Starting a Business in Cyprus: Regulatory Framework and Procedures
Cyprus is a significant jurisdiction for international business due to its strategic location at the crossroads of Europe, Asia, and Africa. As a member of the European Union and the Eurozone, it offers a legal framework aligned with EU directives and a competitive tax regime. For foreign nationals, establishing a business involves interacting with the Department of Registrar of Companies and Intellectual Property (DRCIP).
The business environment is characterized by a common law system based on English principles, making it accessible for international investors. This guide outlines the fundamental steps, legal structures, and compliance requirements for 2025 and 2026.
Common Legal Entities
Foreign investors typically choose between several legal structures, depending on the scale and nature of their operations:
- Private Limited Company (LTD): The most common form, where liability is limited to the amount unpaid on shares. It requires at least one shareholder and one director.
- Public Limited Company (PLC): Suitable for large-scale businesses intended for public share offerings.
- Branch of a Foreign Company: Does not create a separate legal entity; the foreign parent company remains liable for all operations in Cyprus.
- Partnerships: Either General or Limited, governed by the Partnership and Business Names Law.
Company Registration Process
The registration process is digitized and managed by the Department of Registrar of Companies and Intellectual Property. While an individual can initiate some steps, it is standard practice to engage a licensed professional (lawyer or fiduciary) to prepare the Memorandum and Articles of Association.
Step-by-Step Registration
- Name Approval: An application must be submitted to ensure the proposed name is unique. The fee for name reservation is approximately 30 EUR ($32 USD, Jan 2026).
- Preparation of Documents: Submission of the Memorandum and Articles of Association, which define the company's objects and internal regulations.
- Statutory Fees: The standard registration fee for a company with a share capital is 165 EUR ($176 USD, Jan 2026). An additional 0.6% duty on the nominal value of authorized capital may apply if specific thresholds are met.
- Issuance of Certificates: Once approved, the Registrar issues the Certificate of Incorporation, Certificate of Directors and Secretary, and Certificate of Registered Office.
Minimum Requirements
Every Cyprus company must maintain a registered office address within the Republic. While directors do not strictly have to be Cypriot residents, local residency is often preferred for tax treaty purposes to demonstrate that "management and control" occur within Cyprus.
Taxation and Social Contributions
The Cyprus tax system applies to all companies that are tax residents in the Republic. A company is considered a tax resident if its management and control are exercised in Cyprus.
- Corporate Income Tax (CIT): The standard rate remains 12.5% on net taxable profits. Under the Global Minimum Tax (Pillar Two) rules, multinational groups with annual revenue exceeding 750 million EUR may be subject to a top-up tax of 15%.
- Value Added Tax (VAT): The standard rate is 19%. Registration is compulsory if the turnover of taxable goods and services exceeds 15,600 EUR ($16,650 USD, Jan 2026) in any 12-month period.
- Social Insurance: Employers are required to contribute to the Social Insurance Fund. The employer contribution rate for 2025/2026 is approximately 8.8% of the employee's gross salary, plus additional contributions to the Redundancy Fund, Industrial Training Fund, and Social Cohesion Fund.
- General Healthcare System (GHS/GESY): Employers contribute 2.90% of the employee’s gross salary toward the national healthcare system.
Business of Foreign Interests
Non-EU nationals looking to work in their own company must meet specific criteria to be classified as a "Company of Foreign Interests." This status allows the company to employ third-country nationals under favorable conditions.
The primary requirement is an initial investment of at least 200,000 EUR ($213,500 USD, Jan 2026) into the company, which must be supported by bank transfers from abroad. This capital can be used for future company expenses or investments in Cyprus.
Eligible companies can obtain work permits for third-country nationals in categories such as Directors, Middle Management, and Key Personnel. These permits are typically valid for up to two years and are renewable.
Compliance and Annual Reporting
All registered companies in Cyprus have ongoing obligations to remain in good standing:
- Annual Return (HE32): Must be filed once a year with the Registrar, accompanied by the audited financial statements of the previous year.
- Annual Levy: As of 2024/2025, the mandatory 350 EUR annual levy for all companies has been abolished to reduce the administrative burden on small businesses.
- Audit Requirements: All Cyprus companies are required by law to have their financial statements audited by a licensed local auditor.
- Ultimate Beneficial Owner (UBO) Registry: Companies must disclose their beneficial owners (individuals holding more than 25% interest) to the national UBO registry to comply with Anti-Money Laundering (AML) directives.