International Business Company (IBC)

Cyprus International Business Company (IBC)

A Cyprus International Business Company (IBC) is one of the most popular and effective methods of tax planning. The basis of this method is determined by the Cyprus legislation containing the right of taxation on preferential terms for the companies belonging to non-residents.

An IBC can either be resident in Cyprus (provided its management and control is in Cyprus) or it can be non-resident (if its management and control is outside Cyprus).

The key condition of incorporating the IBC by a non-resident is the presence of the treaties for the avoidance of double taxation between the country of registration and the countries where the IBC or its subsidiaries will have activities.

There are more than 30 such treaties signed between Cyprus and other countries. The existence of these treaties, combined with the low tax paid by a Cyprus company offer the possibilities for effective international tax planning. The main objective of the double tax treaties is to avoid the double taxation of income earned in any of the two contracting countries. This is done through the tax sparing provisions whereby tax is credited against the tax that must be paid in the contracting state.

In respect to International law, an IBC is an independent legal entity, which conducts its business activities in accordance with the law of the country of its registration.

The principal corporate legislation under which companies are incorporated and administered in Cyprus is The Companies Laws, Cap. 113 of 1951, which basically duplicates the Companies Act of 1948 of the United Kingdom.

The registration process of the International Business Company

A certain procedure is followed for the registration of the company:

The first step in the process is the choice of the name of the company. An application is filed to the Registrar of Companies with the requested name. The name must include the word “Limited” or its abbreviation “Ltd” to signify limited liability status.

The period for the approval of the name is 5 business days. For urgent cases our law firm can offer a list of names already approved by the Registrar of Companies.

Once approval for the company name is obtained, the Memorandum and Articles of Association of the company are prepared and submitted for registration to the Registrar of Companies together with the information regarding the officers and shareholders of the company.

The share capital can be expressed in any currency and there is no minimum paid up capital.

It takes approximately 7 working days to obtain a company registration number and the company’s corporate documents, i.e. incorporation, director, shareholder and registered office certificates.

Director

The minimum number of directors is one, who can be either an individual or a legal entity. The same requirement is provided for the shareholders. The difference is that the nationality of the directors is crucial, while the nationality of shareholders is immaterial.

Usually members of our firm are appointed as nominee directors in order to execute the board meetings and resolutions in Cyprus. In this way, management and control takes place in Cyprus for tax purposes.

Secretary

It is required by Law that the secretary of the IBC must be appointed by the directors. Although the nationality of the secretary is immaterial, it is recommended that the secretary of the company be resident in Cyprus.

Nominee shareholders

The prevailing method used for an IBC is to employ for its representation Cypriot nominees. Members of our firm can undertake this by registering their names in the Memorandum and Articles of Association.

After the incorporation of the company the nominees have the option to transfer their subscription shares to the actual shareholders by issuing instruments of transfer. Another choice is for the nominees to continue to hold the shares on trust on behalf of the beneficial owner.

A nominee shareholder acts on behalf of the beneficial owner. At the same time, the appointed nominees are not actually entitled to manage the company without the approval of the beneficial owner. Holding the shares on trust on behalf of the beneficial owner guarantees a high level of confidentiality.

The following documents are provided by the nominee to protect the security of the beneficial owner:

• A trust deed;
• Instruments of transfer (bearing no date);
• Directors’ resolution approving the transfer of shares to the actual shareholder;
• The original share certificates issued in the names of the nominee shareholders;
• Undated letters of resignation of the nominee directors.

Registered office

The Cyprus Company Law requires the presence of the registered office of the company to be in Cyprus.

Confidentiality

All information provided by the beneficial owner is treated as strictly confidential. The appointment of nominee directors, shareholders and secretary guarantees the protection from the disclosure of information about the beneficial owner to any governmental institution.

The name of the beneficial owner is required only in case of opening a bank account in Cyprus banks. However, the bank does not disclose the information about the beneficiary to any other institutions. the signatory of the bank account can be the beneficial owner personally or the appointed nominee shareholder (but it must be an individual; legal entities cannot become signatories).

Virtual Office

Virtual office consists of receiving mail on behalf of the company and then either forwarding it to the beneficial owner or keeping it for personal pick up. It is possible also to receive faxes and phone messages for the company, either on our phone number or on a line installed specially for the use of the company.

Bank Account

A company may own one or more bank accounts any currency with a Cyprus bank. the bank account may be opened on the same day provided that we submit the corporate documents, a bank reference letter and certified true copies of the passports of the beneficial owners and of the signatory, the Board’s resolution, and the signed application opening forms. Cyprus banks can offer internet banking and fax trading. Debit or credit cards can be issued provided that a fixed amount is secured in the account.