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Set Up a Liaison Office in Cyprus

Set Up a Liaison Office in Cyprus

New companies in Cyprus can choose to begin their commercial activities here by setting up a liaison office. This is the simplest form of organization that can be chosen by new companies when entering the market and its purpose is to connect the foreign mother company to the market in Cyprus. The liaison office, also known as a representative office, will be dependent on the main company and will act in its best interest.

Our Cypriot company formation experts can help you open a liaison office and take the first steps for doing business in Cyprus.

 Quick Facts  
 Applicable legislation  Cyprus Company Law

 Status

The representative office is not a corporate form. 

 Uses of a liaison office

– marketing;

– contact point for the parent company;

– research. 

 Restrictions of a representative office (if any) A Cypriot representative office cannot engage in commercial activities. 
 Minimum share capital (YES/NO)

 There are no share capital requirements for such an entity.

 Local representative required (YES/NO)

 Yes, a local representative must be appointed.

 Documents to be filed by parent company

 – information about the foreign business;

– proof of local address;

– information about the local officers.

 Local address requirement (YES/NO)

Yes, a local address is a main requirement for a liaison office in Cyprus. 

 Authority to be enrolled with

 Trade Registrar

 Liability of the parent company  The parent company is responsible for its representative office in Cyprus.
 Taxation of a Cypriot liaison office

 No taxes apply to this type of entity.

 Possibility of hiring local staff (YES/NO)

 Yes, a liaison office can have a few employees.

 Travel requirements for setting up a representative office (YES/NO)

 No, there are no requirements to travel to Cyprus.

 Advantages of a liaison office

– simple to set up;

– useful tool to test the market;

– low maintenance requirements.

Support in opening a representative office  Yes, our local specialists can help you set up a representative office in Cyprus. 

Registration procedure for a representative office in Cyprus

Even if the Cypriot liaison office is not a legal entity itself, it must be registered by the parent company with the local authorities, namely the Trade Register.

The procedure for establishing a liaison office is as follows:

  1. locating suitable office space for the office;
  2. appointing a local representative;
  3. enroll workers in social security benefits (the representative(s) are primarily subject to this requirement).

Compared to starting a company in Cyprus, the process of opening a representative office is substantially more straightforward.

The Cypriot Registrar of Companies must receive the following documents, in addition to an application form and registration fee, in order to create a representative office:

  • certified copies of the company’s bylaws and articles;
  • information of the officers representing the foreign company in Cyprus.

An important aspect to consider about the liaison office is that cannot function o an indefinite period of time, which is why foreign investors who want to operate here can later decide to buy a shelf company in Cyprus to use for their activities.

A liaison office in Cyprus has to obtain a license for functioning and be enrolled as a taxpayer. Unlike other types of companies in Cyprus, a representative office does not require a minimum share capital. Some fees may apply for the registration procedure.

Different rules apply to investors from the European Union, European Economic Area (EEA), Switzerland, and non-EU nations interested in company registration in Cyprus. Businessmen from the EU, EEA, and Switzerland enjoy the same privileges as those from Cyprus, and neither work visas nor residence permits are necessary for them.

No matter the form you want to use to set up a company in Cyprus, you can rely on our local agents for support. We also invite you to read about the liaison office in the infographic below:

What to consider about the Cyprus-based liaison office

First of all, a Cypriot representative office lacks its own legal personality, which means that:

  • it is not distinguished from the parent company;
  • it has no unique name or trade name;
  • it has no property of its own;
  • the parent firm will be responsible for the office’s debts.

The process of opening a liaison office in Cyprus is less complicated because it is heavily dependent on the business opening it.

 The Cypriot representative office will rely on the parent company and lacks both legal and financial independence. It does not have permission to sign contracts, and neither it nor its employees are able to bind the business to commercial activities.

The representative office established by a foreign banking institution

Most often, banks choose to establish liaison offices in other countries, which is also the case in Cyprus. In this case, the foreign institution must address the Cypriot National Bank to obtain the operating license.

In accordance with section 8 of the Banking Law, the Central Bank of Cyprus may approve the creation of a representative office with or without any restrictions, based on its judgment of what is appropriate. The Bank will issue to the applicant a relevant approval, usually depending upon the fulfillment of the same requirements applicable to other companies establishing the same type of office.

In this case, the application for the establishment of a representative office in Cyprus must be filed with the Governor of the National Bank, which must be signed by two legal agents appointed by the directors or by any other person(s) acting on their behalf, as appropriate. This means that in this case, the foreign bank must appoint a minimum of two local representatives.

A particularity accepted by the National Bank is for the Cypriot representative office to use the word “bank” or another term designating a financial institution if:

  • this is the same name under which the parent foreign institution conducts business in its home country;
  • if this name is used in Cyprus in conjunction with the description “Cyprus Representative Office’’.

The description must appear in all representative office’s documents, nameplates, and advertisements, either directly below or after its name.

Feel free to address our agents who specialize in company formation in Cyprus for details on setting up a liaison office as a bank.

Why open a liaison office in Cyprus

A liaison office is a good way for international companies to be present in the Cypriot market and maintain a good relationship with their customers. By setting up a representative office, clients have a way of communicating with the company in Cyprus, and the company can monitor the market and adjust its activities accordingly.

A representative office in Cyprus will conduct marketing operations and other non-transactional operations. This type of establishment is different from a branch or a subsidiary in Cyprus, as it can perform certain activities necessary for representing the headquarters. Although the liaison office cannot perform independent activities, it has an important role in representing the company in front of Cypriot institutions and is essential for marketing purposes. If you want to know more about the advantages of a representative office in this country, one of our Cypriot company formation specialists will give you more information.

Does a liaison office need a Cypriot bank account?

Even if it is not mandatory, a representative office may also create a bank account in Cyprus through its local agent. When the parent company decides to change the business form and turn the liaison office into a Cypriot branch, this will also be advantageous when filing tax returns.

If you are looking to open a corporate bank account in Cyprus for your company or liaison office, you can rely on our local consultants. As for foreign investors who want to generate revenue, they can opt to open a branch instead of a representative office since the latter cannot engage in income-generating activities.

Why open a liaison office instead of a branch in Cyprus

Foreign companies seeking to establish a presence in Cyprus usually choose between the branch and the representative office, even if they are very different in terms of activities. However, there are a number of benefits for foreign companies looking to open liaison offices, including:

  • the ease of establishment, which also implies fewer documents compared to the branch;
  • the possibility to hire staff members regardless of whether they are employed by the parent company or not;
  • the liaison office’s ability to register for VAT purposes and receive refunds for VAT;
  • the parent company’s capacity to conduct in-depth market research through the liaison office can be a valuable asset when opening a branch or subsidiary in the future.

When it comes to the quick registration process, it may be compared to buying a shelf company in Cyprus.

Feel free to contact our company formation agents in Cyprus for guidance on choosing the best structure for your operations.

Tax-related aspects when opening a Cypriot representative office

The parent company should be aware that establishing a liaison office in Cyprus means that is not subject to income tax as long as it doesn’t close any sales and doesn’t directly serve its clients. However, it must register for taxation purposes.

However, the Companies Register must receive an annual filing of the overseas company’s financial accounts from a local agent or liaison office. According to EU directives, several exclusions apply to EU enterprises operating abroad. A certificate signed by the company’s directors and secretary, as well as a statement confirming this exemption from the relevant authorities of the company, must be delivered by exempt corporations to the Registrar.

If you require accounting assistance, you may also rely on our accountant in Cyprus. If you want to expand your business in this nation, we can provide consulting or tax-related services. We are also at the service of those who want to start a traditional business by buying a Cypriot shelf company, which is one of the fastest ways to engage in a commercial activity.

We have also created a video on this subject:

Foreign direct investment in Cyprus

Foreign investments play an important role in the Cypriot economy, as the number of foreign-owned businesses is quite high. Furthermore, according to data below:

  • the last quarter of 2022 brought an increase of 9.3 billion USD in terms of foreign direct investment in Cyprus;
  • by comparison, in the previous quarter, the growth was of 3 billion USD;
  • Cyprus’ nominal GDP was 7.1 billion USD at the end of 2022.

For any matters concerning company formation in Cyprus, please contact our team of company registration representatives.