4 Drawbacks of Having a Company in Cyprus (And What You Should Know)

Cyprus is widely recognised as one of the most attractive jurisdictions in Europe for international business. With low corporate tax, zero dividend tax in many cases, and relatively low operating costs, it offers substantial advantages. However, like any jurisdiction, it also has certain drawbacks that entrepreneurs should consider before proceeding.

In this short article we will dive into some minor drawbacks of the Cyprus Corporate Environment.

1. Company Incorporation  - Timeframe
The incorporation of a Cyprus company typically takes between two to four working weeks. While this is a standard timeframe locally, compared to some other jurisdictions where companies can be formed within a few days, it may be considered relatively slow. Proper planning is therefore essential if timing is critical for your business.

2. Bank Account Opening - Delays
Opening a corporate bank account for a newly formed Cyprus company generally requires an additional two to four weeks after submission of the application. Banks require extensive due diligence documentation, including source of funds and business activity details. Although a Cyprus bank account is not always mandatory, having one can significantly strengthen your company’s local substance and credibility.

3. Liquidation or Strike-Off Procedures - Lengthy
Closing a Cyprus company can be time-consuming. A formal liquidation procedure, which involves court approval, may take approximately one year to complete. Alternatively, a strike-off process is faster (around three to six months), but the company may later be reinstated by the Registrar of Companies. Both processes require tax clearance from the Income Tax Office, which contributes to the overall duration.

4. Tax Reviews and Dispute Resolution - Delays
If a company faces a tax dispute or requires clarification regarding submitted tax returns, the review process can take considerable time. The Income Tax Office examines cases on a year-by-year basis, and unless the matter is substantial, responses may not be immediate. While this is rarely an issue for companies with proper accounting support, it can become frustrating in cases of disputed balances or corrections.

The Bigger Picture
Despite these drawbacks — primarily related to speed and administrative timing — Cyprus remains an exceptionally attractive jurisdiction;

• Corporate tax stands at 3% for technology companies and 15% for all other companies (some industries are taxed differently)

• Dividend tax can be zero in most cases,
• 8% flat tax on Crypto gains (for personal and corporate crypto profits)
• Zero tax on disposal of securities
• Low Payroll & Operating costs, and
• Great overall business ecosystem that is investor-friendly and internationally recognised.

Summary

In summary, the main limitation of Cyprus is not taxation or regulation — it is simply the pace of certain administrative procedures. With proper planning and professional guidance, these timing considerations can be managed effectively while enjoying the significant benefits the jurisdiction offers.

CYAUSE Audit Services is an Audit & Assurance firm with offices in Cyprus and the UAE regulated by the UK ICAEW, International ACCA and the Cyprus ICPAC. 

Our firm has extensive knowledge and experience in local tax legislations, relocation consultation, international tax planning solutions and licensing of investment firms, funds and insurance agents / brokers. Our routine day to day services include accounting, audit, tax and advisory services to international businesses interested in relocating or establishing presence to Cyprus.

Our Partnership with  BKR International  (a USA association ranked number 10 in the world), ACCACE Circle (European Network) and 3E Accounting International, a Hong Kong Network, ensures that we are wired and closely connected in all jurisdictions, getting the latest corporate and tax news ensuring our tax planning is accurate and validated before finalisation. Being part of international networks ensures seamless collaboration with overseas experts and access to fast and accurate information on overseas tax and corporate legislations.

Feel free to contact us at enquiries@cyprusaccountants.com.cy or call us at +357 99 428 543.

Learn More about Cyprus Corporate Environment

Information about CYAUSE Audit Services and the Cyprus Corporate & Tax System can be obtained from our Website and our YouTube channel which provides valuable information about the Corporate & Tax Environment of Cyprus.