The term International Business Company refers to legal entities whose beneficial ownership and business activities lie outside the country of registration.
The most common type of Companies incorporated in Cyprus is a company which is limited in its liability by shares. They can also operate in the legal forms of an Overseas branch and of a Limited Partnership.

Registration

The offshore infrastructure in Cyprus is well developed and this allows the quick registration of an I.B.C. as well as obtaining resident and employment permits or any other permits necessary. Registration of an I.B.C. usually takes about seven (7) days, if the name is approved in advance.
Approved names, and already registered companies are normally available by Law Firms n Cyprus. Transfer of shares ownership, of already registered companies may be affected immediately.
Upon registration the following documents are obtained from the Ministry of Commerce Industry and Tourism.

- Certificate of incorporation
- Certificate of director(s) and secretary
- Certificate of registered office address
- Original Memorandum and Articles of Association

Share Capital

The Cyprus Companies Law provides for at least one registered shareholder. The shareholder can be a resident or non resident, individual or corporation. Nominee Shareholders are provided by Law Firms in Cyprus so as secure the anonymity of the company’ s shareholder. In the case of use of Nominees the Beneficial Shareholder (company owner) would not appear in any of the company’s documents. He would be given a Trust declaration stating that the Nominee Shareholder holds the company shares upon trust for him, and at the same time he would be also given a Blank signed Share Transfer Form by the Nominee Shareholder, so he can transfer the shares on his name whenever he wishes.
The minimum required share capital for an International Business Company (I.B.C.) is CY£1,000. A minimum share capital of CY£10,000 is necessary if the I.B.C. wishes to have a fully fledged office in Cyprus or to obtain temporary working permit for the company’s expatriate employees.

Directors

At least one director is necessary. The directors may be local Cypriot individuals or foreigners. It is generally advisable to appoint local directors if one wishes to have effective management and control in Cyprus, so as for the company to be considered as Cyprus resident for Tax purposes. A corporate entity may also act as director. Nominee local directors may be also provided by Law Firms in Cyprus, so as for the company to show presence in Cyprus, and at the same time to protect the anonymity of the foreign owner of the company. In such a case the Nominee Director shall provide the company owner with a General Power of Attorney with which the company Director can fully manage his company without agin his name to appear in any of the company’s documents.

Secretary

An individual or a secretarial company must be appointed, and Cypriot Secretary is used in most I.B.C.s, for facilitating procedures.

Registered Office

The registered office of the company must be in Cyprus. The registered office address is the official address of the company where the statutory books, registers, and the seal of the company should be kept.

Confidentiality

With the use of trustee shareholders together with the appointment of nominee director(s), complete confidentiality and anonymity of the beneficial shareholders is assured. This is the common practice used by the vast majority of companies in Cyprus.

Banking

Very importantly, bank accounts can be opened on the company’s name as well as on the names of individuals. Bank accounts can be opened in Cyprus Pounds, US Dollars, Euros, and other major currencies. In this way movement of funds can be facilitated by the use of Cyprus banks, and at the same time financing can be obtained by the banks for purchase of property or any kinds of business activitiess.

Audit

An IBC needs to be audited by a Cypriot firm of auditors every year in accordance with the International Accounting and Auditing Standards.

Financial and tax statements are submitted to the Inland Revenue. The financial statements are also submitted to the Central Bank of Cyprus.

Exchange Control Regulations

Exchange Control Regulations do not apply to IBCs. Bank accounts of IBCs may be kept anywhere in the world and in any currency. Bank accounts kept in Cyprus may be operated freely without prior approval of the Central Bank of Cyprus.

Work and Resident Permits

Expatriate Personnel may obtain a temporary work and residence permit provided certain criteria are met including that the IBC maintains its own fully-fledged office.

Taxation

A new Income Tax law was enacted by the House of Representatives with effect from 1 January 2003. This law constitutes a major reform aiming to:
• harmonize the tax law with the EU directives and code of conduct of business;
• simplify and modernize the taxation system; and
• maintain and improve the comparative advantage of Cyprus in the field of international taxation;

Main definitions introduced:

Resident in the Republic: means a company whose management and control is exercised in the Republic. Management and control means the majority of the members of the Board of directors resides in the Republic; when applied to an individual, means an individual who stays in the Republic for a period or
periods exceeding in aggregate 183 days in the year of assessment and

a) Resident persons will be charged to tax on the income accrued or arising from sources both within and outside Cyprus.

b) Non – resident persons will be charged to tax on the income accrued or arising from sources in Cyprus only in respect of:

i) income from any trade, business, profession or vocation carried on or exercised as far as attributable to a permanent establishment in Cyprus;
ii) profits or other benefits from any office or employment;
iii)any pension as a result from a past employment exercised in Cyprus rents from property situated in Cyprus.

Non resident companies can freely open and operate bank accounts like Resident companies.

The application of taxation is as follows:

A. Corporation tax rates:

	%
Up to £1.000.000 of profits	10
Any profits in excess of £1.000.000	5

Resident companies		Non-resident companies
Get taxed on worldwide income for:		Get taxed only on income generated in the Republic:
-Corporate profits at 10%		-Permanent establishment
-Rental income at 3%		-Rental income
-Royalties at 10%		-Royalties
-Profits arising from the sale of goodwill		-Profits arising from the sale of goodwill

B. Special defence contribution (SDC)

Resident companies		Non-resident companies
1. Interest received:		1. Interest received:
-Generally all interest received gets taxed at the rate of 10%		-All interest received is exempted
2. Dividends:		2. Dividends:
-Dividends received from a resident company is exempt from SDC		-Full exemption
-Dividends received from a non-resident company are subject to 15% SDC

Special defence contribution (SDC)

Resident companies		Non-resident companies
-Foreign tax withheld on dividends gets credited against local liability. A full exemption exists in the event that the recipient company holds directly at least 1% of the share capital of the company paying the dividend. The above exemption does not apply if more than 50% of the paying company’s activities result directly or indirectly in investment income and the foreign tax is significantly lower than the tax rate payable in Cyprus		No withholding Tax

Withholding Tax

No withholding tax is payable on dividends, interest or royalties to non-resident individuals or corporations.

C. Losses carried forward

The tax loss incurred during the year, which cannot be set off against other income, is carried forward and set off against future profits with no limitation.

D. Capital Gains tax

Any profit from the disposal of securities (shares, bonds, debentures, and other company securities) are exempt from taxation under the Law and the Capital Gains Tax Law. Gains from the sale of shares of companies owning immovable property would exempted form taxation both in Cyprus and on the country the asset is situated. There is capital gains tax only if the asset is in Cyprus.

E. Group relief

Companies which are members of a group may to set off losses against profits. A company will be considered as a member of a group only if 75% cent or more of its share capital is owned directly or indirectly by the other company and the other company is entitled to 75% cent or more of any profits available for distribution. A company will also be considered as a member of a group if, together with others, it constitutes a 75% cent subsidiary of another company.
In such a case the losses of a company which is a member of a group in one fiscal year will be set off against the profits of the other companies which are members of the same group in the same year. The group relief can only be used where all the member companies are Cyprus residents.

F. Deemed dividend distribution

If a Cyprus resident company does not distribute a dividend within two years from the end of the tax year then:

• 70% of accounting profits are deemed to have been distributed.
• 15% SDC is imposed on deemed dividend distribution applicable to shareholders who are residents of Cyprus.
• Deemed distribution is reduced with payments of actual dividends which have already been paid during the two years from the profits of the relevant year.

When an actual dividend is paid after the deemed dividend distribution, then SDC is imposed only on the additional dividend paid.

G. Tax Sparing Provisions

A tax-sparing provision has the effect that if tax is 'spared' ie exempted in Cyprus, then it is credited against an investor's tax liability in his home country (the treaty counterpart) as if it had actually been paid in Cyprus. There are tax-sparing provisions in the treaties with the following countries:

Canada Czech Republic Denmark Federal Republic of Germany Greece India Ireland Italy

Malta Romania Slovakia Sweden Syria United Kingdom Yugoslavia

Other types of Cyprus International Business Companies:

Construction and Engineering Companies

They are particularly advisable for operations anywhere in the world, and especially for operations in the Middle East countries. Cyprus as the country which offering a high degree of stability amongst the neighbouring countries could be used as a set up for minimum taxation on potentially maximum operations especially derived from the establishment of the benefit of double tax- treaties.

Employment Companies

Proved to be very attractive as they have been extensively used for paying a low Cyprus tax will avoid the higher taxation in their home country, providing recruitment of labour for contract or other work undertaken outside Cyprus.

Finance Companies

Particularly advisable as they can be actively involved in the dealing and managing investments, providing investment advice or establishing and operating collective incentive schemes and financing of joint ventures or other attainments in countries with which Cyprus has a double tax treaty, in which withholding tax is either nil or very low.

Trading Companies

These account by far the greatest amount of Cyprus offshore companies. This kind of companies could be utilized for transit trade via the Cyprus seaports, as well as for activities in connection with trading in the geographical area of Cyprus or anywhere else in the world. They may also store maintain, break bulk or repackage their own transit goods in rented private or public warehouses.

Headquarters Companies

Particularly attractive for multinational as well as national companies aiming at centralized management control as well as for companies incorporated in distant tax heaven countries. The entrepreneurial environment, the developed infrastructure of Cyprus and the considerable tax advantages serve interests for Eastern and Western European as well as Middle and far Eastern regions.

Invoicing Companies

This type of companies could be utilized for re-invoicing of goods, fabric and services from any region in the world for any intention and to any destination enjoying the low taxation offshore status.

Royalty Companies

The Cyprus national tax systems in accordance with the laws relating to the operation of double tax treaties, create opportunities for efficient tax planning rendering Royalty- offshore companies (concerning the income received from the transfer of exploitation of intellectual and industrial property rights) extremely attractive.

Real Estate Companies

These companies may be very advantageously used both for investment and for dealing in land, especially from the effective application of the network double tax treaties. In the case of European countries exceptionally interesting arrangements may be made as there are already quite a number of offshore companies related to real estate, representing a wide variety of interests, however Asian real estate companies have been incorporated in a quite large scale, recently.

Examples of the use of Cyprus companies for Provision of Services and Trading

The provision of different sorts of services or offering of goods to companies or individuals in various countries of the world through Cyprus could most importantly enjoy the very low Corporate Tax Benefit. The aforesaid benefit occurs because the taxable profits of these companies are only taxed in Cyprus at the rate of 10%. The sales invoices are issued and paid on the name of the Cyprus company but the services are rendered by the non-Cypriot company, its profits though are taxed on the name of the Cyprus company at the minimal rate of 10%.

International general trading can also enjoy the very Low Corporate Tax Benefit. In such an occasion the engagement of the Cyprus company in international trading does not require for the goods be transported through Cyprus, but can be transported
directly from the supplier to the purchaser. The goods are transported directly from the supplier to the purchaser and the relevant purchase/sales invoices shall be issued on the name of the Cyprus offshore company, and the profits made under the
agreement shall be taxed at the rate of 10%.The money transactions relating to the aforesaid business actions are being made via Bank Accounts belonging to the Cyprus company, held in or outside Cyprus and can be transferred at any time at the beneficial company owner's wishes. The accumulated profits can be also repatriated in the form of an investment or a loan to the purchasing company.