Reasons to relocate Your offshore company to Cyprus
A common problem with classic offshore IBC’s nowadays is that they are rejected by the financial services system and blocked out of the economy through government blacklisting. In order to maintain the account, more and more banks and payment service providers require the account-holder to show its taxpayer identification, evidence of its actual place of business, proof of being subject to tax. A typical IBC is unable to provide these pieces of evidence, as by definition it does not have them. Result: financial accounts being closed, business paralyzed.
There may be some compelling reasons to keep the IBC intact. For example, when it has a significant balance sheet, containing property, assets and contracts that cannot be easily transferred out. In such cases, the IBC may evolve into a more ‘acceptable’ entity by establishing a branch in a more regulated country – such as Cyprus.
In this respect, distinction must be made between a subsidiary and a branch. A branch is not a separate legal person. A branch office must have the same name as that of its parent company. It effectively acts as an extension to its head office. As it’s not a separate legal person, all liability for the activities of the branch fall squarely on the parent company.
An IBC can establish a branch in Cyprus through registering as “an overseas company” with the Cyprus Registrar of Companies.
In order to do so, the foreign company wishing to establish a branch in Cyprus must submit to the Registrar of Companies its certificate of incorporation, memorandum and articles of association, particulars of directors and secretary, and the name and address of at least one person resident in Cyprus that is authorised to accept serviced notices.
The foreign company, through its branch, will have to produce audited financial statements and file tax returns to the Cyprus tax authority. If the management of such company is placed in Cyprus (i.e. it has Cyprus-based directors), the company will be subject to Cyprus tax. Consequently, such company should be able to pass the typical compliance screening in most banks and have access to all practical benefits – same as any other Cyprus-based company.
A similar result will be achieved through a full change of domicile of the IBC from its registration country to Cyprus. While subject to some technicalities, this is quite achievable. The end result will be that the former IBC will continue its life and legal personality as a Cyprus company.
Of note, change of domicile and branch establishment can be significantly more costly and time consuming that establishment of a new company. We will be glad to provide You with more details.