The formation of a company within the TRNC can be used for a variety of reasons, and with the right structure, it can be an effective way to do international business. Additionally, Cyprus’ legal system adheres to EU laws and regulations and is based on the ideas of UK common law (Cyprus Company Law, Chapter 113, based on the English Act of 1948).
What types of companies does the TRNC law permit?
A company is a distinct “legal person” created in order to separate legal responsibility for the affairs of a business (or any other activity) from the personal affairs of the individuals who own or operate the business.
The types of companies TRNC law permit are Local Private Companies, Local Public Companies, Foreign Companies, International Business Companies, Local Banks and International Banking Units. (Although the International Business Companies, Local Banking Units and International Banking Units (IBU) are operating under different Laws, their incorporation and registration procedures are all governed by the Companies Law.)
Local Private Companies: Local Private companies need 2 or more founding members, are limited to 50 shareholders (except for employees or ex-employees), cannot offer shares for public subscription and impose restriction on the transfer of shares. Only registered holders of shares can have any interest in the company’s securities. Local Private Companies are subject to Corporation Tax. Corporation Tax is 10% of the Net Profit of the company. Further 15% is charged as withholding tax taking the total tax to 23.50%.
Local Public Companies: Public companies need 7 or more founding members, can seek public subscription of shares and do not restrict share transfers. There is no restriction as to the maximum number of shareholders. Local Public Companies are subject to Corporation Tax at rates specified above. A general meeting of shareholders must be held once a year (the annual general meeting), although special meetings of shareholders can be called.
Foreign (Overseas) Companies: Foreign Companies are the local branches of foreign companies (excluding the sole proprietorships established in foreign countries) which has the head office and the place of registration in a country outside the TRNC. These companies operate under the same conditions as Local Private and Public Companies and subject to the same rate of taxation. Foreign Companies are registered in the Registrar of Companies by filing the full documents of the head office.
