- Restrictions as to the registration of ships under Cyprus
Flag
- How a Ship May Be Registered
- Registration procedure
- Provisional Registration
- Permanent Registration
- Classification Societies recognised
- Deletion of Vessels
- Transfer of Ownership
- Fees
- Mortgages
- List of the Accounting Authorities recognised in Cyprus
- Parallel registration
- Foreign under Cyprus flag
- Cypriot under foreign flag
- Crews
- International Conventions
- Advantages of the Cyprus flag
SHIPPING COMPANIES
The laws governing the registration of ships under the Cyprus flag and
shipping in general are the Merchant Shipping (Registration of Ships, Sales and Mortgages)
Laws of 1963 to 1987, which are based on Part One of the British Merchant Shipping Act
1894.
A. RESTRICTIONS AS TO THE REGISTRATION OF A SHIP
The Ministry of Communication and Works impose certain restrictions
regarding the registration of ships under the Cyprus flag. These restrictions may be
summarised as follows:
Vessels of any type and tonnage not exceeding 17 years of age may be
registered in the Cyprus Register of Ships.
Vessels of any type (other than passenger ships) and tonnage between
18 and 20 years may also be registered subject to the following conditions:
Either the vessel passes a special
inspection (assessment) (para. 5 post) as specified by the Department of Merchant Shipping
and conducted by its surveyors and any recommendations are dealt with.
The inspection (assessment) may take place up to six months prior to the date of
registration and there is no obligation for the vessel to undergo the same inspection at
the time of provisional registration unless an incident affecting its seaworthiness has
occurred.
or
the vessel is managed from Cyprus; and
a Cyprus Collective Agreement for
Seamen, or an approved agreement between the shipowner and the seamen's unions or
appropriate national authority under a Bilateral Maritime Agreement, is signed and renewed
regularly.
Vessels (other than passenger ships) between 21 and 23 years of age
may also be registered, subject to the conditions (a) and (b) of section 2 above, provided
that the beneficial owner has another two vessels registered under the Cyprus flag, each
over 1000 GRT, with a good record, especially as regards safety, the average age of which,
including the vessel to be registered, does not exceed 17 years.
Compliance with this additional condition is not required in cases
where the beneficial owner is a Cypriot who, in case he resides abroad, fully manages his
vessel.
For the purposes of this section, vessels owned by different companies,
at least 51 percent of the shares of which belong to the same beneficial owners and their
directors are, by at least 50 percent the same, will be considered as property of the same
owner.
Any disclosure of beneficial ownership will be treated in strict
confidence.
Vessels (except passenger vessels) over 23 years of age may be
registered, subject to the conditions (a) and (b) of section 2 above, provided that:-
They are owned by Cypriots, permanently residing in Cyprus or by
Cypriot companies:
at least 51 percent of the shares of which are owned by Cypriots
permanently residing in Cyprus and
at least 50 percent of their directors, who must substantially
participate in the control and management of the activities of the company, are Cypriots,
permanently residing in Cyprus;
They are managed from Cyprus; and
they undergo a special inspection
For passenger vessels over 23 years certain other conditions apply.
(A) A passenger vessel over 17 and up to and 25 years of age may be registered subject
to the following conditions:
- it passes a special inspection which should be undergone at least annually;
- at least 25% of its crew are Cypriot seamen with whom an ay agreement must be signed,
unless the District Labour Office in limassol confirms that there are no unemployed seamen
els available. In addition, at least one Cypriot student or od graduate of a Marine
Officers' School, if available, is ing engaged on the vessel for a period of up to six
months for sea going training; and
- a Cyprus Collective Agreement for Seamen, or an approved fully agreement between the
shipowner and the seamen's unions or appropriate national authority, under a Bilateral
Maritime Agreement, is signed and renewed regularly.
(B) A passenger vessel over 25 and up to 28 years of age may also be
registered subject to the following conditions:
- (i) either its beneficial owner has another two vessels re . tered under the
Cyprus flag, each over 1000 GRT, gLs with a good record especially as regards safety,
the ay be average age of which, including the vessel to be above, registered does not
exceed 25 years; or
(ii) its beneficial owner is a Cypriot who, in case he resides abroad, manages his
vessel,
- it pases a special inspection which should be undergone at least annually;
- it complies with provisions of 1960 SOLAR Convention as new;
- at least 25% of its crew are Cypriots seamen with whom an agreement must be signed,
unless the District Labour Office in Limassol confirms that there are no unemployed seamen
available. In addition, at least one Cypriot student or graduate of Marine Officer's
School, if available, is engaged on the vessel for a period of up to six months for sea
going trading, and
- A Cyprus Collective Agreement for Seamen, or an approved agreement between the shipowner
and the seamen's unions or appropriate national authority, under a Bilateral Maritime
Agreement, is signed and renewed regularly.
(C) A passenger vessel over 28 years of age may be registered
subject to the following conditions:
- it is owned by Cypriot/s, permanently residing in Cyprus or by a Cypriot company:
- at least 5 1 % of the shares of which is owned by Cypriots The permanently residing in
Cyprus, and
- at least 50% of its directors, who must substantially participate in the control and
management of the activities of the company, are Cypriots permanently residing in Cyprus.
it passes a special inspection which should be undergone at least
annually;
it is managed from Cyprus;
at least 25% of its crew are Cypriot seamen with whom an agreement
must be signed, unless athe District Labour av,, Office in Limassol confirms that
there are no unemployed vei sewnen available. In addition, at least one Cypriot
student car or graduate of a Marine Officers' School, if available, is Chengaged on the
vessel for a period of up to six months for seagoing training; and
- a Cyprus Collective Agreement for Seamen, or an approved reagreement between the
shipowner and the seamen's unions the or appropriate national authority, under a
Bilteral Maritime Agreement, is signed and renewed regularly.
1 The inspection (assessment) study wW consist of-
- an examination of sufficient extent of the vessel's records kept by her Classification
Society;
- a general examination of the vessel in accordance with the provisions of section III of
this Note.
This inspection does not apply to liquefied gas carriers or chemical tankers (as these
will be specially considered by the Department of Merchant Shipping) and to pleasure
crafts.
A request for assessment is to be submitted in writing to the Department either by the
owners or by the purchaser with the owners' permission
The onboard inspection should not take longer than one (1) working day.
The applicant must:
- submit the documentation required in section II with complete and correct
information;
- l's Clainstruct the vessessification Society to make available to the ntly Department
their records relating to the vessel;
- make appropriate arrangements and provide safe access to and from the at vessel for
the Surveyor of the Department of Merchant Shipping and assist him so that the survey may
be carried out in accordance with the requirements of this Note;
- advise the Department on the place and dates on which the vessel will be m an
available for survey; the Department may give special consideration toour vessels which
are to sail, in ballast, to a repair port for the purpose of oyed carrying out complete
special survey and or conversion works of a major dent character or are to proceed to a
port where they will be laid-up; le, is
- deposit with the Department sufficient funds to cover the Department's fees and
expenses which will arise in connection with the submitted oved request, any remaining
amounts will be returned to the Applic . ant after unions the completion of the assessment
study;
II. DOCUMENTS TO BE SUBMITTED
The copies of the following certificates, records and reports, as applicable,
should be submitted:
- Certificate of Registry
- Certificate of Tonnage
- Passenger Ship Safety Certificate
- Cargo Ship Safety Construction Certificate
- Cargo Ship Safety Equioment/Radiotelegraphy Certificate
- International Load Line Certificate
- International Oil Pollution Prevention Certificate
- Exemption Certificate(s), if any
- Record of Safety Equipment
- Record of Construction and Equipment - Supplement to oil Pollution Prevention
Certificate
- Vessel's Classification Status Report
- Last Thickness Determination report
- General Arrangement
- Midship section
- Capacity plan
- Safety and Fire control plan
III. SURVEY
- General
The thoroughness or stringency of the survey depends on the condition of the ship
and its equipment as well as the results of the examination of the Classification
Society's records.
Should any doubt arise, as to the maintenace or the condition of the ship or its on
equipment, then further examinations and testing may be conducted as considered necessary
by the Surveyor.The Surveyor may take into account the examination of components made
within the last twelve months, from the date of consideration of the vessel's case, by
Surveyors of the vessel's Classification Society.
The Department may give special consideration to vessels which are to sail, in ballast,
to a repair port for the purpose of carrying our complete special survey and or conversion
works of a major character or are to proceed to a port where they will be laid - up.
The Department may specially consider the cases of vessels which have undergone
complete special surveys during the last twelve months, from the date of the
consideration of the vessels'case, and have fully complied with the applicable Rules and
Regulations of her Classification Society.
- Extent of Survey
Notwithstanding the above and without prejudice to the
provisions of this sub-section the Department, following consideration of the records of
the Classification Society and of the documentation to be submitted, will advise the
Applicant in advance of the survey, the anticipated extent of the general examination, to
enable him to make appropriate arrangements.
The survey of the vessel will be a general examination, the extent of which will be
approximately that of annual classification and statutory surveys applicable to the vessel
under consideration, in accordance with her age and type.
- Disclosure of Information
The Department will not disclose technical
information, drawings, and survey reports to any person other than the Owners or Purchaser
or those who have been given the authority to receive such information by the Cyprus
legislation, a Cyprus court decision or written declaration from the Owners, or the
Purchaser with the permission of the Owner.
- Reporting
On completion of the assessment study the Department will make ship
or its available to the Applicant the recommendation(s) of the may be assessment of the
vessel under consideration for his information and action, if any.
7. Management of vessels, referred to in sections 2, 3 and 4 should be carried out by
shipmanagement companies which have been registered for this purpose and have their
principal place of business in Cyprus and employ suitably qualified personnel. The
personnel must include at least one officer holding a recognised, highest seagoing
certificate of competency in the deck or engine departments and an accountant.
The management agreement for the purposes of this policy, must be
signed on a BIMCO "shipman" standard Management Agreement (attached as Annex 1
at the back of this booklet) and must cover at least Crewing and Technical Management. The
annual management fee is of no interest so, on the signed copy to be submitted it may
either be deleted or replaced by the words "as agreed between the two parties".
Any disclosure of beneficial ownership, under section 3 of the policy
will be treated in strict confidence.
8. Sailing yachts and other vessels of historical value which are
considered antiques" may be registered in the Cyprus Register of Ships irrespective
of their age, provided they are not operating commercially for the carriage of passengers
and cargo, and their seaworthiness is certified after an inspection by a Classification
Society recognised by the Republic of Cyprus and/or a Surveyor of the Department of
Merchant Shipping, at the discretion of the Competent Authority.
-
Tugboats, dredgers and other ships of similar type which have been
specially built and are used for works inside ports or other sea areas irrespective of the
ship's tonnage and the nationality of the shareholders of the Cypriot shipowning company
are allowed to be registered in the Cyprus Register of Ships, provided their age does not
exceed 25 years.
Application for a tanker ship to be registered under the @f-us Flag
must be accompanied by:
a confirmation by one of the recognised Classification Societies that
the ship is equipped with an oil-water separator according to IMCO Resolution A393 (X); or
a confirmation by one of the recognised Classification Societies that
the ship is equipped with an oil-water separator according to IMCO Resolution A233 (VE);
or
in cases where the ship is not equipped with an oil-water separator
as mentioned in (a) and (b) above, she must have an approved system which effectively
prevents the escape of oil into the bilges or one of the following equivalent systems:
there are means to retain on board all mixtures of oil and water
collected in the bilges, for disposal to a reception facility; or
all mixtures of oil and water collected in the bilges are pumped to
the ship's tanks for disposal with cargo oil (load on top)
In case a tanker ship does not satisfy any of the above requirements an oil-water
separator must be installed, in accordance with IMCO Resolution A393 (X), prior to her
provisional registration under the Cyprus Flag.
- General
The thoroughness or stringency of the survey depends on the condition of the ship
and its equipment as well as the results of the examination of the Classification
Society's records.
Should any doubt arise, as to the maintenace or the condition of the ship or its on
equipment, then further examinations and testing may be conducted as considered necessary
by the Surveyor.The Surveyor may take into account the examination of components made
within the last twelve months, from the date of consideration of the vessel's case, by
Surveyors of the vessel's Classification Society.
The Department may give special consideration to vessels which are to sail, in ballast,
to a repair port for the purpose of carrying our complete special survey and or conversion
works of a major character or are to proceed to a port where they will be laid - up.
The Department may specially consider the cases of vessels which have undergone
complete special surveys during the last twelve months, from the date of the
consideration of the vessels'case, and have fully complied with the applicable Rules and
Regulations of her Classification Society.
- Extent of Survey
Notwithstanding the above and without prejudice to the
provisions of this sub-section the Department, following consideration of the records of
the Classification Society and of the documentation to be submitted, will advise the
Applicant in advance of the survey, the anticipated extent of the general examination, to
enable him to make appropriate arrangements.
The survey of the vessel will be a general examination, the extent of which will be
approximately that of annual classification and statutory surveys applicable to the vessel
under consideration, in accordance with her age and type.
- Disclosure of Information
The Department will not disclose technical
information, drawings, and survey reports to any person other than the Owners or Purchaser
or those who have been given the authority to receive such information by the Cyprus
legislation, a Cyprus court decision or written declaration from the Owners, or the
Purchaser with the permission of the Owner.
- Reporting
On completion of the assessment study the Department will make ship
or its available to the Applicant the recommendation(s) of the may be assessment of the
vessel under consideration for his information and action, if any.
Articles of Association
The Articles of Association contain the regulations for the internal
managem of the company. In the Companies Law Chapter 113 under the heading 'Table
A" a specimen of certain statutory provisions regarding the regulations and the
functioning of the company is provided. This specimen may be adopted by the Articles of
Association fully or partly.
The Articles of Association may be amended at any time by special
resolution of the members (majority vote of over 75%).
The Articles of Association may include provisions as to the -
dividends - accounts and audit - right of transfer and procedure to transfer the shares -
voting rights - debentures - general meetings of the company - the appointment, removal
and meetings of the directors - annual general meetings - extraordinary meetings and
meetings for special resolutions winding up of the company - loans to directors etc.
Exchange Control
The Central Bank of Cyprus is the only authorised institution
exercising exchange control, under the Exchange Control Law. The approval of the Central
Bank is required for any non-resident to become a shareholder, or for the transfer of any
share in an offshore company. Such approval is always given by the Central Bank either for
offshore or shipping companies in bona fide cases. However bank references as to the
credit worthiness, financial character, respectability and business integrity of the
beneficial owners of the shares are required, unless they are well known foreign companies
or are already involved in other Cyprus offshore companies. The Central Bank in granting
the exchange control approval imposes the following conditions:
- The shares of the company must belong, directly or indirectly, exclusively to aliens.
Nominees may also be used if anonymity of the shareholders is required, but the names of
the beneficial owners of the shares must be disclosed to the Central Bank who will treat
the information as strictly confidential.
- The objects of the company (other than management) shall be confined outside Cyprus.
- The company will be considered as a non-resident company.
- The company must derive income from abroad either from immovable property, royalties,
commissions, investments of capital in bonds, shares, debentures or loans, or income
deriving from any business, the objects of which lie outside Cyprus.
- The company will not obtain any finance from local sources. Any additional finance
required must be received in fall from external sources, or through Cyprus offshore
banking units.
- All local expenses such as registration expenses, printing, legal fees, etc. must be
covered from funds to be imported from abroad.
- The company must submit regularly copies of its balance sheet and profit & loss
account, as at the end of eac of its financial years, certified by auditors practicing in
the Republic of Cyprus. The accounts must also bear a confirmation from the auditors that
the company did not carry out any transactions with residents other than local payments
for administrative purposes e.g. rents, salaries, electricity etc. Such accounts may be
kept in any currency.
- The minimum authorised and paid up capital must be at least CY 1,000.00 (as already
mentioned the minimum authorised paid up capital is higher for certain types of companies
such as O.B.U.s, insurance companies etc.).
- Companies may be allowed by special permission to carry on transit trade through Cyprus
e.g. printing work (in any foreign language for magazines, newspapers etc.) carry out any
kind of repacking, purchasing goods from local markets for re-exportation etc.
- In case the company opens an administrative office in Cyprus on its own then the
company, and everyone of its expatriate personnel, will be required to open local
disbursement current accounts with authorised dealers (onshore banks) for the purpose of
meeting all their payments to residents.
- Such local disbursement current
accounts may only be credited with amounts transferred from external accounts and/or
foreign exchange converted into Cyprus pounds and will be only debited in connection with
cash withdrawals or with payments to residents, either physical or legal persons.
- Offshore enterprises and their expatriate personnel may place in their local
disbursement current accounts such amounts that they expect to spend in Cyprus. The
expatriate personnel need not place all their emoluments into these accounts. Local
disbursement current accounts must not be overdrawn.
- Upon- winding-up of the offshore enterprise or departure of its expatriate
personnel any residual balance in the respective local disbursement current account will
be convertible into foreign exchange and transferable abroad without reference to the
Central Bank of Cyprus.
- Authorised dealers (onshore banks) with which local disbursement current accounts may be
opened are the following (in alphabetical order):
Bank of Cyprus Ltd.
Barclays Bank Plc
Co-Operative Central Bank Ltd.
Hellenic Bank Ltd.
Lombard NatWest Bank Ltd.
National Bank of Greece S.A.
The Arab Bank Ltd.
The Cyprus Popular Bank Ltd.
Residence and employment applications for the first directors,
executives, employees etc. are submitted to the Central Bank. Any renewals or subsequent
permits are made directly to the Department of Aliens and Migration.
Formation Procedure
According to Cyprus Law an application for the formation and
registration of a company must be carried out through a Cyprus law office.
The formation procedure of a company is, in general lines, as follows:
- Approval of the name of the company.
- Application to the Central Bank for Exchange Control approval.
- Preparation and printing of the Memorandum and Articles of Association of the company in
Greek and English languages.
- Filing with the Registrar of Companies the Memorandum and Articles of Association of the
company in Greek language (duly signed by the subscribers), together with forms H.E.l.,
H.E.2., H.E.3., (duly signed by one director or the secretary) a copy of the approval of
the Central Bank and the receipt for the payment of the registration duty. Form H.E. 1. is
an affidavit by the lawyer of the company as to the legitimacy of the formation of the
company. H.E.2. provides for the registered address of the company. H.E.3. provides for
the appointment of the first directors and the secretary.
- As soon as registration of the company is effected the Registrar of Companies furnishes
the secretary with the Certificate of Registration together with certified copies of the
list of directors and secretary, shareholders, registered address, Memorandum and Articles
of Association, a copy of the Certificate of Registration and a certificate of good
standing of the company. Certified copies of the Memorandum and Articles of Association,
and registration of the company are always given in Greek, but the lawyer of the company
may prepare certified translations of these two documents. Certificates as to the list of
directors and secretary, address of the company, shareholders certificates and certificate
for the good standing of the company can be obtained in the English language. As soon as
the certificate of the registration of the company is issued the company can arrange for
the first meeting of the directors for statutory matters such as appointment of auditors,
appointment of legal adviser, opening bank accounts, approval of the seal of the company,
and of the Memorandum and Articles of association, appointment of the secretary etc.
- The whole application, formation and registration procedure can be completed within
seven to ten days.
- There are certain registration fees which must be paid upon the application for the
registration of any company. The registration fees vary, depending on the nominal capital
of the company, between CY125.00 up to capital of CY 5,000.00 and CY175.00 up to;CY
10,000.00 capital.
For higher authorised share capital the fees payable increase by f.0.40
per every CY 100.00 of capital.
Information needed for registration
Information needed for registration of an offshore company is detailed
below:
- The names, addresses, occupations and nationality of at least two persons or legal
entities who are to be the shareholders or the beneficial owners of the shares of the
company, irrespective of whether anonymity is required to be kept and nominees shall be
used. Since the Memorandum & Articles of Association of the company must be signed by
the subscribers, and in order to save time, the first subscribers of the company are
usually employees or nominee companies of a law office who, upon the registration of the
company, transfer their respective shares to the real shareholders. (In cases of anonymity
the nominees sign a blank instrument of transfer of shares together with a trust deed, and
the Share Certificates which they pass over to the beneficiaries who keep these to
safeguard their interest).
- The name of the proposed company to be registered. It is advisable that several
alternative names are given in order to save time and unnecessary correspondence. In cases
where the name of the company is not an important element law firms have available a list
of approved names ready for immediate use.
- The main objects of the company.
- The proposed authorised and issued share capital and the participation of each
shareholder or beneficial owner in the company. As previously stated the minimum
authorised share and paid up capital required by the Central Bank is CY 1,000.00 without
an administrative office or CY 10,000.00 if an office is required.
- The name, address, occupation and nationality of at least one person to be appointed as
a director, and the same particulars for the secretary. As previously stated one of these
two people must be a person residing in Cyprus. It is advisable, however, to appoint more
than two directors, so that a decision may be easily obtained. It is also advisable to
appoint local directors if the management and control of the company must be in Cyprus.
Although if local directors are appointed they act only upon the instructions received
from the beneficiaries of the company.
PARTNERSHIP AND BUSINESS NAME LAW
Chapter 116
Partnership and Business Name Law Chapter 116 also provides for two general types of
partnerships.
1. General Partnership
2. Limited Partnership
Offshore partnerships enjoy all the advantages extended to offshore companies.
There are two general types of partnerships, the general partnership and the limited
partnership.
I. General Partnership
In the general partnership every partner is liable jointly and severally with all the
other partners for an unlimited amount for the debts and obligations of the partnership.
Partner can also be a company with limited liability or another partnership. The partners
of a partnership may be only companies with limited liability, or only partnerships or
both.
II. Limited partnership
The limited partnership is a Partnership in which at least one of the partners must
have unlimited liability for the debts and obligations of the partnership, whereas the
remaining partners may have limited liability. Limited liability companies may also be
partner in a limited partnership, as the partner with unlimited liability.
Cyprus offshore partnerships enjoy full tax exemption in partnership
profits. In the case of an investor wishing to enjoy the advantages of the tax exempt
position of the Partnership and at the same time the limited liability of the Partnership,
then the following example may be followed: He may form a limited Partnership in which the
partner with the unlimited liability is a limited liability offshore company.
The minimum number of partners required for partnerships (whether
general or limited) is two and the maximum is twenty.
Registration
The procedure for registration of a partnership is as follows:
- Securing the partnership's name.
- Preparing the partnership contract.
- Filing with the Registrar of Companies a special form in which certain information is
given as to the names, addresses, description of the partners, the unlimited or limited
liability of each partners, the duration of the partnership, the person authorised to sign
and bind the company etc.
- Filing a copy of the exchange control approval for the non-resident partners.
- Payment of the registration fees.
BRANCHES
(s. 347 of Cap. 113)
This section falls under s.347 of the Companies Law Chapter 113 and provides for the
registration in Cyprus of foreign Companies under the legal form of a branch (overseas
companies).
Any foreign company may register in Cyprus a branch under Section 347 of the Companies
Law Chapter 113. The procedure followed is identical to that of the United Kingdom.
To register a branch the following documents, duly translated into Greek, are needed:
- a certified copy of the charter, the Memorandum and Articles of Association, or other
document proving the constitution of the company
- particulars of directors and the secretary of the company
- name and address of at least one person resident in Cyprus authorised to receive on the
company's behalf any notices required by law.
The fee payable for the registration of a branch of an overseas company is
CY 3OO.OO
Branches of overseas companies whose management and control is in Cyprus are taxed at
the same rate as the offshore companies i.e. 4.25% on their net profits, whereas if the
management and control is not in Cyprus the profits of the branch are exempted from all
taxes. In addition offshore branches enjoy all the advantages extended to offshore
companies.
SOLE PROPRIETORSHIP (BUSINESS
NAME)
Chapter 116
Any Cypriot or any foreigner (subject to exchange control approval) may carry on
business either on his own name or through a business name which may be registered under
Cap. 1 16.
People in Cyprus are free to carry on business in their own name or under a business
name registered under the Partnership and Business Names Law Cap. 116.
A business name is not in fact a legal entity on its own but may be registered by any
individual or any legal entity carrying on business under a name other than their own.
To register a business name someone needs to file with the Registrar of Companies a
form containing:
- the business name
- the place of business
- the general nature of the business
- the name, address, nationality and occupation of the person or legal entity applying
- date of commencement of business
The application for registration of a business name must be made within 30 days from
the date of commencement of business.
Non-residents require the approval of the Central Bank of Cyprus.
OFFSHORE ACTIVITIES
As stated above the most common type of company used for offshore activities by
non-residents is the private limited company. The procedure followed for the formation and
registration of offshore companies is identical to the local companies of similar type.
The only additional document required which characterises these companies as
"offshore" is the approval of the Central Bank granting to the offshore company
the non-resident status.
Due to the geographical position of Cyprus, its infrastructure and the other advantages
many foreign enterprises consider the Island as an ideal place for business in Europe,
Middle East, Eastern Mediterranean, Arab Gulf and also in Africa and West Asia. The
following categories of offshore companies are currently operating in Cyprus:
| Royalty |
Advertising & Marketing |
| Trust |
Architecture & Engineering |
| Holding |
Construction & Drilling |
| Invoicing |
Investment |
| Re-invoicing |
Magazine & Newspaper |
| Employment |
Real Estate & Land Development |
| Leasing |
Shipping & Shipmanagement |
| Management |
O.B.U.s |
| Trading |
Captive Insurance Companies |
| Sales |
Headquarters |
|
Foreign Sales Corporations (F.S.C.s) |
Offshore companies may also be formed for the management and control of
affairs of any other company. They may also buy and use their own premises such as
offices, stores, flats and houses for accommodating their directors, employees, etc. They
can also store goods, in transit or in bonded stores, and proceed with repacking and
crating processes etc. They may proceed with opening documentary credits, obtaining
certificates of origin of the goods from the Chamber of Commerce, legalisation of the
documents, employ any type of employees, clerical, technical, either local or foreign; act
as trustee or nominee for other offshore companies or as shipowners, shipmanagers,
brokers, charterers, agents etc. They may also become full members of the Cyprus Chamber
of Commerce and Industry for which the annual membership fee is CY 150.00
Section 28A of the Income Tax Laws 15/77 as amended (Law 245/90) refers to any kind of
business as long as these businesses are lawful, performed outside Cyprus, and the income
emanates from abroad.
CAPTIVE INSURANCE COMPANIES
Full compliance with the provisions of the Insurance Law as to the
filing of the accounts and other relevant documents (the Council of Ministers may allow
certain modification of this requirement).
Proof of no financing from local sources
Adequate cover to the satisfaction of the Superintendent of
Insurance, regarding claims from third parties, that these claims shall rank in
priority to the claims of any other company in the group.
A ll local expenses incurred must be covered by funds to be imported from abroad. The
captive insurance company shall advise the Central Bank annually of all funds imported into Cyprus from abroad.
Besides the usual
benefits and advantages available to offshore companies, Captive Insurance Companies may
gain the benefit of obtaining insurance at lesser net cost and have a flexibility which
can be related to all aspects of the sponsor's risk management program.
Other reasons for setting up a
capitive are:
A corporation may believe that the commercial market is charging too
much for a certain line of coverage when compared to the loss experience. Establishing
a captive to write this business could substantially reduce costs.
Just as in a homeowners policy,
corporations are carrying large and larger deductables on their policies. The loses
within these deductibles, however, do not go away and have to be provided for. A captive
is an ideal way to do this.
Some lines of coverage, such as
workers' compensation, are mandated as are the premium levels. A corporation with good
loss experience in these lines may wish to write them in a captive.
Substantial investment income
can be generated in a captive by holding onto the premiums .ums until the losses are
settled. In lines such as medical malpractice some losses can take 15-20 years to settle,
which means considerable interest can be generated on the premiums.
These are just some of the reasons for establishing a captive. The USA
and UK are some way ahead of the others in this area but mainland Europe and the Far East
are catching up fast.
The industry has of course become extremely complex and now includes
multi-parent or association captives and extends to every line of business including
medical malpractice, workers' compensation, auto liability, general liability, products
liability, errors and omissions, property and marine.
OFFSHORE
BANKING UNITS (O.B.U.S)
Offshore Banking Companies or branches may be registered in Cyprus
(registration of both types has already been explained) under certain provisions and
requirements imposed by the Minister of Finance who is the licencing authority and who
acts on the recommendation and consent of the Central Bank of Cyprus under the provisions
of the Banking Business (Temporary Restrictions) Law Chapter 124. The policy of the
licencing authorities is that only international enterprises or their subsidiaries,
established in countries where there is good banking supervision, are eligible for a
licence to operate in Cyprus as an OBU.
In granting the licence, the Minister of
Finance imposes the following conditions which the parent company must accept in writing
before the commencement of the business:
the OBU parent shall provide the Central
Bank of appropriate letters of comfortt
the Cyprus OBU shall operate as a fully staffed office and
not as a brass plate operation
the Cyprus OBU shall (unless special
permission is granted by the Central Bank) operate on an offshore basis and all dealings
shall be with non-residents and shall be denominated in currencies other than the Cyprus
Pound
the Cyprus OBU must supply the Central
Bank with any information regarding its activities, obligations and disclosure of
information
the Central Bank shall have the
supervision and inspection of the Cyprus OBU and for this supervisory function the Cyprus
OBU shall pay to the Central Bank an annual fee of US$15,000.00
the Cyprus OBU shall supply the Central Bank, if so
requested, with any information necessary in order to satisfy them about the OBU's ability
to meet its obligations and its adherence in general to sound banking standards
the Cyprus OBU shall not carry on any
onshore banking business
all local expenses incurred shall be covered by funds
imported from abroad
Generally there are no conditions
regarding the minimum liquidity ratio, minimum reserves at the Central Bank, maximum
interest rates etc.
ADVANTAGES
OF OFFSHORE COMPANIES
a great degree of respectability amongst companies registered in
other tax incentive or tax haven countries. (Cyprus is not black listed in any country in the world)
Cyprus is not considered to be a tax
haven or laissez faire country but a tax incentive country
no withholding of tax on dividends
no capital gains tax (except on sale of
immovable property situated in Cyprus)
freely transferable accounts of any
currency may be kept either in Cyprus or anywhere abroad without any exchange control
restrictions
no exchange control restrictions once
the approval for the registration of the company is granted by the Central Bank
- all expenses incurred for the earning of income as well as annual allowance on fixed
assets are allowed as deductions
- company's foreign employees working in Cyprus are liable to personal income tax at a
rate from 0 to 20% and if working outside Cyprus but receiving their salary through Cyprus
at a rate from 0 to 2%
The above mentioned goods do not have to be imported into Cyprus from abroad, but they may
be bought from the local market duty free.
All the above mentioned duty free goods must observe the following conditions:
- they must be in the possession and use of the beneficiaries and are not allowed to be
lent, exchanged, hired or otherwise disposed of or diverted
- they must not be sold except to persons entitled to possess duty-free goods and only
after the prior approval of the director of the customs and excise
- motor vehicles shall be reported to the Deputy Registrar of Motor vehicles within 15
days of clearance of customs, for the purpose of the registration and circulation
licencing.
SECTION 28A OF THE INCOME TAX LAWS
15 of19977 AS AMENDED (Law245/90)
reads as follows:-
- In the case of a company, incorporated in the Republic as well as in the case of a
company registered under section 347 of the Companies Law and having the
management and control of its business in the Republic the shares of which belong directly
or indirectly exclusively to aliens, and which derive income from sources outside the
Republic.
- from the carrying on of any business the object of
which lies outside the Republic; or
- from the investment of capital in bonds, shares,
debentures or loans of any nature; or
- from any royalties; or
- from immovable property,
tax is imposed on the chargeable income, after deducting any
tax which is payable outside the Republic, at the rate of 4.25 % and the provisions of
sections 42 and 43 do not apply.
- For the purposes of paragraph (b) of subsection (1) the income from investment of
capital is deemed to emanate from sources outside the Republic if notwithstanding the
place of investment and the parties to the relevant agreement, such capital is is used for
activities outside the Republic.
- In the case of a dividend which emanated directly or indirectly from the income referred
to in subsection (1) and which is derived from sources outside the Republic the provisions
of sections 35, 35A, 35B and 36 do not apply and no tax is imposed over and above the tax
which is imposed on the income of the company in accordance with subsection (1) of the
present section.
- The provisions of this section shall be in force for a period of ten years from the
coming into operation of Law 15 of 1977.
Provided that the Council of Ministers may, after the lapse of
ten years, by its decision published in the official gazette of the Republic, prolong such
Provisions for any further period. "
(Note: this law has already been prolonged for a further period of
ten years i.e. up to 2007.)
COMPLETE
EXEMPTION FROM ANY TAX
In the following cases full income tax exemption may be
enjoyed:
- Shipping companies deriving their income from abroad.
- Profits of companies owning aircrafts.
- Crew salaries.
- Profits of offshore partnerships.
- Profits of the non-resident partners in an offshore
partnership.
- Income of Cyprus registered branches of foreign companies,
provided management and control lie outside Cyprus.
- Any kind of income derived by way of interest on foreign
capital when it is deposited in any local operating bank.
- Any kind of income arising outside of Cyprus.
SPECIAL TAX
TREATMENT
- The income of any person, derived from interest on foreign
capital which is imported into Cyprus and lent for the purpose of financing investments
approved by the Minister of Finance, is tax exempted for the first five years.
- Foreign investment income of a non citizen but resident of Cyprus (which is remitted to
Cyprus) is exempted from any tax on the first CY 2,000.00 a year and is taxed at the rate
of 5 percent on any additional amount. (Unremitted investment income is not taxable).
- Pensions over CY 2,000.- p.a. received from abroad are taxed at 5 percent but the
recipient (every year) is allowed to choose whether he prefers to be taxed according to
the normal tax rate (varied from 0 - 4% less allowable deductions).
FREE ZONES
The Law governing the "Free Zones" in Cyprus is the Free Zones Law 69/1975.
This Law provides for the establishment of Free Zones in Cyprus and gives to the Council
of Ministers full powers, on the submission of the Minister of Commerce and Industry, to
declare any area in Cyprus as a Free Zone. The area which the Council of Ministers has
already declared as a Free Zone is situated in the Larnaca district, close to the town and
airport. According to the above mentioned law, and the regulations in force for the time
being, the following arrangements and procedures are followed:
BONDED FACTORIES
Bonded factories enjoy the same custom advantages and other benefits as
the factories operating in the free zones. However, due to the strict customs control
which is exercised there is a fixed supervision fee of CY 2,000.00 p.a.
The applicant for a licence of a bonded factory must furnish
the Custom Authorities with the same information as the case of the free zone.
In addition to this information the
applicant must inform the authorities about the desired location of the factory, and give
a description of the premises (including architectural plans) the amount of capital
intended to be imported etc.
After approval is granted a deposit of a security bond is requested,
which varies according to the case (usually a security bond of CY 10,000.00 is required).
BONDED
WEARHOUSES
In general, goods imported to Cyprus are placed into transit sheds for
30 days during which they must be collected. After that period they must be transferred to
bonded warehouses (public or private).
The annual fee for a private warehouse is CY1000.00 p.a.
The application for approval of a bonded warehouse (private or public)
is addressed to the Director of Customs and Excise and must state the location and
particulars of the premises to be used, the kind of goods to be stored, a brief
description as to how the warehouse will be operated, and a copy of the lease agreement.
The Director of Customs and Excise in
granting the approval imposes certain conditions such as the provision of security, the
kind of goods to be warehoused, the working hours, the amount of charges for customs
attendance etc.
LEASEHOLDING
The principles which govern leaseholding
in Cyprus are similar to those of the United Kingdom. Until 1978 leaseholding in Cyprus
was unknown. The law 2 of 1978 has amended the basic Immovable Property (Tenure,
Registration and Valuation) law and the following subsections were inserted immediately
after section 65 of the basic law:
Section 65 (b)
Refers to leases exceeding 15 years,
whereby the lessor acquires certain rights, provided that the lease is registered with the
appropriate District Land Office within 3 months from the date of the signing of the
contract of lease. In the case of a building under construction, or to be constructed, the
registration of the lease must take place within 3 months from the date the certificate of
registration for such a building was issued. Registrations may be accompanied by other
documents as reasonably required by the Director of the District Land Office. The director
will thereafter make a note of the registration in a book specially kept for that purpose.
Section 65 (c)
Upon the registration of a lease in
accordance with section 65 (b) the lessor shall acquire a real right on the property
leased in respect of which the registration was made.
Section 65(d) & (e)
Any subsequent sub-leases for any terms
exceeding 15 years give also the right to the new lessors for a real right on the property
provided they follow the same procedure for the registration of the contract according to
section 65(b).
Section 65 (j)
All taxes, fees or other charges in
respect of any immovable property payable by the owner thereof under the provision of any
law or regulation in force at any time shall, in the case of immovable property in respect
of which a contract of lease in accordance with section 65 (b) was registered, be borne by
the lessor.
SUITABILITY
OF CYPRUS
existence of perfect postal (Datapo/Intelpost)
telephone, including G.S.M. facilities, telex, telefax (facsimile) and datel communications. Cyprus holds the third place
in the world after the U.S.A and Canada
well organised professional services of any kind, such as lawyers,
auditors, management firms etc.
good industrial relations
minimum of red tape
law and order prevailence
favourable legal system based on the
English legal system
geographic position, excellent climate and pleasant living conditions
good air connections (3 hours from
Europe and 2 hours from the Arab Gulf)
relatively low cost of living
high quality hotels, houses and offices
European standard o f living
availability of foreign schools
excellent banking services, based on the
English banking system
freedom of movement of foreign currency
existence of bonded warehousing and
yards
availability of Freezones Bonded
factories
existence of double taxation treaties
with a number of countries
possibility of legalisation of documents
through the Cyprus Chamber of Commerce and Industry
possibility of Membership of the
offshore company in the Chamber of Commerce and Industry
existence of all major courier services
BASIC DATA ON
CYPRUS
Location
Cyprus is located in the Eastern part of the Mediterranean, at the
crossroads of Europe, Asia and Africa. It is
the third largest island in the Mediterranean, and it covers about 9,500 square kilometres. It is approximately
three and a half hours from Western European airports and the time is always two hours
ahead of Greenwich Mean Time.
The capital of Cyprus is Nicosia with a population of about 220,000 people.
The climate is excellent, with an
average of 360 sunny days per year. The temperature varies from 12 to 15 degrees
Centigrade in December and 35 degrees Centigrade in August (average maximum). The
population is 680,000 out of which 78% are Greek. The languages spoken are Greek and
English.
Cyprus has been an independent country
since 1960. All executive powers are vested in the President of the Republic who appoints
his cabinet for a 5 year term of office. The legislative authority rests with the House of
Representatives elected for a 5 year period. The administration of justice is completely
separate and independent.
The judicial system is based on the
English law, the common law and the law of equity.
The currency of Cyprus is the Cyprus
Pound divided into one hundred cents.
Cyprus has been a member of the United
Nations (since 1960), member of the Council of Europe (since 1961) the Commonwealth (since
1961) and the Non-Aligned Movement (since 1966).
Cyprus is a member of the World Bank, the International Monetary Fund
and has a customs union agreement with the European Economic Community
Cyprus has excellent relations with all
developing countries and the Arab world and maintains worldwide diplomatic missions.
Wage rates are relatively low compared
to most industrial countries.
Cyprus maintains the privilege of third
place in the world in communications development. More than 120 countries may be reached
around the clock, through a fully automatic - direct telephone and facsimile system,
whereas the rest of the world may be reached through telephone operators. G.S.M. systems
also in operation.
Two hundred and eight countries are connected to the Cyprus
International Automatic Telex exchange, on a fully automatic direct dialling system. Tle
Cyprus Telecommunications Authority have also introduced the facsimile system and datel service.
Cyprus is also a member of the Society
for Worldwide Interbank Financial Telecommunications (S.W.I.F.T.).
Air and sea connections with Cyprus from Europe and everywhere else
in the world are easily accessible and there are daily flights in and out of Cyprus to
the Middle East, Europe, Asia, America and Africa.
Cyprus has two main modem ports situated
on the south coast of the island serving containerised bulk and break bulk cargo. Both
ports are also used for transit trade, and Cyprus originated trade.
There is a high standard of recreation,
discos, bars, night clubs, good shows, restaurants, specialised restaurants, tavemas,
sandy beaches, archaeological sites, churches and monasteries, excursions, wine festivals,
hotels etc.
DOUBLE
TAXATION TREATIES OF CYPRUS
Cyprus has a Double Taxation Treaty with
the following countries:
- Austria
Belarus
Bulgaria
Canada
China P.R.
- Czech Republic
- Denmark
- Egypt
- France
- Germany
- Greece
- Hungary
- India
- Ireland
- Italy
- Kuwait
- Kyrgyztant
- Malta
- Moldova
- Norway
- Poland
- Romania
- Russia
- Syria
- Sweden
- Tajikistan
- Turkmenistan
- Ukraine
- United Kingdom
- U.S.A.
- Yuogoslavia
Double taxation treaties with Belgium and Finland are currently being negotiated.
Treatment of income related to Dividents -
Royalties - Interest (taxable in the country of residence: tax credit being allowed for
foreign tax)
| A. Received in Cyprus |
Dividends |
Royalties |
Interest |
| 1.Austria |
10% |
NIL |
NIL |
| 2.Belarus |
5% |
NIL |
NIL |
| 3.Bulgaria |
NIL |
NIL |
NIL |
| 4.Canada |
15% |
10%(i) |
15% |
| 5.China P.R. |
10% |
10% |
10% |
| 6.Czech Republic |
10% |
NIL(b.3) |
10% |
| 7.Denmark |
15% |
NIL |
10% |
| 8.Egypt |
NIL |
NIL |
NIL |
| 9.France |
15%(f) |
NIL(b.1) |
10%(g.1) |
| 10.Germany |
15% (c)
or 27% (h.2) |
NIL(b.1) |
10% |
| 11.Greece |
25% |
NIL(b.2) |
10% |
| 12.Hungary |
15%(e.2) |
NIL |
10%(g.1) |
| 13.India |
10%(f) |
15%(g.1) |
10%(g.1) |
| 14.Ireland |
NIL |
NIL(b.2) |
NIL |
| 15.Italy |
15% |
NIL |
10% |
| 16.Kuwait |
10% |
5% |
10%(g.1) |
| 17.Kyrgystan |
NIL |
NIL |
NIL |
| 18.Malta |
NIL |
10% |
10% |
| 19.Moldova |
NIL |
NIL |
NIL |
| 20.Norway |
NIL(d) |
NIL |
NIL |
| 21.Poland |
10% |
5% |
10% |
| 22.Romania |
10% |
NIL(b.3) |
10% |
| 23.Russia |
NIL |
NIL |
NIL |
| 24. Slovak Republic |
10% |
5% |
10% |
| 25.Syria |
NIL(h.1) |
NIL |
NIL |
| 26.Sweden |
15%(h.1) |
NIL |
10%(g.1) |
| 27.Tajikistan |
NIL |
NIL |
NIL |
| 28.Turkmenistan |
NIL |
NIL |
NIL |
| 29.Ukraine |
NIL |
NIL |
NIL |
| 30. United Kingdom |
15%(a) |
NIL(b.1) |
10% |
| 31.U.S.A. |
15%(e.1) |
NIL |
10% |
| 32.Yugoslavia |
10% |
10% |
10% |
| B. Paid from Cyprus to: |
Dividends |
Royalties |
Interest |
| 1. Austria |
10% |
NIL |
NIL |
| 2.Belarus |
NIL |
NIL |
NIL |
| 3.Bulgaria |
NIL |
10%(i) |
15% |
| 4.Canada |
NIL |
10%(i) |
15% |
| 5.China P.R. |
10% |
10% |
10% |
| 6.Czech Republic |
NIL |
5%(i) |
10% |
| 7.Denmark |
15% |
NIL |
10% |
| 8.Egypt |
15% |
10% |
15% |
| 9.France |
NIL |
NIL(b.1) |
10% |
| 10.Germany |
25% |
NIL(b.2) |
10% |
| 11.Greece |
NIL |
NIL(b.1) |
10%(g.1) |
| 12.Hungary |
NIL |
NIL |
10%(g.1) |
| 13.India |
10% |
15% |
10% |
| 14.Ireland |
NIL |
NIL(b.2) |
NIL |
| 15.Italy |
NIL |
NIL |
10% |
| 16.Kuwait |
NIL |
5%(i) |
10%(g.2) |
| 17.Kyrgystan |
NIL |
NIL |
NIL |
| 18.Malta |
15% |
10% |
10% |
| 19.Moldova |
NIL |
NIL |
NIL |
| 20.Norway |
NIL |
NIL |
25% |
| 21.Poland |
10% |
5% |
10% |
| 22.Romania |
10% |
5%(i) |
10%(g.1) |
| 23.Russia |
NIL |
NIL |
NIL |
| 24. Slovak Republic |
NIL |
5% |
10% |
| 25.Syria |
NIL(h.1) |
15%
or 10% |
NIL |
| 26.Sweden |
15% |
NIL |
10%(g.1) |
| 27.Tajikistan |
NIL |
NIL |
NIL |
| 28.Turkmenistan |
NIL |
NIL |
NIL |
| 29.Ukraine |
NIL |
NIL |
NIL |
| 30. United Kingdom |
NIL |
NIL |
10% |
| 31.U.S.A. |
NIL |
NIL |
10% |
| 32.Yugoslavia |
NIL |
10%(i) |
25% |
|
