A Cyprus Limited Liability Company (LLC) is the most popular legal entity formed by foreigners in Cyprus. Chapter 113 of the Companies Law of 1959 (amended in 1968) governs limited liability companies which are based on the United Kingdom’s Companies Act of 1948. Several amendments were enacted to this law after Cyprus joined the European Union (EU) in 2004 to comply with EU laws.
The following types of Companies are recognized by the Law:
• Company with limited liability by guarantee, with or without shares
• Company with limited liability by shares
A company with limited liability by guarantee limits a member’s liability on dissolution, by its original agreement. This type of Company is best suited for a non-profit purpose.
A company with limited liability by shares limits a member’s liability to the nominal value of its subscribed shares. This type of LLC can be either public or private. Foreigners mainly choose to set up a private LLC which restricts the right of its members to transfer shares and limits the number of members to 50 while prohibiting invitations to the public to participate and subscribe to shares. A Cyprus LLC can be established as a general trading company or a holding company which holds title to properties and other assets.
Background
Cyprus is an island on the Mediterranean divided into two countries since 1974 after an invasion by Turkey following an attempted coup by the Greek military government. The largest area in the south is controlled by the majority population of Greek descendants called the Republic of Cyprus. Northern Cyprus is controlled by Turkey where the minority Turkish Cypriots resides. Cyprus is located near Greece, Turkey, Lebanon, Israel, and Egypt.
Since Northern Cyprus is only recognized as a country by Turkey, global focus is on the Greek Republic of Cyprus. Since this is a former British Colony, English is the second most popular language after Greek.
Its political system is a democratically elected unitary presidential constitutional republic with a president and a parliament.
Cyprus Limited Liability Company (LLC) Benefits
A Cyprus LLC has several benefits including:
- No Corporate Tax: As long as the LLC is considered foreign owned, Cyprus will not impose a corporation tax. However, U.S. citizens and others from countries taxing global income must declare all income to their tax authorities.
- Limited Liability: LLC members’ liability is limited to their contributions.
- Two Members: A minimum of two members is required to form a LLC.
- EU Member: Cyprus is a member of the European Union (EU) opening more opportunities to do business with other EU members.
- English: While Greek is the predominant language, English is its second official language.
Limited Liability
A Cyprus LLC’s liability is limited to its assets. Anyone suing a LLC will not have access to the assets of the members (shareholders) as they are only liable to their contribution to the capital of the company.
Articles of Association and Company Memorandum
The LLC’s Charter is prepared by a Cyprus attorney who is divided into two parts:
1. The Articles of Association contains the Regulations which the LLC operates under and regulates the right of its members (shareholders) amongst themselves.
2. The Memorandum of Association specifies the purposes and powers of the LLC in its dealings with the outside world, its authorized capital, and its limited liability protections.
These two documents are filed with the Registrar of Companies.
Company Name
Cyprus LLC’s must select a company name not resembling other Cyprus corporation or company name for approval by the Registrar of Companies. Submitting more than one name for approval is recommended to facilitate the process if the first suggestion is rejected.
Company names can be in English and must end with an abbreviation of “LTD” or “LLC”.
The company name cannot infer it has connections to international, national, or royalty without proof. Words like “Bank”, “Co-Operative”, Financial Services”, or “Insurance” cannot be used without justification.
Office Address and Local Agent
A local office address is required for a LLC so writs and other official documents can be served along with a local registered agent who can provide his/her office as the registered office of the LLC.
Membership
A LLC can have a minimum of two members (shareholders) and upon registration, must provide the full name, address, nationality, profession, and number of shares held. Corporations can be members of a LLC.
Bearer shares are not permitted. Otherwise, all shares are nominative, but members wishing anonymity can appoint nominees as the registered shareholders. Nominees can be from any country. Normally, the company incorporating the LLC arranges for nominee shareholders.
Manager and Secretary
At least one Director (Manager) must be appointed whose full name, profession, address, nationality, with a copy of his/her passport will be filed with the Registrar of Companies. While the Director can be from any country, the residency of the Director determines whether the LLC is treated as a Cypriot or a foreign company for tax purposes.
A Secretary is required for every LLC. The Secretary works for the Director and keeps the LLC’s statutory register while working as a non-executive employee. Normally, the company incorporating the LLC provides the Secretary who can be a natural person or a company controlled by the incorporator.
Authorized Capital
The minimum authorized share capital is 1,708 Euros (it must be in Euros). Such capital can be increased with a simple Resolution by the members (shareholders) if provided in the Articles of Association. While there is no requirement, normally denomination of shares is divided in 1 Euro per share.
Taxes
Cyprus LLC’s treated as foreign entities for tax purposes pay no corporate taxes. However, U.S. citizens and everyone residing in countries who tax global income are required to declare all income to their tax authorities.
Resident LLC’s are taxed at a 12.5% rate.
Public Records
Everything which is filed with the government is accessible by the public.
Accounting and Audit Requirements
Cyprus has several rules pertaining to the manner in which accounting records are prepared:
1. Only licensed Cyprus accountants should prepare annual audited accounts. The initial audited account can cover the first 18 months of the company’s existence and then every 12 months thereafter.
2. Every audited account must be filed with the Registrar of Companies.
3. Every year, the Annual Tax Return must be filed with the Registrar of Companies. It must include the registered shareholders, the share capital, the registered office address, along with the names of the directors and secretary.
Annual General Meeting
Annual general LLC meetings are required and can be held in any country.
Time Required for Registration
A Cyprus LLC can be registered in 5 business days.
Shelf Companies
While shelf companies are available to purchase, they are not recommended for saving registration time as they will need to be amended to fit the desired Articles of Association and Company Memorandum.
Form a Cyprus Limited Liability Company (LLC) Conclusion
A Cyprus LLC has several benefits including: no corporate tax, limited liability, only two members required to form a LLC, a member of the EU, and English is the second official language.
