Re-Domiciliation of foreign companies in Cyprus: Process & Benefits
Re-domiciliation of companies in and out of Cyprus became possible on the 28th July 2006, when the House of Representatives enacted the Law 124(I)/2006 which amended the Companies Law Cap. 113 and made the transferring of the seat of a company to and from Cyprus possible. This article focuses on the re-domiciliation of a Cyprus company out of its jurisdiction.
The applicable law, the Cyprus Companies Law Cap. 113 (the “Law”) section 354, is clear that in order to re-domicile a Cyprus company out of its jurisdiction the Cyprus Company must (a) obtain the consent of the Registrar of Cyprus Companies and, (b) apply to a foreign country to continue its existence under the jurisdiction of that country, provided the laws of that country allow it.
Obtaining the consent from the Cyprus Registrar of Companies:
The procedure for obtaining the consent to re-domicile out of Cyprus from the Registrar of Companies is rather simple. Firstly, there is a pre-requisite that the company’s memorandum and articles of association contain a provision allowing the company to change its seat and re-domicile. If this is not provided in the Memorandum and Articles of Association of the company then the company must amend them as per the provisions of the law.
If the company’s memorandum and articles of association do contain the power of the company to re-domicile then, an application must be prepared and submitted together with a statement signed by two directors of the company (or in the case where there is only one director then to be signed by that one), which according to section 354IA of the Law must contain the following information:-
(i) The Name, Registration number and address of the registered office of the Cyprus Company;
(ii) The nature of the activities of the Company;
(iii) The proposed Continuing Name outside Cyprus;
(iv) The Country or jurisdiction where the Company intends to continue;
(v) The name and address of the relevant Overseas Authority;
(vi) The date that it is proposed to establish the seat of the company at the foreign country.
Apart from the above though, in order of the Cyprus Registrar of Companies to approve the continuation of the company at another country, it must be satisfied that:-
(a) the application for re-domiciliation was approved by a special resolution of the company members;
(b) the special resolution also approved the interim financial statements that were presented before the general meeting, showing the market value of the assets of the company;
(c) that the said special resolution and interim financial statements have been filed at the Registrar of Companies’ office according to Section 354 IB(a) of the Law;
(d) that a statement of solvency was submitted to the office of the Registrar of Companies signed by two directors (or in the case where there is only one director then to be signed by that one) attesting that the directors are not aware of any matters that may negatively affect the solvency of the company within a period of three years. Each director of the company which will swear the affidavit without being aware of facts of which he should have been aware of in order to justify the affidavit, will be guilty of an offence punishable with one year’s imprisonment or a fine not more than CYP20,000 (approx EUROS34,200)
(e) documents from relevant Authorities were filed confirming that the Company does not owe any taxes and customs duties according to Section 354 IB(1) (h);
(f) in case that the company is carrying out in Cyprus or from Cyprus activities which requires specific permit, that a consent of the relevant authority for the continuation of the company abroad was presented to the Registrar of Companies.
(g) An approval from the relevant Cyprus supervisory or regulatory authority for continuance of the Company outside the Republic has been submitted (where applicable);
(h) where the Company has listed its shares on the stock exchange, that a Consent from the Stock Exchange of the Cyprus Council of Securities and Exchange Commission has been obtained and submitted (where applicable);
(i) the consent from the Cyprus Securities and Exchange Commission was obtained and submitted (where applicable);
(j) a Statement in lieu of prospectus or corresponding document for public companies according to Section 354 IB(1)(D) was prepared and submitted.
(k) That all relevant fees in relation to the application for re-domiciliation have been paid;
(l) That there are no pending court cases or liquidation procedures against the company and that,
(m) All taxes and duties have been paid by the company.
If any of the above is pending during when the company is making the application for redomiciliation, then the company must finalise it in order for its application to continue.
Benefits when changing company seat into the Republic:
This enactment and subsequent regulations create new opportunities to international investors and traders as foreign companies can now become tax resident of Cyprus and take advantage of the favourable features of the Cypriot tax jurisdiction being:
- One of the lowest corporate tax rates in Europe – 12,5%
- Tax‐exempt dividend income (subject to non‐stringent conditions)
- No withholding taxes on payments of dividends, interest and royalties irrespective of recipient
- No taxation on profits from the sale of securities (no minimum holding period, percentage etc)
- No taxation on profits of foreign permanent establishments
- No taxation on the liquidation of a Cypriot company
- Wide tax treaty network
- Unilateral tax credit relief irrespective of the existence of a tax treaty
- No substance, debt‐equity and thin capitalization rules
- Full adoption of the EC Directives and many more.
The successful Cypriot tax regime can now be utilised by foreign companies without the need to fully restructure e.g. transfer their assets and liabilities to a newly incorporated Cyprus company and liquidate the former, thus avoiding possible tax and other implications in the country of origin. An additional and equally important advantage is that the business of the company can continue without interruption and hence there will be a significant saving in administration and other costs.
For more information on this topic and a fee quotation plus disbursements please contact Mr. Paris Hadjipanayis at [email protected]