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Expats Owning and Operating a Business in Cyprus

Author: Jim Newham
Submitted: August 2017

Cyprus is a favourable country in which to set up a company or expand an existing business. In addition to the favourable tax regime, the poricess for starting a business is quite well streamlined. In the World Bank rankings for starting a business, Cyprus comes 53rd out of 190 countires and territories, and its overall ranking for ease of doing business is 45th. Nevertheless, for best results, make sure to do thorough research and start planning well in advance!

For EU citizens, things are even easier: no minimum investment is required and there is no need to have a Cypriot partner. Due to British influence, Cyprus has a strongly business-favouring character. Note, however, that there is a lot of documentation that must be filed in Greek. Many foreign businesses in Cyprus are related to the tourist industry, or its subcomponents, leisure and catering.

Immigration Matters

Before you can start your own business in Cyprus, you need to ensure you have the legal right to live and work there. Normally you will need to acquire a residence permit [before you can operate a business in the country. For more information on residence permits and immigrating into Cyprus in general, see our Immigration section.

Business Plan

To help prepare for the launch of your business into the competitive Cypriot market, it is essential to create a high-quality business plan. First, make sure you have a clear view of what it is you want to do, and how feasible as business idea this is. You will need to research related businesses that already operate in the local area and determine your potential customers and partners. Additionally, you should think through your best financing options.

Once you have completed your research, you should be able to fill out a business plan to around 3-5 pages. This should set out your business objectives, target market and commercial strategy, and include financial projections and potential obstacles.

Legal Structure

Another important step is to decide which legal structure your business will adopt. A legal structure determines the benefits you enjoy and the nature of your legal, financial and tax obligations. Details of the most common business types in Cyprus are given below.

Sole Proprietor

The advantage of setting up your business as a sole proprietor is that it is cheap and easy to do. Furthermore, you have full ownership and control over the business and all after-tax profits are yours. On the other hand, you are personally liable for all the losses your business makes, and have additional responsibilities such as keeping business records. It is important to work within your remit of experience and be cautious about any profits you make early on, as they may well be slender.

Partnership

In a general partnership, each partner is considered a self-employed entrepreneur and may have a greater or lesser involvement in the company. Each of them is jointly and severally liable for any debts and obligations the business incurs. This business structure may have from two to 20 partners, and must be registered within one month of formation.

In a limited partnership, there are two different types of partner: at least one active partner, who runs the day-to-day business and has full joint liability, and one or more sleeping partners, whose liability is limited to their initial capital contribution. Active partners are liable for income tax like sole traders, while sleeping partners pay tax on any profits they receive.

Private Limited Company limited by shares

This type of company is headed by a number of directors. Its equity is divided into private, registered shares which can be traded normally. Each shareholder’s liability is limited to the amount of capital they contributed during start-up. Requirements for this form of enterprise are very few. Consequently, this is the most common type of business structure.

Setup and Registration

Once you have worked through the above stages, you should be ready to set up your company. At this point you should consider hiring a lawyer, who will do the paperwork needed to set up a company and be invaluable at informing you about local business laws and culture. This is really the only option as failing to comply with local regulations is stiffly penalised.

To start with, you will need to register your business under the Companies Act. Next, all businesses have to register for tax. To read more about tax for expats in Cyprus, see Taxation. As you will also need to set up a bank account, you will need an accountant before you can establish your company. Note that you are unlikely to get a loan from a Cypriot bank. For more information about setting up a business in Cyprus, see the Cyprus Chamber of Commerce or Central Bank of Cyprus websites.

Your company must be registered in the Cypriot Trade Register. Generally, you must register less than a month after your business activity begins. Once proof of identity and a completed registration form (which may require the services of a lawyer) have been submitted, you will be given your unique registration number. This number must be used on all company correspondence.

Employing Staff

If you want to employ someone (including yourself) to work in your business you will have to register as an employer. As an employer, you will have to ensure that your business complies with Cypriot labour regulations. You should familiarise yourself with different types of contracts, minimum wage requirements, equal opportunity policies, work permits, insurance payments and recruitment options. Note that if you employ freelance workers, you will not have so many legal obligations as they will be liable to pay their own tax and insurance.

 

 

 




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