Branching out: establishing a place of business in Republic of Cyprus

Any overseas company, wherever incorporated, may establish a branch in the Republic of Cyprus through which it may channel its activities. The establishment of a branch of an overseas company in Cyprus does not constitute the creation of a new legal entity that is separate and distinct from the overseas company.

On the contrary, a branch presupposes and requires the existence of an overseas company in a jurisdiction other than Cyprus. The directors, secretary and other officers of the overseas company, and its registered office, as they exist in the country of incorporation, will remain unchanged.

With filings confined to the notification of certain particulars relevant to the structure of the overseas company as they exist in the country of incorporation, formalities and documentation pertinent to the registration of a branch with the registrar of companies in Cyprus are considerably less.

Registering a branch

Pursuant to section 347 of the Companies Law, overseas companies that seek to register a branch in Cyprus must, within one month from the date of establishment of a place of business in Cyprus, submit the following documents and their official Greek translations:

1. A written report containing the following particulars of the overseas company – name and legal form, branch name, registered office and business address, business objects and activities, principal place of business, issued capital, information as to applicable winding-up procedures and proceedings, governing law;
2. A certified copy of the memorandum and articles of association of the overseas company, or any other document of like description constituting or defining the incorporation of the company, including any amendments. Certification should be made by a government authority to whose custody the original is committed, or by a notary public, or a company officer before a person with authority to administer an oath;
3. A detailed list of the directors, secretary and all other persons authorised to represent the overseas company and the branch in transactions with third parties and before public authorities (including courts);
4. The names and addresses of one or more persons residing in Cyprus who are authorised to accept service of legal documents and any other notices required to be served on the overseas company in Cyprus.

   The list of documents may be extended to include the consent of responsible public authorities where the overseas company is engaged and seeking to carry on regulated activities (i.e. banking, insurance, investments).

   Reduced tax exposure

   The advantage of a branch structure lies in the reduction of the overseas company’s tax exposure in its country of incorporation. A branch of an overseas company of which the management and control is exercised in Cyprus is taxed at a flat corporate tax rate of 12.5% on its net profits.

   Branch profits may also be subject to corporation tax in the country of incorporation of the overseas company – since the results of the branch are consolidated with the results of the overseas company in the financial statements and tax return – but where a double tax treaty exists between Cyprus and the country of incorporation of the overseas company, relief will be available for tax paid in Cyprus. Cyprus maintains a robust and global network of double tax treaties, which reduce or eliminate withholding taxes imposed by the contracting states on dividends, interest and royalty payments.

   In order to strengthen the substance of the Cyprus branch’s activities for tax residency purposes, the following actions may be contemplated:

   1. Any contracts relating to the operations of the branch should be managed from Cyprus by the individuals affiliated with the branch;
   2. The branch should maintain a separate set of books and records that will be kept at the local place of business of the branch in Cyprus, and that are distinct from the books and records of the overseas company;
   3. Any contract relating to operations undertaken by the overseas company through its branch should, to the extent possible, denote that the branch is party to the contract. Where this is not feasible, such contract may be in the name of the overseas company, provided that it is stipulated that the overseas company is acting through its branch in performing under such contract;
   4. Any contract relating to the branch should be signed in Cyprus and in all events not in the country of incorporation of the overseas company. The signatory of the contract should clearly indicate in the signature block or elsewhere that he or she is signing on behalf of the branch; and
   5. In conducting its business and communicating with third parties, the branch should where possible use its own letterhead, or otherwise seek to refer to itself as the branch of the overseas company in third party communications.

Depending on the nature and extent of the overseas company’s activities, VAT registration in Cyprus may be necessary. A branch registered in Cyprus will be required to comply with the tax filing obligations in Cyprus. These include the annual filing of financial statements, unless the overseas company is incorporated in an EU member state and an exemption is recognised by directives 78/660EEC, 83/349/EEC and 84/253/EEC.

Claiming an exemption

Overseas companies claiming an exemption should deliver to the Registrar of Companies a signed declaration by the officers of the company to that effect, clearly stating the legal grounds upon which the exemption is sought. The declaration should annex a like official confirmation from the appropriate authority of the country of incorporation of the overseas company that it is exempt from such obligation.

If the overseas company ceases to have a place of business in Cyprus, it must immediately give notice to the Registrar of Companies in Cyprus. As from the date the notice is given, the obligation of the overseas company to deliver any documents to the Registrar of Companies shall cease.