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International Business Companies

Cyprus,  in contrast to tax havens,  is a tax incentive country which offers many benefits aimed at attracting non-residents who wish to conduct their business affairs from the island. The Central bank, through its permit to non-resident investors, imposes certain conditions with regard to beneficial ownership, business activities, financial arrangements and reporting procedures, which must be observed at all times. International Business Companies (Offshore)  are not allowed to derive any income from within Cyprus, either in Cyprus Pounds or foreign exchange, by supplying any goods or services on the island to residents or non-residents. As long as these conditions are observed, the Central Bank permit remains valid, while the offshore enterprise, its beneficial owners and expatriate employees enjoy considerable benefits under various laws and regulations. These include exemption from exchange control, favorable treatment with regard to customs duties and considerable concessions on income tax. When permission is granted by the Central Bank of Cyprus to establish an offshore company it must be acted upon within six months of the date of the letter from the Central Bank to the company. If an extension of the validity is required then an application must be submitted before the expiration of the permit.

The following are the regulations concerning offshore companies in Cyprus:

1) The objects of the company, other than management, shall be confined to activities outside Cyprus. Any services provided in Cyprus to non-residents, including offshore companies established in Cyprus, are considered as onshore activities and they are prohibited.

2) The company's office in Cyprus (if operating in Cyprus) shall be:

a. located in a suitable distinct premises not part of a dwelling house,

b. equipped with normal office and telecommunication facilities and

c. staffed with full-time personnel.

3) The share capital of the company shall at all times be held by non-residents.

4) The company shall not obtain any finance from local sources. And additional finance required shall be received in full from external sources.

5) All local expenses of the company shall be covered from funds imported from external sources. The company shall advise the Central Bank of Cyprus annually of the funds imported into Cyprus from external sources. In case the company opens an administrative office in Cyprus then the company and everyone of its expatriate personnel shall open Local Disbursement Current Accounts with Authorized Dealers (onshore banks) for the purpose of meeting all their payments to residents of Cyprus.

6) The company shall submit regularly to the Central Bank of Cyprus copies of its Balance Sheet and Profit & Loss Account, as at the end of each of its financial years, certified by accountants practicing in the Republic of Cyprus and duly authorized by the Minister of Finance to prepare accounts for income tax purposes. The accounts shall also bear a confirmation from the auditors that the company has not carried out any transactions with residents other than local payments for administrative purposes e.g. rents, salaries, electricity, etc.

Provided the above conditions are observed the company shall be considered for Exchange Control purposes as non-resident. The Central Bank reserves the right to ask for any additional information regarding the activities of the company, as it may consider necessary.

 

 

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