Cyprus’ history as a base for international business dates back to the 1970s; however, it was not until the 1990s that the establishment of businesses abroad began to increase significantly. Until 2003 there was a separate treatment for offshore companies (also known as international business companies) compared to “local” companies. Today, the difference between them does not exist in the eyes of the law or the tax collector. In that context, an offshore company denotes a company that is owned by foreign shareholders and established outside the country of its principal operations or formed to serve a particular purpose (ie as SPV/SPE, special purpose vehicle/entity).
Strictly speaking, the cost of establishing and maintaining a business is a factor of its size and activities. Despite this, we will try to at least establish the basic costs of creating and managing a personal offshore company or SME.
Incorporating a limited liability company in Cyprus is easy and relatively inexpensive. Some of the best deals you can find will be as low as €450. This may seem quite competitive, but beware of fees and expenses that will increase later on and your cost of incorporation can be as high as €750. In any case, make sure you are absolutely clear on what the total cost will be.
Registering a domain name is a process that you can easily do yourself and, as such, does not require a lawyer.
offshore bank accounts
Cyprus’ exchange control law was abolished on May 1, 2004, the day Cyprus joined the European Union. Since then, any company can open a bank account in any currency, of course as long as the bank offers it, and there are no restrictions on transferring funds in or out of the country. Your existing lawyers, accountants or business associates may be able to give you a letter of recommendation. The truth about opening a bank account for an offshore company is that it costs nothing, especially if you fill out all the bank forms yourself and have someone introduce you. Banks in Cyprus rely heavily on foreign deposits which currently 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 these hard times a depositor be well received.
Recurring costs are mainly related to the fulfillment of legal obligations, such as drawing up accounts, carrying out statutory audits, filing VAT and annual declaration to the Cyprus Registrar of Companies, filing income tax returns, the declaration of deductions related to the special defense contribution. The costs of these, if fully outsourced to an accounting firm, will cost you no more than €1,000 per year, but can increase if you are an active trading company with a high volume of transactions. With that in mind, it’s always best to ask for a couple of quotes and make your choice.
It is inevitable that you will need a lawyer to at least incorporate the company and later when the need arises; however, your maintenance cost will increase if you have hired a lawyer to act as a shareholder or nominee director, provide secretarial services, and maintain a registered address. Also, if you want to save some costs, drafting an operating or shareholder agreement, as well as board meeting minutes and resolutions, can be handled for you with the review-only attorney. Unless you have chosen to use a lawyer on an ad-hoc basis, the costs for those services will be around €1,200 per year plus the cost of services provided per hour.