar does not offer a cancellation facility for the incorporation of companies or the filing of documents. We will be unable to cancel any such submission on your behalf and will not refund any payment you have made. All prices shown at Coddan Web Site are in Great British pounds. Credit cards are the preferred method of payment; we accept VISA, MasterCard and Delta. We can accept payment in UK Pounds Sterling, US Dollars, Euros, Australian Dollars and Canadian Dollars.

Our company's main strength is its team, which comprises of more than twenty multi-discipline professionals, including association with commercial lawyers, accountants, company secretaries, bankers, international trade and investment specialists and experienced corporate administrators providing professional corporate services from our offices to clients all over the world. Our aim is to establish a close working relationship with our clients and, because of this, all new clients are provided with an initial consultation with no cost or commitment, which will enable them to evaluate the nature and scope of their specific requirements. We provide everything you need to easily and affordably incorporate your business in Cyprus. Coddan provides complete and confidential Cyprus corporate management services. Included are wide ranges of financial and administrative services to individuals and corporate entities, as a base for their international and local business activities in Cyprus. Our mission is to provide high quality services to our clients over the long-term at competitive fees. You will find that we are able to render certain additional services exceedingly valuable when the time factor is of special importance.

Please pay careful attention to the following instructions if you plan to incorporate a private company limited by shares or guarantee company through Coddan. If you are interested in having Coddan provide nominee directors, nominee shareholders, bank account signatories, administrative or clerical services, or grant general power of attorney for the proposed company, you may order this service online.

We recommend reviewing this site in its entirety, so that you are knowledgeable of the Cyprus jurisdiction and the powers granted to Cyprus companies. Your reasons for incorporating in Cyprus cannot be determined by Coddan, although we can refer you to the appropriate professionals for business planning, legal or tax advice. You should know who your shareholder(s), director(s) and officer(s) are, the overall structure and organization of your company, and you must confirm agreement by all parties involved before you proceed with the incorporation.

Complete and submit a limited company or guarantee company application form. Adequate completion and submission of this form, along with the provision of payment, will enable Coddan to incorporate your proposed company within seven business days. To expedite the process, we recommend making full use of the Coddan Online Incorporation Form. All information submitted is strictly confidential.

Unless you are paying by credit card, wiring instructions will be provided separately upon application. The total amount due, including all government fees, must be paid in advance. Coddan will not incorporate your company and cannot release company documentation (including the Memorandum and Articles of Association, company seal, share certificates, etc.), or take further action on behalf of the company, until it has confirmation of your payment. Our Pricing Schedule is made readily available on this site.

We will express mail your corporate documents to the mailing address you specify in your incorporation order. If everything proceeds as planned, you will have all corporate documents within seven business days of your incorporation request. Your possession of these documents finalizes the incorporation process and grants you the right to use the powers of the company as provided for under Cyprus law. If Coddan is serving as Director, we will retain the original documents and company seal, and send you a copy of the memorandum and articles of association.

Live Help » Live Help is a real time "chat" feature which enables you to interact with a customer service representative without a phone call. Get answers to your questions while using our website. Clicking the "Live Help" button will start an on-line session with one of our representatives. Live Help is currently available during normal business hours. Outside of the above opening hours our business center will be closed. When you click on the button you will see an e-mail form that will allow you to send us a mail with your questions. Live Help is absolutely free! There are no hidden fees. We offer the service as a courtesy to our website visitors. Dear visitors, while having a chat session with a customer, we are frequently requested to give a piece of advice on tax planning or business structuring. We would like to inform you that it is against our principles to provide online advice pertaining to these issues. The points that may be covered during a session include service description, package or service price, navigation at our website, ways of making an order, methods of payment etc. Yet, if you wish us to provide you with advice on tax or business structuring, you should be aware that this service is chargeable. If you have any questions please E-Mail or call us: 0800 081 1510 or +44 (0) 207 637 3881, fax: +44 20 7681 3318.

Please read the following before you get started:

CYPRUS COMPANY FORMATIONS FROM - £1,100

Thank-you for visiting the website of Coddan. We hope that the site will be a valuable resource for clients and prospective clients who require up to date legal information in a quickly changing world. The decision of whom you choose to represent you is an important one. Please feel free to contact us with any questions you may have. We recognize that organising a corporation, partnership, or limited liability company can be a maze of paperwork and documentation. Let us help you in compiling and organising all the necessary documentation, and even assist you in deciding which business form would work best for you. The form of entity selected for the conduct of a business greatly impacts the daily operations of the business and the income tax consequences to both the business and its owners. Our services extend from the initial document preparation and filing with appropriate authorities, including post-formation activities such as preparation and adoption of By-laws and director/shareholder resolutions.

Our lawyers have vast experience in dealing with many types of business entities, from start-up ventures to large corporations. Our lawyers assist start-up businesses in the choice of entity, whether corporation, limited liability company, general partnership, limited partnership, or limited liability partnership. Each of these entity choices offers its own unique set of advantages and disadvantages. The key to setting up a successful business is properly defining the relationship among the owners. Our lawyers have experience in setting up these agreements, whether employment agreements, shareholder agreements, partnership agreements, or operating agreements.

Coddan is one of the world's leading independent providers of Cyprus company formation services. We have been involved with offshore business for many years. Our business is primarily based upon personal relationships, trust and discretion. These values are fundamental to our approach and will remain so. Our services cover most of the world's financial and trading territories. We offer a wide scope of unparalleled professional services, which, in addition to the traditional company incorporation services, include auditing, accounting, legal, shipping, and trust; administration and taxation services. For clients requiring confidentiality, professional nominee directors, nominee secretary and nominee shareholders are provided. Furthermore, Coddan provides Cyprus registered office facilities, registered agent, company secretarial services, mail forwarding, telephone answering, and facsimile services.

REGISTRATION OF CYPRUS LEGAL ENTITIES

Registration of a Cyprus Private Company Limited by Shares (capital CYP£5.000). The incorporation of a Cyprus company normally takes up to 40 working days. Includes: payment of first year's government fees, registered agent & registered office for the first year. Registration of Cyprus company and providing Memorandum and Articles of Association (Apostilled) in Greek and true translation in English. Certificate of Incorporation (Apostilled), Certificate of Shareholders (Apostilled), Certificate of Registered Office Address (Apostilled), Certificates of Directors and Secretary, all in English (Apostilled). Obtaining tax registration number of the company from the tax authorities (Apostilled). Providing share certificates and round rubber stamp of the company. +44 (0) 207.637.3802 +44 (0) 289.099.8744 +44 (0) 800.081.1510 info@ukincorp.co.uk

Cyprus is an independent democratic republic, and a member of the Commonwealth. It is prosperous: GDP US$16,400 per head. The economy is dominated by services, with tourism particularly important. Unemployment is low. The Cyprus Government has worked hard to create a favourable offshore tax regime while at the same time maintaining a normal-looking domestic economy, albeit with rates of taxation that are low by international standards. The success of this programme is attested by the nearly 50,000 offshore companies registered in Cyprus since 1975. Domestic and offshore companies alike now pay 10% tax.

Cyprus has double-tax treaties with 27 other countries, including most major Western 'high-tax' countries, and most Central and Eastern European states. This is unusual for an international offshore financial centre and the effect is that Cyprus is a very effective location for holding and investment companies aimed at emerging markets. Cyprus has a good, European-standard business infrastructure, and English is widely spoken. However, it is a relatively expensive jurisdiction for offshore operations, and many documents need to be filed in Greek. The legal system is predominantly based on English law, and provides for various types of trust.

The Central Bank of Cyprus, within the policy for harmonization with the European Union (EU) acquits communitarian, announces the introduction of additional liberalization measures with respect to investments by non-residents in Cyprus and by Cypriots abroad. Specifically the following measures have come into effect since 7 January 2000:

Investments in Cyprus by citizens (physical or legal persons) of EU member states:

Direct investment. All restrictions concerning the maximum allowable percentage of foreign participation as well as the minimum level of foreign investment in any enterprise in Cyprus are abolished, provided the foreign investors are citizens of EU member states. The new Central Bank policy does not touch upon limitations applicable under other laws or regulations. Such limitations, for example, apply to the acquisition of immovable property.

Portfolio investment. Henceforth, investors who are citizens of EU member states may acquire up to 100% of the share capital of Cypriot companies listed on the Cyprus Stock Exchange. In the banking sector, the maximum foreign equity participation remains 50%, in accordance with the policy announced in July 1999. In case of liquidation of sizable portfolio investments undertaken after the issue of this announcement, the Central Bank reserves the right to demand the gradual transfer abroad of the capital gain, in order to mitigate possible negative effects on the balance of payments and foreign exchange reserves.

Non-residents wishing to acquire any share or participation in Cypriot legal entity should apply through a lawyer or accountant practising in Cyprus. The professional will submit to the Central Bank an application containing the requisite information, i.e. share capital, economic activities, etc. Upon receipt of the necessary permit, the non-residents' shares or participation must be registered in their names, or in the names of their nominees, at the Department of the Registrar of Companies under Companies or Partnerships Laws, as the case may be. Legal procedures pertaining to the registration, re-organisation and liquidation of business entities must be completed through advocates practising on the island. Business entities with non-resident participation are required to prepare and submit to the Central Bank and the Department of Inland Revenue annual Financial Statement audited by local practising accountants.

Cyprus offers the possibility of registering such an offshore entity. The Cyprus government, in order to attract foreign participation in establishing such companies, offers several incentives and has adopted a particularly easy procedure of registration. There are, however, many possible benefits for international businesses in Cyprus. Full compliance with EU law, OECD and FATF requirements, has enhanced Cyprus' status as a respectable centre for international business and ensured its elimination from "black lists". Further, businesses can utilise the wide network of Treaties for the Avoidance of Double Taxation entered into by Cyprus, for advantageous international taxation planning, without restrictions on die benefits provided by the Treaties.

Using a Cyprus company as a holding company has extremely significant benefits. Income from dividends is tax-free; gains on stile of shares of subsidiaries (or any companies) are tax-free and there are no withholding taxes on payments of dividends or interest from Cyprus. Holding companies in Cyprus, whose shares are owned by non-Cyprus residents and which receive dividend income from anywhere in the world, are not subject to any income tax in Cyprus on their dividend income or on their dividend distributions. Furthermore, a Cyprus holding company can benefit from the many double tax treaties entered into by Cyprus (especially in die form of zero/reduced withholding taxes on payments of dividends by subsidiaries). They are subject to the same taxation rules as all Cyprus companies and there is no "ring fencing". Also there is no legal definition of a holding company and therefore there are no restrictions as to its activities. If such a company mixes trading with investment income, its trading income will be taxed at 10% whilst its investment income will be tax-free.

Any income or profits from the sale of securities (shares, bonds, debentures, etc) are not subject to Cyprus taxation. Profits earned from a permanent establishment abroad are fully exempt from Cypriot tax. There is no capital gains taxes (except only on immovable property in Cyprus) and payments from Cyprus to any country in the world, of dividend, royalties or interest are without any Cyprus withholding taxes, irrespective of any Treaty for Avoidance of Double Taxation. Interest earned from bank deposits held by non-residents in Cyprus is completely tax-free. Cyprus incorporated companies, which have their residence (i.e., their place of management and control) outside Cyprus are not subject to Cyprus income tax.

EU citizens or companies incorporated in the 25 EU countries do not require any government permit in order to own shares in a Cyprus company and there is a complete absence of exchange controls. The new VAT law in Cyprus, gives new opportunities to international business companies to re-claim their VAT expenses in Cyprus whilst in most cases not leading to die requirement to impose VAT on sales (goods outside Cyprus are outside die scope of Cyprus VAT, but provision or receipt of services should be looked at more carefully and requires professional advice). It is, therefore, evident that die introduction of the new rules has actually greatly enhanced the potential of beneficially utilizing Cyprus in international tax planning.

CYPRUS FORMS OF COMPANY

Private Company Limited by Shares. The relevant legislation is Cyprus Companies Law, Cap. 113, which is virtually a copy of the English 1948 Companies Act. A private company is one which by its articles: restricts the right to transfer its shares. Limits the number of its members to 50. Prohibits any public subscription to shares or debentures. The Companies (Amendment) Law of 2000 (Law 2(I)/2000) introduced single-member companies. The Companies (Amendment) (No. 3) Law of 2000 (151(I)/2000) introduced new provisions as to the validity of transactions of companies and as to the information which must be included in the official documents of companies. The Companies (Amendment) Law of 2001, Law 76(I) of 2001 provided for a new system for the certification of companies’ auditors and for the recognition of Bodies of Auditors and the grant of approval to auditors with foreign qualifications and also the recognition of accountants' companies by the Council of Ministers.

When 100% foreign-owned, a private company is referred to as an 'offshore company', although recently the expression International Business Company has come into favour. However, as from 1st January 2003, an offshore company (IBC) no longer has a separate taxation status, and is taxed according to the same principles as a regular company. IBCs are now allowed to trade inside Cyprus. However, a pre-existing IBC which makes an irrevocable commitment not to trade inside Cyprus until 2006 is able to claim the existing low tax rate for the three years 2003, 2004 and 2005.

In order to form a foreign-owned company, a bank reference and copy of the owner's passport is required for the registration. The bank reference must be issued by a bank included on the Central Bank of Cyprus's list of qualifying banks.

Cyprus Exempt Private Company. A private company limited by shares is exempt if: no body corporate other than another exempt company holds any of its shares or debentures. The number of debenture holders is not more than 50. No body corporate is a director of the company. The main advantages of an exempt private company are: it need not file accounts with its Annual Return. It is not subject to the statutory restrictions on loans to directors.

Cyprus Public Company Limited by Shares. Any company registered under the Act whose Articles do not contain the restrictions applicable to private companies is a public company. A public company may obtain a listing on the Cyprus Stock Exchange.

Cyprus Company Limited by Guarantee » As in England, companies limited by guarantee are normally used only for charitable or non-profit-making purposes. Apart from their share structure, they are similar to other types of private company and also fall under the Cyprus Companies Law.

If you intend to form a Cyprus GUARANTEE COMPANY, then CLICK HERE. (Cyprus Guarantee Company Formation Package - £1,100. The incorporation of a Cyprus guarantee company normally takes up to 40 working days. Includes: payment of first year's government fees, registered agent & registered office for the first year. Registration of Cyprus guarantee company and providing Memorandum and Articles of Association (Apostilled) in Greek and true translation in English. Certificate of Incorporation (Apostilled), Certificate of Registered Office Address (Apostilled), Certificates of Directors and Secretary, all in English (Apostilled). Obtaining tax registration number of the company from the tax authorities (Apostilled). Providing round rubber stamp of the company. Central Bank of Cyprus Permission (Apostilled). NO OTHER HIDDEN COSTS.)

Cyprus Branch of Overseas Company » Any overseas company may operate in Cyprus as a branch. Within one month of establishment of such a branch, the following documents must be filed (in Greek) with the Registrar: a certified copy of the Memorandum and Articles of Association. A list of the directors and secretary. The names and addresses of persons residing in Cyprus authorized to accept all notices on behalf of the Company. Companies with branches in Cyprus must also file their accounts annually, together with certified Greek translations. Documents requirements: Certified copy of the Certificate of Incorporation. A certified copy of the charter, memorandum and articles of association or any other document confirming the constitution of the company. Certificate of directors and secretary of the company. Resolution of open branch office in Cyprus. Articles of the branch Office. The name and address of at least one person resident in the Republic of Cyprus authorized to accept on behalf of the company any notices required to be served on the company. General Power of Attorney to the official representative resident in the Republic of Cyprus authorized to accept on behalf of the company any notices required to be served on the company. All these documents could be apostilled separately or as one set. The Central Bank of Cyprus requires bank references for foreign company for the establishment of the branch in Cyprus (these references are similar to those for the establishment of an International Business Company).

If you intend to establish a Branch of Overseas Company, then CLICK HERE. (Economy Cyprus Branch of Overseas Company Formation Package - £900.00 The incorporation of a Cyprus branch normally takes up to 40 working days. Includes: payment of first year's government fees, registered agent & registered office for the first year. Registration of Cyprus branch and providing Memorandum and Articles of Association (Apostilled) in Greek and true translation in English. Certificate of Incorporation (Apostilled), Certificate of Registered Office Address (Apostilled), Certificates of Directors and Secretary, all in English (Apostilled). Obtaining tax registration number of the branch from the tax authorities (Apostilled). Providing round rubber stamp of the branch. Central Bank of Cyprus Permission (Apostilled). NO OTHER HIDDEN COSTS.)

General Partnership. Partnerships fall under the Partnerships and Business Names Law Cap 116, basically similar to the equivalent English legislation. They must be registered with the Registrar of Partnerships within one month of formation, giving name, purposes, place of business, full particulars of the partners etc. Foreigners may belong, but need exchange control consent. A general partnership may have between 2 and 20 individual members (up to 10 only, if it intends to conduct banking business). Partnerships do not need to file accounts or to be audited.

Cyprus Limited Partnership » These are similar to general partnerships except that they have one or more general partners with unlimited liability and one or more limited partners (whose liability is limited to the amount declared in the partnership return filed with the Registrar). Limited partnerships, used in conjunction with offshore companies offer good tax planning possibilities.

If you intend to establish a Limited Partnership, then CLICK HERE. (Economy Cyprus Limited Partnership Formation Package - £1,100 The incorporation of a Cyprus partnership normally takes up to 40 working days. Includes: payment of first year's government fees, registered agent & registered office for the first year. Registration of Cyprus limited partnership and providing Memorandum and Articles of Association (Apostilled) in Greek and true translation in English. Certificate of Incorporation (Apostilled), Certificate of Members (Apostilled), Certificate of Registered Office Address (Apostilled), all in English (Apostilled). Central Bank of Cyprus Permission (Apostilled). NO OTHER HIDDEN COSTS.)

Local Trusts. A 'local trust' is governed by the Cyprus Trustees Law Cap 193, which closely follows the English Trustee Act 1925. The settlor and beneficiaries are normally residents of Cyprus, and the trust and its property are subject to exchange controls, although these are vestigial since Cyprus joined the EU.

Offshore Trusts. Offshore Trusts are the same as local trusts, but their beneficiaries must be non-resident, and all the trust's activities must be outside Cyprus. As with 'offshore' companies, the special tax status of offshore companies has ceased with Cyprus's accession to the EU.

International Trusts. The International Trusts Law of 1992 brought Cyprus trust law into line with that of other major international trust jurisdictions. Both settlor and beneficiaries must be non-resident, although one Trustee must be Cypriot. International trusts may have many tax and legal advantages.

SCOPE OF CORPORATION TAX

The offshore regime in Cyprus has changed as part of the island's accession to the EU, and as a result of agreements with the Organisation for Economic Cooperation and Development (OECD). Cyprus was excluded from the OECD's June 2000 'harmful' tax haven blacklist in return for pledging a commitment to amend its tax practices. In July, 2002, as part of the Income Tax Act No. 118(I) of 2002, Parliament approved a uniform 10% corporate tax rate, to apply to both onshore and offshore companies, plus a 2% levy on wage bills (meant to subsidise pensioners), and a 'Special Contribution' related to defence which in effect applies the 10% corporate tax rate to inter-company dividend and interest payments. However, the rules are complex.

The 10% corporate tax gives Cyprus the lowest rate in the EU, after Ireland (12.5%), with the (very new) exception of the Isle of Man, which has just announced a nil rate - but the IOM isn't really in the EU anyway for most purposes. The new regime introduces a 'residence'-based system of taxation, and was in operation from 1st January 2003. Further proposals include the exchange of tax and finance information, as well as the signing of double tax treaties, between Cyprus and additional OECD member countries. Cyprus has proposed to maintain its company and trust management regime, although the identity of the beneficiaries will have to be disclosed to the tax authorities when a company is registered or when a change of ownership takes place. The new rules came into effect from December 31, 2003 for new companies registering in Cyprus, while those that are already registered on the island will have until December 31, 2005 to comply with the new requirements.

After the EU finally agreed its Tax Directive in June, 2003, the Commission said it intended to give the ten acceding states, of which Cyprus is one, until 2007 to implement the Directive, which includes a 'Code of Conduct' on 'harmful tax practices' and rules to avoid the double taxation of royalty and interest payments. However, a statement released by the Cypriot Ministry of Finance said that Cyprus will adopt the new code in full, and that it hopes to do so in time for the EU's January 2005 savings tax deadline. However, profits from activities of a permanent establishment situated outside Cyprus are completely exempt. This exemption will not apply to a Cyprus company if: (i) its foreign permanent establishment directly or indirectly engages in more than fifty per cent (50%) of its activities in producing investment income, and (ii) the foreign tax burden is substantially lower than that in Cyprus. Dividends will be exempted from tax; however, new provisions have been introduced under the Special Contribution for the Defence of the Republic Law, 2002 ("Special Contribution"). "Permanent establishment" has the same meaning as defined in the OECD Model Tax Convention on Income and on Capital with the exemption of "a building site or construction or installation project", which constitutes a permanent establishment only if it lasts more than three (3) months.

Calculation of Taxable Base. Allowable expenditure needs to be incurred 'wholly and exclusively' for the business; however, mixed private/company expenses can often be apportioned. Among others, the following expenses are allowable: repairs, but not improvements, alterations or additions; contributions to an approved fund. Bad debts and provisions for them. Non-capital scientific research expenditure. Expenditure on patents or patent rights. Various types of charitable expenditure. Interest on loans, other than for those used to acquire shares. Rental payments. Salaries and other compensation costs for employees and directors. Inventories are valued using FIFO. Wear and tear allowances on prescribed scales which replace depreciation in the tax calculation. Investment allowances which are available for certain activities. There are some restrictions on the use of losses from one trade to offset profits from another. Unrelieved losses can normally be carried forward to offset future profits, but from 1996 they have only a 5-year life. Group relief is available but with limitations.

50% of income from interest derived by a company is exempt from corporate tax but the whole interest received or credited will be subject to the new provisions of the Special Contribution. Interest derived from ordinary trading activities will only be subject to the Income Tax Law provisions without any exceptions. The Group Relief rules, now enacted, provide for group relief of tax losses among companies of the same group. A company will be considered as member of a group if: A company is at least 75% subsidiary of the other, or both companies are at least 75% subsidiaries of a third company. A company will be considered to be 75% subsidiary of another company if and so long as not less than 75% of its ordinary share capital with voting rights are owned directly or indirectly by that other company and that other company is entitled to not less than 75 per cent of: any profits available for distribution to the equity shareholders, and any assets of the subsidiary company which would be available for distribution to its equity holders on a winding up.

Group tax losses may be set off as long as both companies are Cypriot tax residents and are members of the same group during the whole year of assessment. Only the loss of any year of assessment of a company can be set off against the other company's profits of the corresponding year of assessment. Losses brought forward will not be available for Group Relief. Any payment for acquiring the tax losses will not be taken into account in the tax computation nor it will be considered to be a dividend or an allowable expense. Profits from the sale of shares, bonds, debentures and other titles of companies established anywhere in the world are exempt from tax.

Filing Requirements and Payment of Tax. Company tax returns must be filed in respect of each fiscal (calendar) year by 31st December in the year following the fiscal year, together with balance sheet and profit and loss account, auditor's report, income tax and Defence Tax computation and additional information report. Self-assessment operates, and corporation tax payments have to be made on 1st August, 30th September and 31st December of the year of assessment. Fines apply to late or materially faulty self-assessments.

Withholding Tax. Dividends, royalties arising from the use of an asset outside Cyprus and interest payments to non-residents are now exempt from withholding tax. Other types of payment to non-residents are subject to withholding tax at 10%, although if the payment is in respect of a right outside Cyprus, there is no withholding. The rate of withholding for film rentals earned by a non-resident is 5%.

Tax losses. Losses can be carried forward and set-off against future profits indefinitely. Group relief (set off of the loss of one company with the profit of another) is allowed between resident companies of a group. Group is defined as: One company holding at least 75% of the voting shares of the other company. At least 75% of the voting shares of two companies are held by another company. Group relief is available only when both companies belong to the same group for the whole year. Losses incurred in one year can be set off only against profits of the same year. Partnership transferring business into a company can carry forward tax losses into the company for future utilisation.

Tax deductible expenses. As a general rule, all expenses incurred wholly and exclusively in earning the income of the company are deductible but there are certain restrictions. Non-tax deductible expenses. Entertaining expenses exceeding 0,5% of gross revenues or 5.000, whichever is the lower. Expenses relating to private saloon cars. Interest on assets not used in the business as well as interest on private saloon cars.

Mergers, reorganisations, demergers of companies. In the case of reorganisations, the transfer of property, and the transfer of shares in exchange for shares in another company are exempt from income tax.

Reorganisations include merger, demerger, transfer of assets and exchange of shares between resident and/or non-resident companies in Cyprus. A merger is: one or more companies on dissolution without liquidation, transfer their total net assets to a pre-existing company in exchange of shares or with cash consideration not exceeding 10% of the nominal value of the shares, or in the absence of nominal value the accounting value of the shares. Two or more companies transfer on dissolution without liquidation, their total net assets to a new company they incorporate in exchange for shares or with cash consideration not exceeding 10% of the nominal value of the shares, or in the absence of nominal value the accounting value of the shares. A company transfers at dissolution without liquidation, its total net assets to its 100% holding company.

A demerger is: A company at dissolution without liquidation, transfers its total net assets to two or more existing or new companies in exchange for shares to its own shareholders or with cash consideration not exceeding 10% of the nominal value of the shares or in the absence of nominal value the accounting value of the shares. A transfer of net assets takes place when a company at dissolution without liquidation transfers one or more of its divisions/activities to another company in exchange of shares.

REQUIREMENTS FOR SETTING UP A LIMITED COMPANY

Cyprus is now developed as an international business centre. Since 1975 non-residents have established more than 1000 companies for the investment of capital locally, over 28.000 offshore companies for the management of their overseas affairs and more than 10.000 shipping companies for the registration of ships under the Cyprus flag. The registration of such companies it is to be noted that Cyprus Companies Law Chapter 113 is similar to the 1948 British Act.

Firstly, under the Exchange Control Law, the Central Bank of Cyprus is the competent authority for the issue of t