07-12-2012

Cyprus Company Redomiciliation

Authors

  • Phivi Tramountanelli, Attorney at law
    Associate at Christos Patsalides LLC

The Cyprus re-domiciliation legislation was enacted on the 28th of July in 2006 (enactment Law 124(I)/2006), as an amendment to the Companies Law Cap.113 to permit:

  • Foreign (non-Cypriot) companies to re-domicile to Cyprus; and
  • Cypriot companies to be re-domiciled abroad.

Under this amendment, in case where a foreign company decides to re-domicile to Cyprus, the existing business of a foreign company continues as a Cyprus company, not by dissolution but simply by ‘moving’ to Cyprus.

The law may have been passed in 2006, but in practice only recently the related regulations have been issued which provided details of the procedure to be recorded, the required forms to be filed and the necessary fees to be paid.

Existing companies may now change their seat of incorporation to Cyprus without going through the required liquidation and re-contribution process in the current jurisdiction so it will no longer be necessary to wind up their activities and start over under a new company shell.

The ability to re-domicile companies to and from Cyprus opened new planning dimension for investors and traders. Most important is the fact that foreign companies may now without any difficulty benefit from the Cypriot corporate tax system.

The Procedure

For a foreign company to re-domicile to Cyprus, the company must be registered in a country permitting re-domiciliation according to the country’s Companies Laws. Basic prerequisite for the re-domiciliation of a company is for the foreign company’s Memorandum and Articles of Association to include and provide the ability for a company to be re-domiciled in and out of Cyprus.

The foreign company must first apply for the re-domiciliation out of its country to the foreign country’s Company Registrar.

Once the national procedures of the foreign company’s country are finalized (each country may have different procedure for recording the re-domiciliation of the company out of the country), the foreign company must apply to the Cyprus Registrar of Companies to be registered in Cyprus as a ‘Continuing Company’ pursuant to the provisions of Companies Law Cap.113.

First of all, the foreign company must appoint an approved local (Cyprus) representative (lawyer), to manage the re-domiciliation process. The approved representative must first arrange for the approval of the name of the company which must be the same as the foreign company, but ending with the abbreviation‘Ltd’, and then he must prepare an application for re-domiciliation and file all appropriate supporting documentation.

The approved representative lawyer files an affidavit declaring that the provisions and requirements of the Cyprus Companies Laws have been fulfilled and that the applicant company has no criminal prosecutions and is currently in Good Standing.

If approved, the foreign company obtains a Temporary Registration Certificate and is, at that time, able to continue its business activities subject to the Cyprus Company and Tax legislation.

The Temporary Certificate will give the re-domiciled Company the status of a legal entity established under the Cyprus Companies Law by granting to it all rights and obligations arising therefrom. The amended documents will be considered to be the Company’s Article of Association.

A Permanent Registration Certificate follows thereafter.

The whole procedure of the recordal of the re-domiciliation of a company, may take a few months. For the re-domiciliation to be recorded we need the name of the overseas company together with its registration number; the proposed continuing name; the country or jurisdiction where the overseas company has been incorporated; the date of incorporation; the nature of company’s activities and the company’s authorised capital.

Foreign companies re-domiciling to Cyprus (along with the management and control) are considered tax residents of Cyprus. Resident Cyprus companies enjoy the numerous advantages provided through Cypriot tax legislation.

A company re-domiciled in Cyprus has the lowest corporate tax in Europe with a percentage of 10%, has a tax – exempt dividend income (subject to non-stringent conditions), has no withholding taxes on payments of dividends, interest and royalties irrespective of recipient; has no taxation on profits from the sale of securities (no minimum holding period, percentage, etc.), no capital or net worth taxes during the life of a Cypriot company, has no capital gains or income tax on the disposal of the shares of a Cypriot company, has a broad double income tax treaty network, has a unilateral tax credit relief irrespective of the existence of a tax treaty, debt equity and thin capitalization rules, it benefits the full adoption of all European Union Directives and many more.

The material contained in this document is being released only for educational purposes and should be used as an information guide, and no responsibility can be accepted by the authors or the publishers.

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