FAQ & Glossary

Frequently asked questions (FAQ)

About Cyprus

Does Cyprus have business-friendly environment?

Overall, Cyprus has a business-friendly environment, with significant competitive advantages. In addition to safe and welcoming environment with excellent quality of life, the island offers a reliable legal and regulatory framework, based on English Common Law fully compliant with the EU, the Financial Action Task Force (FATF), Organization for Economic Cooperation and Development (OECD), Foreign Account Tax Compliance Act, USA Federal Law (FATCA), the Financial Stability Forum laws and regulations and Anti-Money Laundering and Countering the Financing of Terrorism Directives of the European Parliament and European Council. With a transparent tax regime with one of the lowest income tax rates worldwide charged at 12.5%, and multiple tax incentives, Cyprus is a highly competitive business hub.

As a Member State of the European Union (EU) since 2004 and the member of Eurozone since 2008, with strategic geographical location and high human talent, Cyprus has strong infrastructure, advanced educational institutions and medical centers, and a government with a business-friendly approach, focusing on promoting research, scientific excellence, innovation, and technological development.

Cyprus is a major entrepreneurial hotspot and a credible platform for investments, tax planning and international banking, as well as one of the top global hubs for Information and Communication Technology (ICT), ship owning and shipmanagement services.

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Cyprus is not an offshore jurisdiction, nor is it a tax haven.

Quoting the Minister of Finance of the Republic of Cyprus, Constantinos Petridis, “Cyprus is not a tax haven but it is a competitive investment destination due to the legal framework, investors, natural wealth and skilled labour.”

Cyprus’ offshore corporate structure was eliminated upon entering the European Union. Further, after being declared by the Organization for Economic Cooperation and Development (OECD) as largely compliant with standards set by the Global Forum on Transparency and Exchange of Information for Tax Purposes, Cyprus (along with Luxembourg and Seychelles) has obtained the same rating as the United States, Germany and the United Kingdom.

Agency Rating Outlook Date
DBRS Morningstar BBB Stable Apr 08 2022
Standard & Poor’s BBB Stable Sep 02 2022
Moody’s Ba1 Positive Aug 19 2022
Fitch BBB- Stable Sep 16 2022
Description 2022 2021 2020
Gross Domestic Product (GDP)* $27.7B $27.6B $24.7B
GDP Real Growth** 4.1% 5.3% -5.2%***
GDP per capita (PPP)* $48,443 $45,034 $41,347
Inflation** 2.6% 2.3% -1.1%

 

*Source: World Economic Outlook Database: Cyprus, International Monetary Fund

**Source: Winter 2022 Economic Forecast for Cyprus, European Union

***For comparison, the world average in 2020 based on 176 countries is -4.86% due to COVID-19 pandemic.

 

Cyprus has an advanced high-income economy with well developed infrastructure and a very high Human Development Index.

GDP Composition by Sector of Origin 2022

  • Services: 83.7%
  • Industry: 7.9%
  • Construction: 6.3%
  • Agriculture: 2.1%

Business services sector remains the fastest growing sector of the economy. As of 2016, Cyprus Securities and Exchange Commission (CySEC) reportedly regulates world’s biggest brands in retail forex. Estimated 70% of GDP is deriving from the financial sector, whereas shipping contributes with 7%. Construction industry contributes with 6.3% of GDP. Currently, around 70 high-rise buildings are proposed and/or under construction, of which 29 are skyscrapers, including the ‘City of Dreams Mediterranean’, the Europe’s largest casino resort.

The workforce in Cyprus is characterized by high education and diversity in skills. With the second-highest tertiary education (including diplomas, undergraduate and graduate certificates, and associate’s, bachelor’s, master’s and doctoral degrees) attainment rate in the EU at 57.1%, Cyprus surpasses the EU average of 40.7%.*

*Source: European Commission

Based on provisional data, the average gross monthly earnings of employees during the fourth quarter of 2021 amounted to €2.341 compared to €2.259 during the fourth quarter of 2020, marking an increase of 3,6%.*

* Source: Statistical Service of the Republic of Cyprus

The education system is divided into pre-primary education (ages 3–6), primary education (ages 6–12), secondary education (ages 12–18) and higher education (ages 18+). Full-time education is compulsory for all children aged between 5 and 15. State-provided schooling including higher education is paid for by taxes.

With its practically-oriented curriculum, high graduate rates, accessible study programmes and high living standards, Cyprus is a great option to obtain a globally accredited undergraduate and postgraduate degrees at 4 public and 6 private universities.

Cyprus an island country in the Eastern Mediterranean Sea with an estimated population of 1,223,824, and it is one of the countries with the lowest crime rates (0.929 per 100 persons) within the EU.

According to the latest Census of Population and Housing 2021 of the Republic of Cyprus dated 1st October 2021, Nicosia (the island’s capital) has a population of 351,600 (of which 62,800 foreigners), Limassol has a population of 258,900 (of which 53,100 foreigners), Larnaca has a population of 154,200 (of which 29,100 foreigners) and Paphos has a population of 101,900 (of which 38,700 foreigners).

The official languages of the Republic of Cyprus are Greek and Turkish.

Proficiency in English is higher than in many other European countries, being taught as a second language in schools, with over 80.4% of residents in Cyprus having high level of proficiency.* Many Cypriots speak French, German and Russian language.

*English language was the sole official language during British colonial rule and lingua franca (until 1960) and continued to be used (de facto) in courts of law until 1989 and in legislature until 1963.

2022 public holidays in Cyprus
01/01/2022 New Year’s Day
06/01/2022 Epiphany
07/03/2022 Green Monday (Movable)
25/03/2022 Greek Independence Day
01/04/2022 Cyprus National Day
22/04/2022 Orthodox Good Friday (Movable)
23/04/2022 Orthodox Easter Eve (Movable)
24/04/2022 Orthodox Easter (Movable)
25/04/2022 Orthodox Easter Monday (Movable)
01/05/2022 Labour Day
13/06/2022 Pentecost (Movable)
15/08/2022 Assumption Day
01/10/2022 Cyprus Independence Day
28/10/2022 Greek National Day
24/12/2022 Christmas Eve
25/12/2022 Christmas Day
26/12/2022 Boxing Day

Banking in Cyprus

Who regulates the banks in Cyprus?

The Central Bank of Cyprus (CBC) is the central bank of the Republic of Cyprus and was established in 1963, shortly after Cyprus gained its independence, in accordance with the Central Bank of Cyprus Law, 1963 and the relevant articles of the Constitution. CBC is governed by the Central Bank of Cyprus Law, 2002 as amended.

Following the accession of the Republic of Cyprus to the European Union in 2004, CBC became a member of the Eurozone group of central banks in 2008.

The banking sector in Cyprus is comprised of domestic banks and international banks with Cyprus-based subsidiaries or branches. In addition to the traditional deposit and lending services, banks in Cyprus operate under the universal banking model, offering a diverse range of products and services. As of February 2022, Cyprus’ banking system Liquidity Coverage Ratio amounts to 344%, which is almost double than the respective EU average of 175%.

Local authorised credit institutions:
  • Ancoria Bank Limited
  • Astrobank Public Company Limited
  • Bank of Cyprus Public Company Ltd
  • Cyprus Development Bank Public Company Limited
  • Hellenic Bank Public Company Limited
  • Housing Finance Corporation
  • RCB BANK LTD*

*Following a relevant decision by the European Central Bank (ECB) as per the official announcement dated 24th March 2022, the ECB restricted RCB Bank Ltd’s business.  In this regard, as from the ECB’s decision date and onwards, RCB Bank Ltd is not able to take new deposits, grant new loans, or make new investments.

Foreign authorised credit institutions and branches of foreign credit institutions from EU member states operating under the “European passport”:

Subsidiaries of foreign credit institutions from EU member states:

  • Αlpha Bank Cyprus Ltd
  • Eurobank Cyprus Ltd
  • National Bank of Greece (Cyprus) Ltd

Subsidiaries of foreign credit institutions from non-EU member states:

  • Societe Generale Bank-Cyprus Limited

Branches of foreign credit institutions from EU member states:

  • Banque SBA
  • Central Cooperative Bank PLC
  • EFG Bank (Luxembourg) S.A.
  • First Investment Bank Ltd
  • National Bank of Greece S.A.

Branches of foreign credit institutions from non-EU member states:

  • Arab Jordan Investment Bank SA
  • Bank of Beirut SAL
  • BankMed s.a.l.
  • Banque BEMO SAL
  • BBAC SAL
  • BLOM Bank SAL
  • Byblos Bank SAL
  • Credit Libanais SAL
  • IBL Bank sal
  • Joint Stock Company Commercial Bank “Privatbank”*
  • Jordan Ahli Bank plc
  • Jordan Kuwait Bank PLC
  • LGB Bank S.A.L.

*Following the amendment of the licence of the branch of Public Joint-Stock Company Commercial Bank “Privatbank” by the Central Bank of Cyprus on 20th December 2016, the said branch is not permitted to engage in any banking business, other than: (i) the repayment or renewal of existing deposits and the acceptance of payments towards existing credit facilities, and (ii) the repayment of administrative expenses relating to the operations of the branch.   

Representative offices
  • EFG Private Bank Limited

Cypriot nationals, residents, non-residents, resident and non-resident companies can open personal and/or corporate bank account in Cyprus, subject to conditions specified by the relevant financial institution. Depending on the circumstances, bank account can be opened online or in person, by submitting the application form accompanied by the requested documents.

Documents can be submitted in original and/or as true copies, notarized and certified by Apostille. Further, the documents should be in Greek or English language, or officially translated by relevant authorities.

Timeframe is dependent on multiple factors, including the jurisdiction of the non-resident individual and/or company, business activities, physical presence in Cyprus, Know Your Customer (KYC) and due diligence checks, low/medium/high risk categorization, etc.

Corporate bank account: KYC and due diligence requirements for legal entities
  • Memorandum and Articles of Association;
  • Certificate of Incorporation;
  • Certificate of Registered Office Address;
  • Certificate of Directors and Secretary;
  • Certificate of Shareholders;
  • Certificate of Good Standing;
  • Proof of listed status on the stock exchange (if applicable);
  • Board Resolution to open a bank account;
  • Board Resolution with name(s) of the Authorized Signatory(ies) authorized to open a bank account;
  • Latest financial statements filed with the relevant authorities (if applicable);
  • Statement of business activities and location of business operations of the legal entity;
  • Statement of expected counterparties for inward and outward transactions, including the estimated annual incoming and outgoing turnovers;
  • Group structure (if applicable);
  • Corporate structure leading up to the ultimate beneficial owner(s) (UBOs) of the legal entity.
  • Certified copy of the passport;*
  • Original or certified copy of the proof of address (i.e. utility bill as a proof of applicant’s residential address), not older than 3 months;*
  • Bank reference letter, not older than 3 months;*
  • UBOs CV;
  • UBOs source and value of wealth supported by relevant documents (e.g. bank statement, title deeds, etc);
  • UBOs tax return for the last two years.

*All physical persons, including UBOs, Director(s), Secretary, and the Authorized Signatory of the bank account.

Personal bank account: KYC and due diligence requirements for physical persons
  • Certified copy of the passport;
  • Original or certified copy of the proof of address (i.e. utility bill as a proof of applicant’s residential address), not older than 3 months;
  • Bank reference letter, not older than 3 months;
  • CV;
  • Source and value of wealth supported by relevant documents (e.g. bank statement, title deeds, etc);
  • Tax return for the last two years.

The above documents and information are required for the pre-approval stage of the procedures, however, financial institutions may require additional documentation and clarifications, as well as in-person interview with the applicant.

Yes, a non-Cypriot can open a bank account in Cyprus.

Cypriot nationals, residents, non-residents, resident and non-resident companies can open personal and/or corporate bank account in Cyprus, subject to conditions specified by the relevant financial institution.

Cyprus Company

How to open and maintain a company in Cyprus?

Establishing and managing a company in Cyprus is fairly simple – with the business-oriented government, Cyprus supports local business development and encourages foreign investment.

Timeframe: 2 weeks

The process of incorporating a company can be broken down to 4 steps, though certain business activities might require business permits or licenses issued by relevant authorities and/or regulating bodies, prior to commencement of business operations.

Step 1
  • Obtaining the approval from the RoC for the name of the company.
  • Preparation of incorporation documents and relevant forms: i) Memorandum of Articles of Association (MoAA), which must be submitted in Greek language14 and contain the information on the business activities of the company; ii) shareholders’ KYC information and documents, as well as the share capital and distribution of the shares; iii) Appointed Company Officers (ACOs) i.e. Directors and Secretary KYC (it is not required to have a Cypriot national as ACO, however, it is required that ACOs, specifically the Secretary, have sound knowledge of Cyprus Companies Law Cap.113); iv) Registered Office Address of the company (Cyprus company must maintain a Registered Office Address in Cyprus).
Step 2
  • Incorporating the company – registering Director(s), Secretary and Shareholder(s), as well as the Registered Office Address, and submitting the documents with the RoC.
  • Collecting the incorporation certificates: i) Certificate of Incorporation; ii) Certificate of Registered Office Address; iii) Certificate of Directors and Secretary; iv) Certificate of Shareholders, and v) certified copy of the MoAA.
Step 3
  • While the Registered Office Address of the company must be in Cyprus, the operations can be ran from anywhere in the world. To fully utilize Cyprus tax benefits, it may be considered running the business from Cyprus and opening an office, setting up the infrastructure, obtaining relevant licenses and insurance coverages, and hiring the staff.
  • Cyprus company may have a bank account in a local bank. The duration and overall process to open a corporate bank account will be affected by the actual location of the operations, i.e. the business address.
Step 4

Registration with the relevant authorities:

  • BO Register;
  • Corporate Income Tax;
  • VAT;*
  • Social Insurance and GHS contributions;*
  • Trademark*
Maintaining the company

Maintaining a healthy and legally compliant business in Cyprus, statutory responsibilities must be followed:

  • Annual company levy of €350, due 30th June each year;
  • Prepay corporate income tax in 2 instalments: 31st July and 31st December of reporting tax year, and the remaining balance until 1st August of the next tax year;*
  • Submit VAT declarations and pay VAT liability before the 10th day of the second month following the end of each VAT reporting period (i.e. approximately 40 days after VAT reporting period end);*
  • Annual General Meeting (AGM) – the first AGM must be held, to review important topics and approve financial statements, within 18 months from the date of incorporation of the company, and then annually, not later than 12 months after previous AGM;
  • Prepare and submit to RoC the Annual Return and financial statements approved at the last AGM, within 28 days from its drafting date;
  • Prepare and submit to the Cyprus Tax Department the Tax Return based on the audited financial statements by 31st March of the year following the year after the reporting tax year (i.e. 15 months after the tax year end);
  • Keep at registered office or at a location designated by the directors: i) accounting records; ii) Register of members; iii) Register of directors and secretary; iv) Register of directors’ interests (in shares of the company); v) Register of debentures and charges; vi) Minutes of directors’ and shareholders’ meetings.
  • Company and its Appointed Company Officers (ACOs) have an obligation to inform the Registrar of Companies (RoC) of any changes of the company’s particulars, e.g. change of name, change of directors’ and secretary details, change in share capital, change of Registered Office Address, change of shareholders, change of UBOs, amendments of the MoAA etc, within 14 days from the date of change.
  • Annual Business Shield Insurance;*
  • Annual Professional Indemnity Insurance;*

*If applicable.

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Under expedited procedure, it takes 3 business days to get the company’s name approved. Once the approval of the name of the new company has been confirmed by RoC, the approval of the application to incorporate a company should take around 7 business days from the date of application. In total, it takes 2 weeks to incorporate a company.

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Holding company does not conduct business operations and its purpose is to hold the controlling stock or membership interests in other companies, allowing diversification of investment across multiple industries, while creating streamlined management and maintaining ownership over each relevant business.

Cyprus tax-resident holding company benefits from multiple advantages, including but not limited to:

  • Income from dividends is tax-free;
  • Profits from the sales of shares are tax-free;
  • Profits from the activities of a Permanent Establishment (PE) abroad are tax-free;
  • Dividends and interest paid to non-resident individuals and/or corporations are tax exempt;
  • Capital gains on disposal of capital assets are tax-free;
  • There are no thin capitalization rules.

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Yes, a non-Cypriot can own a company in Cyprus. There is no restriction on foreign ownership, or nationality and residency of the shareholder(s) of a company in Cyprus.

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Yes, a non-Cypriot national can be a Director of a company in Cyprus. There is no requirement to have a Cypriot national as the Appointed Company Officer (ACO), i.e. the Director and/or Secretary. However, it is required that the ACOs, especially the Secretary, have sound knowledge and understanding of Cyprus Companies Law (Cap.113).

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Yes, a non-Cypriot national can be a Secretary of a company in Cyprus. There is no requirement to have a Cypriot national as the Appointed Company Officer (ACO), i.e. the Director and/or Secretary. However, it is required that the ACOs, especially the Secretary, have sound knowledge and understanding of Cyprus Companies Law (Cap.113).

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Every company, registered with the RoC of the Republic of Cyprus, must pay an annual fee of €350 by 30th of June of each year of its operation.

The annual company levy can be paid: i) electronically, ii) in person in Cyprus, iii) in person in the Cyprus Embassy of the relevant country, iv) via bank transfer.

It is noted that, if a company fails to complete the payment of the annual fee in a timely manner, penalties for late payment will apply as follows:

  • for payment within 2 months from the 30th of June (i.e. up until 31st August), the charge imposed equals to an additional 10% on the original fee, thus making the total amount to be paid €385;
  • for payment within 5 months from the 30th June (i.e. up until 30th November), the charge imposed equals to an additional 30% on the original fee, thus making the total amount to be paid €490;

Companies belonging to a group, for which the total payable fees do not exceed the sum of €20.000, can complete and submit the application for the payment of annual fee by allocating the sum amongst the companies in equal parts.

A local accounting firm can provide assistance with the payment of annual company levy in Cyprus.

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Company is required to keep at registered office, or at a location designated by the directors:

  • accounting records;
  • Register of members;
  • Register of directors and secretary;
  • Register of directors’ interests (in shares of the company);
  • Register of debentures and charges;
  • Minutes of directors’ and shareholders’ meetings.

Registration of trademark constitutes a form of intellectual property and can be completed at the Intellectual and Industrial Property Section of the Registrar of Companies and Intellectual Property of the Republic of Cyprus.

Trademark is a distinctive element or a combination of elements, which is used to distinguish the products or services of an enterprise from the products or services of other enterprises, such as:

  • words;
  • persons’ names;
  • drawings;
  • letters;
  • numbers;
  • illustrations;
  • colours;
  • shape of product;
  • shape of its packaging; or
  • sounds.

Eligibility for a Distinctive Mark entails: i) being capable of distinguishing the products or services of an enterprise from those of other enterprises; ii) determining the object of the protection provided to its beneficiary with clarity and accuracy.

Trademark neither protects the appearance of a product nor an invention. To protect the appearance of a product, or invention, other forms of intellectual property rights are available (e.g. industrial design or sample, patent etc).

There are multiple EU and national grants, tax incentives, programmes and financing options available to eligible candidates for obtaining business funding in Cyprus, including but not limited to:

EU Competitive Programmes

Transnational programmes, financed directly by the EU΄s budget, aimed at contributing to the implementation of EU policies.

Co-Financed Programmes

Co-funded by: i) specific funds of the EU multi-annual budget* allocated to Cyprus, and ii) national resources (state budget).

Cyprus Recovery & Resilience

Temporary EU funding: i) economic and social impact of the COVID-19 pandemic; ii) sustainable development; and iii) resilience of EU economy.

National Grant Schemes

Funded solely by national funds; focusing on e.g. strengthening employment, promotion of tourism, etc.

Financial Instruments

Support for investments and funding: loans, guarantees, equity and other risk-bearing mechanisms, combined with technical support, interest rate subsidies etc.

Local accounting firm can assist with business funding options available to eligible candidates.

*Programmes mainly funded by the European Structural and Investment Funds.

To have access to regulated professions and to exercise specific services and activities, certain permits and authorizations are required to be granted by the relevant authorities of the Republic of Cyprus. Requirements, procedures, fees and timeframe for obtaining a specific permit and/or license will depend on the industry, economic sector and commercial or professional activities, as well as on the authority issuing the license. The main categories of operating permits for businesses are as follows:

  • Agriculture & veterinary services;
  • Basic business establishment;
  • Construction & engineering;
  • Crossborder provision of services;
  • Education;
  • Fireworks & explosives;
  • Health, welfare & beauty;
  • Mass media communication;
  • Metrology;
  • Professional services;
  • Radiocommunication services;
  • Transport & logistics;
  • Tourism & leisure;
  • Wholesale & retail trade.

Local accounting firm can assist with obtaining permits and/or licensing in Cyprus.

Company Redomiciliation to Cyprus

Is it possible to relocate an existing company to Cyprus?

Overseas company incorporated in an approved jurisdiction can be registered as continuing and transfer its registered office to Cyprus, subject to the legislation of its current jurisdiction and company’s MoAA permitting such transfer.

Key points in relocating your business which will define the timeframe and efficiency of the entire process include:

  • Establishing physical presence of your company (e.g. statutory requirements; accounting, audit and tax support; legal support; corporate structure and banking; premises, operational infrastructure and logistics, staffing, etc);
  • Acquiring residence permits and personal residence, as well as ensuring the requirements for your dependents and/or yourself are met (e.g. education, healthcare, lifestyle & leisure, insurance, transportation, etc).
  • Determine company’s: i) name; ii) directors and secretary; iii) address of registered office; iv) members and share capital; v) objects of the company; and vi) MoAA.
  • Submit the application to the Registrar of Companies (RoC) and obtain a temporary certificate of continuation.
  • Submit the application to the RoC for the certificate of continuation within 6 (+ 3) months from the date of issue of the temporary certificate of continuation.
  • Provided that the RoC requirements are met and the application and supporting documents submitted are in accordance with the Companies Law (Cap. 113), the certificate of continuation is issued, certifying that the company has been registered as continuing in Cyprus and, any previously issued certificates cease to have any legal effect.
  • Register the company and obtain relevant permits, in accordance with regulatory requirements: i) BO Register; ii) corporate income tax; iii) VAT, if applicable; iv) Social Insurance and GHS; v) Trademark.; and vi) business permits and licensing, if applicable.

Apart from being rightfully acknowledged as a perfect holiday destination with a plethora of stunning beaches and ancient antiquity sites, Cyprus is an entrepreneurial hotspot and an established business hub with excellent geographical position, well developed infrastructure and island-wide commercial 5G network.

According to global immigration experts, Cyprus ranks as one of the best relocation destinations of the world and a hotspot for relocation of an existing legal entity for its key business and leisure indicators – EU Member State status, geographical location and climate, educational benefits and highly favourable tax incentives.

Depending on the requirements of the business operations, local market parameters, or even personal preferences, a sustainable business can be established and thrive in any city or town on the island.

While Nicosia, as the capital of Cyprus, may be a better option for businesses dependent on governmental institutions, Limassol is the unofficial business capital of the region. With a futuristic waterfront skyline and the tallest seafront residential building in Europe, Limassol is a home to major international companies and, with estimated 300 sunny days each year, it’s worth considering a coastal location for a perfect work-life balance.

Since the early 2000s, major international technology companies such as Microsoft, Oracle, Amdocs, SAP, IBM and TSYS have been operating in Cyprus, with the likes of Movavi, Wargaming, Sykes and Whipper joining the trend in the last 5 years.

Cyprus has become a prime location for the fintech industry, welcoming some of the world’s most prominent forex brokers and online trading platforms, including BDSwiss, Plus500, Alpari, GO Markets, FBS, Forex Time FXTM, FP Markets, Hot Forex, Trade360, XM, Exness, and Plum.

With tech industry on the rise, both global tech leaders and small startups are establishing their presence on the island. Multinational ICT* companies, including fintech, regtech and consulting firms, are making Cyprus their operational base for:

  • favourable IP-box tax regime;
  • strong IP protection through domestic legislation and a network of EU and international agreements;
  • wide access to markets;
  • pro-business environment;
  • multilingual, tech-savvy workforce;
  • low operating costs;
  • access to EU funded programs and Angel Investors;
  • multiple tax incentives and a revised policy for employment permits.

*Information and communication technologies

Beneficial Ownership Register (BO Register) in Cyprus

Is registration with Beneficial Ownership Register (BO Register) in Cyprus mandatory?

Submitting UBOs details to the BO Register in Cyprus is mandatory, under the 5th EU AML Directive and it must be completed within 30 days from the date of company’s registration. Further, any changes in the UBO’s details must be submitted within 14 days from the date of the change. The deadline for registration of existing companies with the BO Register is 31st July 2022.

In 2018 the European Council issued the Directive (EU) 2018/843 (the “ 5th EU Anti-Money Laundering Directive), which amended the 4th Anti-Money laundering Directive. Under the revised provisions, EU Member States were required to launch publicly accessible registers of beneficial ownership of companies.  The 5th EU AML Directive was transposed into Cyprus Legislation through the Prevention and Suppression of Money Laundering Activities Laws of 2007-2021 on 23rd February 2021. According to the Law, companies and any other legal entities incorporated in the Republic of Cyprus must obtain and hold adequate, accurate and current information on their beneficial ownership, including details of the beneficial interests held.

BO Register registration can be completed as follows:

  • The responsibility for the true and accurate submission of the UBOs information lies with the legal entity itself and its officers. Detailed information for the submission of information is provided on the official website of the Department of Registrar of Companies and Intellectual Property (RoC) of the Republic of Cyprus: https://www.companies.gov.cy/en/services/451
  • Service providers can submit the UBOs information on behalf of the legal entity and its officers.

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Ultimate beneficial owner means any natural person(s) who ultimately owns or controls the customer and/or the natural person(s) on whose behalf a transaction or activity is being conducted and includes, at least, a shareholding of 25 % plus one share, or an ownership interest of more than 25% in the customer held by a natural person, hence an indication of direct ownership.

As of 1st June 2022, the general public, as well as obliged entities, can have access to information regarding the BO Register of companies and other legal entities. To receive information on UBOs, interested parties must submit a written application (including the name and registration number of the company or other legal entity, as well as an e-mail address for reply purposes) to RoC, with a fixed fee of €3.50 per company or partnership.

Notwithstanding the criminal liability or prosecution of any person, where there is a failure to comply with the reporting obligations about the UBOs of corporate and other legal entities, the corporate or other legal entity and each of its officers shall be liable to a fine of €200 and a further fine of €100 for each day of continuation of the violation with a maximum total fine of €20,000.*

*Provided that an officer of a corporate or other legal entity shall not be subject to a fine if he had exercised due diligence to comply with the provisions of the paragraph 11 of the Directive for the Prevention and Suppression of Monay Laundering and Terrorist Financing R.A.A 112/2 and the violation is not due to any act or omission or negligence on his part.

Cyprus Tax

What is tax framework in Cyprus?

Cyprus Tax Department is responsible for the implementation of the Laws on Direct and Indirect (VAT) Taxation, the collection of government revenues deriving from these Laws, the implementation of Double Tax Agreements between the Republic of Cyprus and other countries, the Exchange of Information on Tax Matters on the basis of European Directives and other International Conventions.

Cyprus has an extensive network of over 67 Double Tax Treaties (DTTs), ensuring that dividend and interest payments, made to/from Cypriot companies by foreign subsidiaries/debtors, are subject to minimum or no withholding taxation in the remitting country.

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Double Taxation Agreements

(Source: Ministry of Finance of the Republic of Cyprus)

No: State Date of Signature Entry into force
1 Andorra 18/5/2018 11/01/2019
2 Armenia 17/01/2011 19/09/2011
3 Austria                     (new agreement) 20/03/1990          21/05/2012 01/01/1991      01/04/2013
4 Azerbaijan*** 29/10/1982 26/08/1983
5 Barbados 03/05/2017 11/09/2017
6 Belarus 29/05/1998 12/02/1999
7 Belgium 14/05/1996 08/12/1999
8 Bosnia* 29/06/1985 08/09/1986
9 Bulgaria 30/10/2000 03/01/2001
10 Canada 02/05/1984 03/09/1985
11 China 25/10/1990 05/10/1991
12 Czech Republic        (new agreement) 15/04/1980   28/04/2009 30/12/1980 26/11/2009
13 Denmark                   (new agreement) 26/05/1981      11/10/2010 10/04/1982 07/09/2011
14 Egypt                          (new agreement) 19/12/1993     08/10/2019 14/03/1995 31/07/2020
15 Estonia 15/10/2012 08/10/2013
16 Ethiopia 30/12/2015 18/10/2017
17 Finland 15/11/2012 28/04/2013
18 France 18/12/1981 01/04/1983
19 Georgia 13/05/2015 04/01/2016
20 Germany                    (new agreement)  (amending protocol) 09/05/1974     18/02/2011    19/02/2021 11/10/1977 16/12/2011 08/12/2021
21 Greece 30/03/1968 16/01/1969
22 Hungary 30/11/1981 24/11/1982
23 Iceland 13/11/2014 22/12/2014
24 India                           (new agreement) 13/06/1994      18/11/2016 21/12/1994 14/12/2016
25 Iran 04/08/2015 05/03/2017
26 Ireland 24/09/1968 12/07/1970
27 Italy                            (new protocol) 24/04/1974    04/06/2009 09/06/1983 23/11/2010
28 Jersey 11/07/2016 17/02/2017
29 Jordan 17/12/2021 11/04/2022
30 Kazakhstan 15/5/2019 17/1/2020
31 Kingdom of Bahrain 09/03/2015 26/04/2016
32 Kuwait                       (new agreement) 15/12/1984     05/10/2010 25/09/1986 30/08/2013
33 Kyrgyzstan*** 29/10/1982 26/08/1983
34 Latvia 24/05/2016 27/10/2016
35 Lebanon 18/02/2003 14/04/2005
36 Lithuania 21/06/2013 17/04/2014
37 Luxembourg 08/05/2017 23/04/2018
38 Malta 22/10/1993 11/08/1994
39 Mauritius                  (new protocol) 21/01/2000     23/10/2017 12/06/2000 2/5/2018
40 Moldova 28/01/2008 03/09/2008
41 Montenegro* 29/06/1985 08/09/1986
42 Netherlands 01/06/2021
43 Norway                      (new agreement) 02/05/1991    24/02/2014 01/01/1995 08/07/2014
44 Poland                        (new agreement) 04/06/1992    22/03/2012 07/07/1993 09/11/2012
45 Portugal 19/11/2012 16/08/2013
46 Qatar 11/11/2008 20/03/2009
47 Romania 16/11/1981 08/11/1982
48 Russia              (amending protocol)  (additional amending protocol) 05/12/1998     07/10/2010  08/09/2020 17/08/1999 02/04/2012 15/01/2021
49 San Marino    (amending protocol) 27/04/2007    19/05/2017 18/07/2007 27/6/2018
50 Saudi Arabia 03/01/2018 01/03/2019
51 Serbia* 29/06/1985 08/09/1986
52 Seychelles 28/06/2006 27/10/2006
53 Singapore 24/11/2000 08/02/2001
54 Slovakia** 15/04/1980 30/12/1980
55 Slovenia*                   (new agreement) 29/06/1985     12/10/2010 08/09/1986 14/09/2011
56 South Africa        (amending protocol) 26/11/1997      01/04/2015 08/12/1998 18/09/2015
57 Spain 14/02/2013 28/05/2014
58 Sweden 25/10/1988 14/11/1989
59 Swiss Confederation (amending protocol) 25/07/2014   20/07/2020 15/10/2015 03/11/2021
60 Syria 15/03/1992 22/02/1995
61 Thailand 27/10/1998 04/04/2000
62 The States of Guernsey 15 /07/ 2014 (in Cyprus), 29 /07/2014 (in Guernsey) 04/03/2015
63 Ukraine***                (new agreement) (amending protocol) 29/10/1982     08/11/2012      11/12/2015 26/08/1983 19/08/2013 28/11/2019
64 United Arab Emirates 27/02/2011 01/01/2014
65 United Kingdom (amending protocol) (new agreement) amending protocol 20/06/1974  02/04/1980      22/3/2018       19/12/2018 18/03/1975 15/12/1980 18/7/2018 2/10/2019
66 USA 19/03/1984 31/12/1985
67 Uzbekistan*** 29/10/1982 26/08/1983

*7 Denmark – The existing Convention shall cease to have effect as from 1.1.2012

The treaty  between Cyprus and the Socialist Federal Republic of Yugoslavia is still in force.

** The treaty between Cyprus and the Czechoslovak Socialist Republic is still in force

***The treaty  between Cyprus and the Union of Soviet Socialist Republics is still in force.

No, tax is not high in Cyprus, quite the opposite – Cyprus has one of the lowest EU corporate tax rates at 12.5% and is considered an attractive tax regime with and multiple tax incentives, in addition to being a business-friendly, safe and welcoming environment with excellent quality of life.

Cyprus does not have net wealth tax, nor withholding tax, nor inheritance tax.

Capital Gains Tax (CGT) is imposed at the rate of 20% on profits from the disposal of:

  • immovable property in Cyprus;
  • shares of companies (not listed on a recognized stock exchange) owning immovable property in Cyprus;
  • disposal of shares of companies which directly own* an immovable property in Cyprus and derive at least 50% of their market value from the relevant immovable property; and
  • sale agreement of immovable property in Cyprus.

CGT is not imposed under certain circumstances, e.g. disposal of shares listed on any recognized stock exchange; transfer upon death; gifts between spouses, parents, children and relatives up to third degree of kindred; gift to a charitable organization, the Republic of Cyprus, or a political party; gift to a company of which the shareholders are, and continue to be for 5 years after the gift, members of the disposer’s family; etc.

*Or of companies which indirectly participate in a company or companies which own immovable property in Cyprus.

Corporate income tax in Cyprus is calculated at 12.5% on the company’s net profit.

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Taxpayer’s registration and obtaining the company Tax Identification Code (TIC) from the Cyprus Tax Department is mandatory and it must be completed within 60 days of the date of incorporation of the company.

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  • A company is Cyprus tax resident if it is managed and controlled in Cyprus.
  • All companies that are tax residents in Cyprus are taxed on their income accrued or derived from all sources in Cyprus and abroad.
  • A non-tax resident company is taxed on income accrued or derived from business activity which is carried out through a permanent establishment (PE) in Cyprus and on certain other incomes arising from sources in Cyprus.

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Tax registration can be completed by submitting at the Tax Department district offices the Form TD2001, accompanied by supporting documents which will depend on the type of legal entity submitting the request for tax registration. Tax Identification Code (TIC) is issued within 1-3 working days.

Local accounting firm can assist with corporate income tax registration in Cyprus.

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Value Added Tax (VAT) is imposed on the provision of goods and services in Cyprus and on the importation of goods into Cyprus. It comprises of three rates: zero rate (0%), reduced rate (5% or 9%) and the standard rate (19%).

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VAT registration at the Cyprus Tax Department is not mandatory if the taxable transactions value of goods and services carried out in 12 preceding months and/or in the next 12 succeeding months does not exceed the threshold amount of €15.600.

If applicable (subject to the threshold), VAT registration must be completed prior to issuing the first invoice and company must submit VAT declarations and pay VAT liability (before the 10th day of the second month following the end of each VAT reporting period, i.e. approximately 40 days after VAT reporting period end).

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VAT registration can be completed by submitting at the Tax Department district offices the Form TD1101, accompanied by supporting documents, including but not limited to a copy of an official receipt/document, proving that the entity carries out taxable activities/transactions in the Republic of Cyprus (e.g. copy of a contract, copy of an invoice related to their activities/transactions).* VAT Registration Certificate is issued and sent by post within 8-12 days.

*Additional documents may be required.

Local accounting firm can assist with VAT registration in Cyprus.

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Registration at the Social Insurance Services and General Health System (GHS) is mandatory before the commencement of employment of the first employee in Cyprus and can be completed by submitting an application for employer registration.

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In brief, Social Insurance contributions for employees have a rate applied up to a level of earnings, charged at 21.5%, of which 8.3% is paid by the employee, 8.3% by the employer and 4.9% from the Consolidated Fund of the Republic of Cyprus.

Detailed rates for the two categories (employees and self-employed) compulsory insurance are as follows:

Employed persons’ contribution

  • 5%, of which 8.3% is paid by the employee, 8.3% by the employer and 4.9% from the Consolidated Fund of the Republic of the contribution year beginning on or after 1st January 2019.
  • 8%, of which 8.8% is paid by the employee, 8.8% by the employer and 5.2% from the Consolidated Fund of the Republic for the contribution year beginning on or after 1st January 2024.
  • 1%, of which 9.3% is paid by the employee, 9.3% by the employer and 5.5% from the Consolidated Fund of the Republic for the contribution year beginning on or after 1st January 2029.
  • 4%, of which 9.8% is paid by the employee, 9.8% by the employer and 5.8% from the Consolidated Fund of the Republic for the contribution year beginning on or after 1st January 2034.
  • 7%, of which 10.3% is paid by the employee, 10.3% by the employer and 6.1% from the Consolidated Fund of the Republic for the contribution year beginning on or after 1st January 2039.

Self-employed persons’ contribution

  • 5%, of which 15.6% is paid by the self-employed and 4.9% from the Consolidated Fund of the Republic, from the first Monday of the contributions’ year 2019.
  • 8%, of which 16.6% is paid by the self-employed and 5.2% from the Consolidated Fund of the Republic, from the first Monday of the contributions’ year 2024.
  • 1%, of which 17.6% is paid by the self-employed and 5.5% from the Consolidated Fund of the Republic, from the first Monday of the contributions’ year 2029.
  • 4%, of which 18.6% is paid by the self-employed and 5.8% from the Consolidated Fund of the Republic, from the first Monday of the contributions’ year 2034.
  • 7%, of which 19.6% is paid by the self-employed and 6.1% from the Consolidated Fund of the Republic, from the first Monday of the contributions’ year 2039.

Voluntary insured persons’ contribution

  • 4%, of which 14% is paid by the voluntary insured person and 4.4% from the Consoli- dated Fund of the Republic, from the first Monday of the contribution year 2019.
  • 7%, of which 15% is paid by the voluntary insured person and 4.7% from the Consoli- dated Fund of the Republic, from the first Monday of the contribution year 2024.
  • 21%, of which 16% is paid by the voluntary insured person and 5% from the Consoli- dated Fund of the Republic, from the first Monday of the contribution year 2029.
  • 3%, of which 17% is paid by the voluntary insured person and 5.3% from the Consolidated Fund of the Republic, from the first Monday of the contributions’ year 2034.
  • 6%, of which 18% is paid by the voluntary insured person and 5.6% from the Consolidated Fund of the Republic, from the first Monday of the contribution year 2039.

Contribution of voluntary insured persons working abroad in the service of Cypriot employers

  • 5%, of which 16.6% is paid by the voluntary insured person and 4.9% from the Consolidated Fund of the Republic for the contribution year beginning on or after 1st January 2019.
  • 8%, of which 17.6% is paid by the voluntary insured person and 5.2% from the Consolidated Fund of the Republic for the contribution year beginning on or after 1st January 2024.
  • 1%, of which 18.6% is paid by the voluntary insured person and 5.5% from the Consolidated Fund of the Republic for the contribution year beginning on or after 1st January 2029.
  • 4%, of which 19.6% is paid by the voluntary insured person and 5.8% from the Consolidated Fund of the Republic for the contribution year beginning on or after 1st January 2034.
  • 7%, of which 20.6% is paid by the voluntary insured person and 6.1% from the Consolidated Fund of the Republic for the contribution year beginning on or after 1st January 2039.
Category Applied on Contribution rate
Employees Own emoluments 2.65%
Employers Employees’ emoluments 2.90%
Self-employed Own income 4.00%
Pensioners Pension 2.65%
Persons holding office Officers’ remuneration 2.65%
Persons earning rental, interest, dividend and other income Rental, interest, dividend income, etc 2.65%

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Cyprus has relatively low personal income tax – yearly income of up to €19,500 is tax free for Cyprus tax residents. The tax rate is increased as the taxable amount increases, with the highest rate of 35% for yearly income of €60,001 and higher.

Annual income Tax rate
from to
€0 €19,500 0%
€19,501 €28,000 20%
€28,001 €36,300 25%
€36,001 €60,000 30%
€60,001 (and over) 35%

An individual that is not a tax resident in any other single state (for one or more periods that in total exceed 183 days within a same tax year), nor a tax resident in any other state for the same tax year, will be considered a Cyprus Tax Resident if all of the below conditions are met:

  • Resides in the Republic of Cyprus for not less than 60 days during a tax year;
  • Conducts a business activity in the Republic and/or is employed in the Republic and/or maintains an office for a company tax resident in Cyprus at any time during the tax year;
  • Maintains a permanent residential property in the Republic (either purchase or rent) during the tax year.

In case where any and all of the above conditions have been disrupted (e.g. termination of employment, termination of rental of the property, etc) during the tax year, an individual will not be considered a tax resident of the Republic of Cyprus.

The 183-Day Rule (implemented in cases where an individual resides in Cyprus for not less than 183 days during the tax year) remains in force without any further requirements.

Either 60-Day Rule or 183-Day Rule can be called upon during a tax year in consideration of Cyprus Tax Residency for individuals.

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  • A tax-resident individual is taxed on income accruing or arising from sources both within and outside Cyprus.
  • A non-tax-resident individual is only taxed on income accruing or arising from sources within Cyprus.

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Tax registration can be completed by submitting at the Tax Department district offices the Form TD2001, accompanied by supporting documents, including but not limited to a copy of a valid identification document.* Tax Identification Code (TIC) is issued within 1-3 working days.

*Additional documents may be required for EU citizens and for non-EU citizens.

Local accounting firm can assist with personal income tax registration in Cyprus.

Yearly salary of up to €19,500 is tax free in Cyprus. Cyprus tax residents are taxed on all chargeable income from all sources in Cyprus and abroad.

Non-Cypriot tax-resident individuals are only taxed on income accruing or arising from sources in Cyprus, and are exempt from tax on dividend and interest income. Further, tax-resident individuals non-domiciled in Cyprus are exempt from tax on dividend and interest income.

The current tax incentive for non-residents working in Cyprus who earn more than €100,000 per year provides a 50% tax exemption on employment income for the first 10 years of employment. The new incentive scheme, which will also apply to existing employees in Cyprus*, states that the minimum required salary will be reduced from €100,000 to €55,000 per year, while the duration of the 50% tax exemption will be extended from 10 years to 17 years from the commencement of their employment in Cyprus.

*Provided they were resident abroad for 12 consecutive years prior to the commencement of their employment in Cyprus. 

Audit & Accounting in Cyprus

What is the audit and accounting framework in Cyprus?

As a member of the EU, Cyprus is subject to the accounting, auditing and financial reporting requirements established in EU Regulations and Directives as transposed into national laws and regulations. The Institute of Certified Public Accountants of Cyprus (ICPAC) is the only body of accountants recognized by the Council of Ministers, and the only recognized body of auditors in Cyprus pursuant to article 113 of the Auditors Law of 2017 (L.53(I)/2017).

The Companies Law, Cap. 113 sets the requirements for the preparation of corporate financial statements in Cyprus and transposes the EC Accounting Directive (2013/34/EU). The Companies Law requires all entities to apply EU-endorsed International Financial Reporting Standards (IFRS) in their consolidated and separate financial statements. Companies which have subsidiary companies are required to prepare consolidated financial statements in accordance with IFRS as adopted by the European Union. Both consolidated and stand-alone financial statements should be presented to the shareholders of the company or of the parent company at the Annual General Meeting (AGM). Exemptions from consolidation apply for a parent company of small and medium-sized group except where any affiliated enterprise is a public-interest entity or where the obligation to prepare consolidated financial statement arises under other legislation.

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All companies registered in Cyprus, including small/dormant companies, are subject to Annual Statutory Audit* – the Companies Law requires mandatory statutory audit for all registered companies in Cyprus, regardless of the size of the legal entity. Company has an obligation to prepare and submit to the Registrar of Companies and Intellectual Property of the Republic of Cyprus the Annual Return (Form HE32), accompanied by financial statements approved at the last Annual General Meeting (AGM), within 28 days from its drafting date.

Further, Company has an obligation to prepare and submit to the Cyprus Tax Department the Tax Return (Form TD4), which is prepared based on the audited financial statements. Form TD4 should be submitted by 31st March of the year following the year after the reporting tax year (i.e. 15 month after the tax year end).

As regards the preparation of financial statements, complete set of financial statements of a company must be in compliance with the International Financial Reporting Standards (IFRS).**

*i) L.53(I)/2017 The Auditors Law of 2017; ii) Companies Law (Cap 113) par.152A (Compulsory auditing of financial statements and directors’ report by auditors. As amended.); iii) Regulation (EU) No537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities and repealing Commission Decision 2005/909/EC; iv) Directive 2014/56/EU of the European Parliament and of the Council of 16 April 2014 amending Directive 2016/43/EC on statutory audits of annual accounts and consolidated accounts.

** Companies Law (Cap 113) par.142 (Annual and consolidated financial statements. As amended.)

In accordance with the Cyprus Companies Law (Cap.113), books of accounts which are considered necessary for the preparation of financial statements must be kept by all companies registered in Cyprus.

  • Accounting records must show all sums of money received and expended, all sales and purchases, assets and liabilities.
  • In accordance with the Cyprus Companies Law Cap.113, books of accounts which are considered necessary for the preparation of financial statements must be kept.*

*Companies Law (Cap 113) par.141 (Keeping of books of account. 6(a) of 167(I) of 2003.)

The Institute of Certified Public Accountants of Cyprus (ICPAC) is the competent authority for regulating the accounting and audit profession in Cyprus.

Qualified auditors, which have acquired a license pursuant to the provisions of the Auditors Law of 2017, registered with the Institute of Certified Public Accountants of Cyprus (ICPAC) Registry, and holders of a practicing certificate and audit qualification can practice the accounting and audit profession in Cyprus.

As per the Companies Law Cap.113, par.155, (Qualifications for appointment as auditor. As amended.), no person shall be appointed as an auditor of a company unless he/she has previously acquired a license pursuant to the provisions of the Auditors Law of 2017.

FinExpertiza Cyprus (Hadjihannas and Partners Accountants Limited) is a licensed audit firm, registered with the Institute of Certified Public Accountants of Cyprus (ICPAC), authorized to provide the following audit services:

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FinExpertiza Cyprus (Hadjihannas and Partners Accountants Limited) is a licensed accounting firm, registered with the Institute of Certified Public Accountants of Cyprus (ICPAC), authorized to provide the following accounting services:

  • Bookkeeping services;
  • Assistance with the preparation of Statutory Financial Statements;
  • Assistance with the preparation of Management Accounts;
  • Preparation of Financial Statements according to International Financial Reporting Standards (IFRS);
  • Supervision of accounting departments;
  • Payroll services.

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Duration of audit process depends on the size of the company and having all of the necessary preparations completed. Depending on multiple parameters, audit can take 1 – 3 months to be completed, including planning, fieldwork and compiling the audit report.

Auditor is licensed and registered with ICPAC
  • Only qualified auditors, which have acquired a license pursuant to the provisions of the Auditors Law of 2017, registered with the Institute of Certified Public Accountants of Cyprus (ICPAC) Registry, and holders of a practicing certificate and audit qualification can practice the accounting and audit profession in Cyprus
Specific needs of the business
  • Industry experience is essential for an efficient and timely audit.
  • Auditors with membership in global audit & accounting networks have significant background in working with businesses in various industries and jurisdictions, bringing valuable insight and knowledge.
Reliability and reputation
  • In addition to education, qualifications, competence, years of experience and continuous professional development, good auditors are praised for their integrity, ethics and objectivity.
  • Beyond an internet search, referrals, reviews and word-of-mouth enquiries, it is prudent to question the methodology, audit planning process and ability to meet deadlines, to ensure that the audit firm has a good reputation.
Technology and innovation
  • Technology-enabled audit firms can perform the audit with advanced computer-assisted auditing techniques and practices, in addition to being able to hold virtual meetings with international clients.
  • Tech-savvy auditors can offer an advanced insight into business performance, based on data analysis and interpretation.
Relationship, communication and continuous support
  • A good auditor should have the ability to effectively and clearly communicate, especially when it comes to any potential concerns and/or issues.
  • Working with a consistent and approachable team is invaluable, hence, building a good and trusting relationship with the auditor ensures an open line of communication and prompt, professional support.
Accountant is registered with ICPAC
  • Professional accountants in Cyprus are registered with the Institute of Certified Public Accountants of Cyprus (ICPAC) The principal objectives of ICPAC include provision of an organisational framework for all professional accountants, adherence to the Code of Ethics and continuous professional development and keeping up-to-date on issues relevant to accounting, audit and other business and regulatory matters.
Specific needs of the business
  • In addition to bookkeeping, preparation of financial statements and management accounts, payroll and submitting tax returns, accountants can provide assistance with growth planning and development advice.
  • Accountants with membership in global audit & accounting networks are considered a great resource to a business, as they have significant background in working with businesses in various industries and jurisdictions.
Reliability and reputation
  • In addition to education, qualifications, competence, years of experience and continuous professional development, good accountants proactively assist their client’s business and abide with the Code of Ethics, i.e. integrity, objectivity, professional competence and due care, confidentiality and professionalism.
  • Beyond an internet search, referrals, reviews and word-of-mouth enquiries, it is prudent to question the transparency, company regulations and statutory requirements, accounting process, as well as the ability to meet deadlines, to ensure that the accounting firm has a good reputation.
Technology and innovation
  • Technology-enabled accounting firms utilize advanced computer-assisted accounting techniques and practices, in addition to being able to hold virtual meetings with international clients.
  • Technology advancements have increased accountants’ ability to interpret data efficiently and effectively.
Relationship, communication and continuous support
  • A good accountant makes an effort to thoroughly understand the business – financial situation, regulatory requirements, business operations, workload, etc. With strong work ethic, accuracy and efficiency, an accountant plays a pivotal role in effectively communicating essential data for business decisions.
  • Working with a consistent and approachable team is invaluable, hence, building a good and trusting relationship with the accountant ensures an open line of communication and prompt, professional support.

AML/CFT Compliance

What is AML/CFT compliance in Cyprus?

Anti-Money Laundering and Counter Terrorist Financing (AML/CFT) policies and procedures is a series of questions posed to clients, considerations, steps and checks which need to be addressed during the on-boarding of a new engagement as well as throughout the subsequently established business relationship, through the ongoing monitoring of the business relationship, in order to assess whether there are any suspicions for Money Laundering/Terrorist Financing.

In effect, AML/CFT are laws, regulations and procedures aimed at uncovering efforts to disguise illicit funds as legitimate income. Money laundering and the financing of terrorism are financial crimes with economic effects, seeking to conceal crimes ranging from small-time tax evasion and drug trafficking to public corruption and the financing of groups designated as terrorist organisations. AML/CFT controls, when effectively implemented, mitigate the adverse effects of criminal economic activity and promote integrity and stability in financial markets.

  • 1st AMLD 1991 – Credit and Financial Institutions, Drugs-Related Offences (1st EU AML Directive);
  • 2nd AMLD 2001, Transposing Jun 2003 – Collaboration with the FATF (2nd EU AML Directive);
  • 3rd AMLD 2006, Transposing Dec 2007 – Enhanced Due Diligence, Service Providers & Terrorist Financing (3rd EU AML Directive);
  • 4th AMLD 2015, Transposing Jun 2017 – Risk Based Approach & Tax Havens (4th EU AML Directive);
  • 5th AMLD 2018, Transposing Jan 2020 – Transparency, Digital Currencies, UBO Registry & Exchange of Information (5th EU AML Directive);
  • 6th AMLD December 2020, Transposing June 2021 – Focuses on Criminal Offences and Penalties (6th EU AML Directive).

Transparency and accountability in business represent the visibility of all information impacting both the investors and the consumers, and a reliable disclosure of the performance of a legal entity. In an effort to end financial crime and corruption, the majority of the governments worldwide, including Cyprus, are focusing on transparency in business especially when it comes to the corporate ownership and tax requirements.

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KYC refers to Know Your Customer and it is a mandatory process of identifying and verifying the identity of the client and the origin of their wealth, as well as assessing corporate structures and validating registration credentials of their business, to ensure that any and all disclosure requirements are met under the scope of the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) compliance.

KYC due diligence measures apply to both natural persons and legal entities. The objective of the KYC is to comprehend the financial background and business activities of a client, enabling the financial institutions and obliged entities* to understand, mitigate and manage the Money Laundering and Financing of Terrorism (ML/FT) risks associated with the clients and their business transactions.

*EU framework for obliged entities applies to financial services institutions, i.e. credit institutions, banks, insurance companies, investment firms, etc; notaries and other legal professionals; auditors, external accountants and tax advisers; fiduciary service providers; gambling services, estate agents; providers engaged in exchange services between virtual currencies and flat currencies; custodian wallet providers; persons trading in works of art and other persons trading in goods to the extent that payments are made or received in cash amounting €10K or higher in a single or multiple linked transactions.

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Politically Exposed Person (PEP) is a natural person who is or who has been entrusted wıth prominent public functions in the Republic or in another country, an immediate close relative of such person, as well as a person known to be a close associate of such person:

Provided that, for the purpose of the present definition, ‘prominent public function’ means any of the following public functions:

  • heads of State, heads of government, ministers and deputy or assistant ministers,
  • members of Parliament or of similar legislative bodies,
  • members of governing bodies of political parties,
  • members of Supreme courts, of constitutional courts or of other high-level judicial bodies, the decisions of which are not subject to further appeal, except in exceptional circumstances,
  • members of courts of auditors or of the boards of central banks,
  • ambassadors, charges d’ affaires and high-ranking officers in the armed forces,
  • members of the administrative, management or supervisory bodies of State-owned enterprises,
  • directors, deputy directors and members of the board or equivalent function of an international organisation,
  • Mayors.

No public function referred in points (a) to (i) shall be understood as covering middle-ranking or more junior officials.

Close relatives of a politically exposed person includes the following:

  • The spouse, or a person considered to be equivalent to a spouse, of a PEP,
  • The children and their spouses, or persons considered to be equivalent to a spouse, of a PEP,
  • The parents of a PEP.

‘Persons known to be close associates of a politically exposed person’ means a natural person who:

  • Is known to have joint beneficial ownership of legal entities or legal arrangements, or any other close business relations, with a politically exposed person, or
  • Has sole beneficial ownership of a legal entity or legal arrangement which is known to have been set up for the de facto benefit of a politically exposed person.

Source of wealth refers to the origin of the entire body of wealth (i.e. total assets) of the client. It could be an inheritance, divorce settlement, savings, business activities, etc. The information that should be obtained should give an indication as to the volume of wealth the client would reasonably be expected to have and provide a picture of how it was acquired. Although firms may not have specific details about all their client’s assets, it may be possible to gather general information from commercial databases or other open sources.

Source of funds refers to the origin of the particular funds or assets (e.g. the amounts being invested, deposited or remitted). It is considered easier to establish the source of funds than the source of wealth, but this should not simply be restricted to knowing from which bank or financial institution the funds may have been received. The information obtained should be substantive, relevant and be able to establish the fund’s origin and the method/circumstances under which the funds were acquired.

Certain jurisdictions, countries, regimes, groups, organizations, entities, companies and/or individuals can be sanctioned for multiple reasons, including but not limited to – having strategic deficiencies in AML/CFT regime, corruption, drug trafficking, facilitating the smuggling or trafficking of people, terrorist activities, war crimes, tax fraud and evasion, money laundering, lack of implementing the adequate procedures and/or reluctance to fully cooperate with the international bodies, etc. More commonly known as blacklists, these databases can be maintained by governments, political and economic unions of member states, international organizations, global organizations, e.g. EU Sanctions, EU High-Risk Third Countries, EU List of Non-Cooperative Jurisdictions for Tax Purposes, Consolidated List of Financial Sanctions Targets in the UK, OFAC Specially Designated Nationals and Blocked Persons List, United Nations Security Council Consolidated List, and many more.

For a less severe and/or lesser offenses, jurisdictions can be included in the greylists (as opposed to blacklists), which generally contain a larger number of jurisdictions where concerns were identified during the screening process and are regarded as cooperative, subject to the successful delivery of their commitments. For example, the Financial Action Task Force (FATF) publishes, in addition to their blacklist, the greylist of nations that have not acted effectively to curb money laundering and the financing of terrorism – FATF Jurisdictions under Increased Monitoring, while the EU has 2 annexes to conclusions adopted by the Economic and Financial Affairs Council (ECOFIN) and forming the EU list of non-cooperative jurisdictions for tax purposes, Annex I being the blacklist and the Annex II the greylist.

Cyprus is not included in any of the blacklists, nor on any of the greylists.

As a Member State of the European Union (EU) since 2004 and the member of Eurozone since 2008, Cyprus is a major entrepreneurial hotspot and a credible platform for investments, tax planning and international banking, as well as one of the top global hubs for Information and Communication Technology (ICT), ship owning and shipmanagement services.

Overall, Cyprus is considered an attractive tax regime with one of the lowest EU corporate tax rates at 12.5% and multiple tax incentives, in addition to being a business-friendly, safe and welcoming environment with excellent quality of life.

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Glossary

 

A
ACCA Association of Chartered Certified Accountants
ACFE Association of Certified Fraud Examiners
ADIT Advanced Diploma in International Taxation
AML Anti-Money Laundering
Arm’s Length The concept of an arm’s length transaction assures that both parties in the deal are acting in their own self-interest and are not subject to any pressure or duress from the other party.
B
BEPS Base Erosion & Profit Shifting
Blacklist A list of selected tax havens or high-risk countries.
C
CCCI Cyprus Chamber of Commerce and Industry
CEE Central & Eastern Europe
CFT Counter Terrorist Financing
CRS Common Reporting Standard
CTO Cyprus Tourism Organization
CySEC Cyprus Securities and Exchange Commission
D
DTT Double Tax Treaties
E
EC European Community
EMEA Europe, Middle East and Africa region
ENR Energy & Natural Resources.
EU European Union
F
FATCA Foreign Account Tax Compliance Act
FATF Financial Action Task Force
FOF Forum of Firms
FS Financial statements
G
GAAP Generally Accepted Accounting Principles
GAPP Global Assignment Policies and Practices
GCC Gulf Co-operation Council
I
IAB International Accounting Bulletin
IASB International Accounting Standards Board
ICAEW Institute of Chartered Accountants in England and Wales
ICPAC Institute of Certified Public Accountants of Cyprus
IFAC International Federation of Accountants
IFRS International Financial Reporting Standards
IIA Cyprus Cyprus Institute of Internal Auditors
IMF International Monetary Fund
IP Intellectual Property
ISA International Standards on Auditing
IT Information Technology
K
KYC Know Your Client
L
LLC Limited Liability Company
LLP Limited Liability Partnership
LTD Limited Company
M
M&A Mergers and Acquisitions
MOA Memorandum of Agreement
O
OECD Organisation for Economic Co-operation and Development
P
PE Permanent Establishment
PLC Public Limited Company
PPP Public Private Partnership
S
STEP Society of Trust and Estate Practitioners
T
TIC Taxpayer’s Identification Code
TPG Transfer Pricing Guidelines
TPR Transfer Pricing Regulation
TPS Transfer Pricing Studies
V
VAT Value Added Tax