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1.1.1.2. Types of Partnerships and Hybrid Entities Available for International Business / Structuring

Foreign investors tend to use either subsidiary companies incorporated in Cyprus or branches in order to do business in Cyprus. Subsidiary companies are treated as separate entities in company law. Branches are considered to be extensions of their foreign company. The foreign company is therefore liable for all debts of the branch.

Under section 347 of the Companies Law, companies incorporated outside Cyprus (Overseas Companies) may register a branch in Cyprus.  This does not amount to the creation of a new legal entity in Cyprus; the entity incorporated abroad simply has a branch in Cyprus and may operate through it for its international activities.

Overseas Companies may establish a branch in Cyprus by filing with the Registrar the following documents translated into Greek:

  • a certified copy of the overseas corporation’s charter, statutes or
  • memorandum and articles of association or other instrument containing or defining its constitution;
  • particulars of any directors and secretary of the corporation;
  • the names and addresses of one or more persons resident in Cyprus authorized to accept on behalf of the corporation any notice required to be served on it.

Any changes to the above particulars should be notified to the Registrar of Companies.

The overseas corporation’s charter should be certified by:

  • a public notary or governmental official in whose custody the original is committed, or
  • an officer of the company before a person having authority to administer an oath.

The certificates of the above persons should be authenticated by a diplomatic or consular representative of the Republic of Cyprus.

Upon registration of the branch, its management should be provided with a full set of documents, properly legalized and translated into English or any other language. Such documents normally comprise of:

  • the certificate of registration
  • the charter of the overseas corporation or other instrument defining its constitution
  • a list of directors and name of the person authorized to accept notices letterheads, invoices and other branch stationery
  • any other information and documentation pertaining to the branch’s activities up to the date of its establishment.

A branch is required to file annual accounts

Partnerships

The Partnerships and Business Name Law also provides for two general types of Partnerships:

  • General Partnership
  • Limited Partnership

A Partnership is based on an agreement between two or more natural or legal persons to carry on a business in common with the view to profit.  Partnerships are registered in Cyprus under the Partnerships and Business Names Law which is also based on English Law.

General Partnership in which every partner is jointly and severally liable with the other partners (without limit) for all debts and obligations of the partnership.  After a partner’s death his estate is also severally liable for such debts and obligations in the due course of an administration, insofar as they remain unsatisfied subject to the prior payment of his separate debts.

Limited Partnership in which there is at least one general partner liable (without limit) for all debts and obligations of the partnership and one or more limited partners who are not liable beyond the fixed amount that they have contributed to the partnership. A limited partner may neither take part in the management of the partnership nor bind it.

For the registration of a partnership, a prescribed form is submitted to the Registrar of Partnerships containing the name, address, nationality, profession of each partner, the name, object and duration of the partnership and the partners’ authority to bind the partnership.

Sole Proprietor

Sole proprietors, or sole traders, are individuals who own and run a business on their own account with or without employees. Any Cypriot or any EU citizen may carry on business either on his own name or under a business name registered under the Partnership and Business Names Law Cap. 116, if they so wish, but they are personally responsible for all the debts of the business.

A business name is not in fact a legal entity on its own but may be registered by any individual or any legal entity carrying on business under a name other than their own.

To register a business name someone needs to file with the Registrar of Companies a form containing:

  • The business name
  • The place of business
  • The general nature of the business
  • The name, address, nationality and occupation of the applicant person or legal entity
  • Date of commencement of business

The application for registration of a business name must be made within 30 days from the date of commencement of business.

A physical person is obliged to submit audited financial statements if his/her turnover exceeds EUR 70,000 annually. Sole traders’ profits are eligible to income tax, whether the profits are actually distributed to the proprietor or left in the business.

Cyprus International Trusts

The use of Cyprus International Trusts is increasingly becoming popular as a vehicle for international tax planning and business structuring. Income and gains of a Cyprus International Trust derived from sources outside Cyprus are exempt from any tax imposed in Cyprus. See Sec. 10.4. for further detail.