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Cyprus offshore companies: Establishment and maintenance costs

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Cyprus’ history in providing base for international companies dates back from the 1970’s; however, it was not until the 1990’s that the establishment of offshore businesses significantly starts increasing. Up until 2003 there was a separate treatment for offshore companies (also known as, International Business Companies) as compared to the "local" ones. Today, difference between them does not exist in the eyes of the law or the taxman. In that context, an offshore company denotes a company that is held by foreign shareholders and established outside the country of its main operations or formed to meet a particular purpose (i.e. as SPV/SPE, special purpose vehicle/entity).

Strictly speaking, the cost of establishing and maintaining a company is a factor of its size and activities. Despite that, we shall attempt to at least lay down the base costs of setting up and running a personal or an SME offshore company.

Incorporation costs
Incorporating a limited company in Cyprus is easy and relatively inexpensive. Some of the best offers you may come around will be for as low as €450. This may look quite competitive but beware of fees and expenses that will crawl up later and your incorporation cost may go up to €750. Whatever the case, make sure that you are absolutely clear of what the total cost will be.

Registering a domain name is a procedure you can easily do by yourself and as such does not require a lawyer.

Offshore bank accounts
The Cyprus Exchange control law was abolished on 1 May 2004, the day Cyprus joined the European Union. Since then, any company can open a bank account in any currency, of coarse as long as the bank offers it, and there are no restrictions on the transfer of funds in or out of the country. Lawyers, accountants or existing business associates of yours could give you a recommendation letter. The truth about opening a bank account for an offshore company is that it does not cost anything, especially if you complete all bank forms by yourself and have someone introduce you. Banks in Cyprus are highly dependent on foreign deposits which current amount to 30% of the total deposit base in the banking sector (Ref. Central bank of Cyprus, “Monetary and Financial Statistics”, July 2011) and in this difficult times a depositor will be warmly welcomed.

Maintenance costs
Reoccurring costs relate primarily to meeting legal obligations such as, producing accounts, undergoing statutory audit, submitting VAT and annual return to the Cyprus Company Registrar, filling income tax returns, declaration of deduction related to special defense contribution. The costs of those if fully outsourced to an accounting firm will cost you no more than €1,000 per year but may increase if you are actively trading company with large volume of transaction. With that in mind, it is always best to ask for a couple of quotations and make your choice.

It is inevitable that you need a lawyer to at least incorporate the company and thereafter when and if the need arise; however, your maintenance cost will go up if you have engaged a lawyer to act as a nominees shareholder or director, provide secretarial services and maintain a registered address. Furthermore, if you wish to save some costs, writing up an operational or shareholders agreement as well as board meeting minutes and resolutions could be handled by you with the lawyer just reviewing. Unless you have opted to use a lawyer on an ad-hoc basis, the costs of those services will be around €1,200 per year plus cost of services provided at an hourly rate.

Tags: Cyprus

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