{"id":1185,"date":"2021-12-05T09:06:00","date_gmt":"2021-12-05T09:06:00","guid":{"rendered":"https:\/\/aspentrust.com\/?p=1185"},"modified":"2023-01-04T15:49:49","modified_gmt":"2023-01-04T15:49:49","slug":"corporate-restructuring-with-a-cyprus-company","status":"publish","type":"post","link":"https:\/\/aspentrust.com\/corporate-restructuring-with-a-cyprus-company\/","title":{"rendered":"The Rewards of Business Expansion and Relocation with a Cyprus Company"},"content":{"rendered":"\n

Located in the Eastern Mediterranean, the island of Cyprus is one of the most favorable jurisdictions to consider for corporate restructuring, business expansion and relocation<\/strong>. There are many benefits to restructuring or expanding a private company into a Cyprus company <\/strong>including tax optimization and business environment advantages.<\/p>\n\n\n\n

The Aspen Trust Group<\/u><\/a> examines the reasons behind most corporate relocation efforts and the tax-efficient advantages of formation as a Cyprus company.<\/p>\n\n\n\n

Business Expansion and Relocation Options<\/h2>\n\n\n\n

Named as one of Forbes\u2019s Best Countries for Doing Business in 2019<\/u><\/a> and with over 12% of the resident population active in start-up enterprises<\/u><\/a>, Cyprus remains one of the best jurisdictions for business expansion and relocation, even for small business owners.<\/p>\n\n\n\n

The options of company structures in Cyprus<\/u><\/a> include a private limited liability company (Private Cyprus Ltd.), a public limited liability company (Public Cyprus Ltd.), and a sole proprietorship. With the current incentives for company formation, most business owners are opting for a Private Cyprus Ltd with an established and transparent ultimate beneficial owner<\/u><\/a> in order to maximize the advantages of the Cyprus jurisdiction and EU membership.<\/p>\n\n\n\n

Under the new Cyprus immigration rules for 2022, business expansion and relocation will be made easier and faster as well as offer more support for company formation with the Business Facilitation Unit. Support services include registration of a company, social insurance, employees, and tax-related registries; residence and employment permit for foreign nationals employed by companies; and guidance mechanisms for company establishment and operation in Cyprus.<\/p>\n\n\n\n

In addition, companies interested in business expansion and relocation to the jurisdiction may qualify to bring foreign employees, their families, and support staff along with them, while they are also offered residence and work permits valid for a period of 3 years. The new initiatives aim to improve the acceleration of the process to as little as 1 month for permit obtainment.<\/p>\n\n\n\n

Another modern aspect of the immigration scheme pertains to digital nomads<\/u><\/a>, or self-employed foreign nationals, who may be granted residence and work permits by meeting certain income criteria. Through this, digital nomads of the program may relocate to Cyprus and find a favorable business environment for establishing their own Cyprus company to better optimize their quality of life and tax status<\/p>\n\n\n\n

What is Corporate Restructuring?<\/h2>\n\n\n\n

When making the choice to expand and relocate a business, many companies find it the perfect time to work with financial consultants to also restructure their organization to improve efficiency and financial considerations. The term \u2018restructuring\u2019 is used to describe a wide variety of business activities that ultimately lead to the reorganization of an enterprise and is an effective optimization strategy for business expansion and relocation.<\/p>\n\n\n\n

Established by Eurofound in 2001, the European Monitoring Centre on Change (EMCC)<\/u><\/a> designates eight different types of restructuring activities.<\/p>\n\n\n\n

  1. Relocation;<\/li>
  2. Outsourcing;<\/li>
  3. Delocalization;<\/li>
  4. Bankruptcy;<\/li>
  5. Merger and acquisition;<\/li>
  6. Internal restructuring;<\/li>
  7. Business expansion; and<\/li>
  8. Those that don\u2019t fit the previously listed activities.<\/li><\/ol>\n\n\n\n

    The goal of the EMCC is to promote greater understanding on the changes of work, employment and restructuring.<\/p>\n\n\n\n

    Since the European economic and financial crisis in 2008, the concepts of restructuring and reorganization have become increasingly pertinent with the distinct rise in corporate reorganization cases<\/u><\/a>.<\/p>\n\n\n\n

    Corporate Restructuring in the EU<\/h2>\n\n\n\n

    On November 18, 2019, the European Council adopted a new directive<\/u><\/a> in order to facilitate cross-border conversions, mergers, and divisions of limited liability companies within the EU. The directive went into force on January 1 2020 and must be implemented in the local laws of EU member countries by January 31, 2023. While the directive is focused on cross-border mergers, anticipation is high that more harmonious options for corporate restructuring are on the rise.<\/p>\n\n\n\n

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    Back in 2005, another directive covering cross-border mergers was adopted by the European Council, which prompted the issue of procedure into domestic legislation in each member state.<\/p>\n\n\n\n

    Aiming to understand the economic crisis in Europe, the European Commission began conversations with EU-level partners back in January 2002 under Article 138(2) EC, now Article 154, of the Treaty on the Functioning of the European Union (TFEU)<\/u><\/a> to better anticipate and navigate social effects on corporate restructuring.<\/p>\n\n\n\n

    As tangible action has been slow by social partners, the Commission relaunched a political debate<\/u><\/a> that centered on discussions focused on change and corporate restructuring. The hope is that these conversations will lead to measures to promote employment, growth and international competitiveness.<\/p>\n\n\n\n

    As companies look for ways to deal with the economic challenges brought on by the COVID-19 pandemic, corporate restructuring is an attractive option. Beyond cross-border mergers, corporate restructuring is available for companies looking into business expansion and relocation to gain financial advantages such as tax optimization, like those found when restructuring an established entity as a Cyprus company.<\/p>\n\n\n\n

    What Prompts an Existing Business to Restructure or Relocate?<\/h2>\n\n\n\n

    There are several reasons for an existing business to begin looking at restructuring or relocating options.<\/p>\n\n\n\n

    Tax Incentives<\/strong><\/em><\/p>\n\n\n\n

    Often, the most important reason for restructuring for business expansion or relocation is tax optimization<\/u><\/a>. Tax regimes in various jurisdictions attract existing and new business enterprises with low-tax benefits and treaties with multiple countries to avoid double taxation.<\/p>\n\n\n\n

    Limited or Slow Economic Recovery<\/strong><\/em><\/p>\n\n\n\n

    Financial pressures on businesses to reduce the costs of operations throughout regional and global recessions can lead to considerations about restructuring a foreign company in another jurisdiction. Centralizing different functions of business while relocating can alter the financial burdens on existing businesses and also lead to more economic benefits.<\/p>\n\n\n\n

    Issues on Compliance<\/strong><\/em><\/p>\n\n\n\n

    Existing businesses may find increasingly complex compliance regulations too difficult and controlling. On the other hand, some jurisdictions may have too little compliance regulations that in turn lead to lower protections. Restructuring to an EU-member state offers a chance to become part of a regulated, unified market economy while ensuring that compliance is straightforward and uniform with access to protections and key benefits.<\/p>\n\n\n\n

    Globalization<\/strong><\/em><\/p>\n\n\n\n

    Growth between emerging, developing, and mature markets continue to show disparities. Globalization is speeding up the process of acquiring capital, goods, and markets around the world, including an expansion in the number of international employees eager to relocate or join these business ventures.<\/p>\n\n\n\n

    Competitiveness<\/strong><\/em><\/p>\n\n\n\n

    As jurisdictions begin to offer more incentives for foreign companies looking for new markets, existing companies can use restructuring as a means of more effective business expansion or relocation strategies with the aim of maximizing value while minimizing taxes and other financial, employee, and rental costs. This strategy provides them with a competitive advantage over other companies.<\/p>\n\n\n\n

    Intellectual Protections (IP) and Liability Concerns<\/strong><\/em><\/p>\n\n\n\n

    Jurisdictions attractive to foreign companies not only offer financial benefits but also maintain options for IP protections and management<\/u><\/a> or have created noteworthy protections concerning liabilities, both personal and corporate. Usually, the governments of these jurisdictions are actively working to promote international company formation within their borders in order to continue strengthening regional industries and markets.<\/p>\n\n\n\n

    Access to employment markets with qualified staff at lower costs<\/strong><\/em><\/p>\n\n\n\n

    With companies permanently looking to reduce employee costs they always seek to relocate to jurisdictions where the employee market is mature. There are plenty of qualified-multilingual individuals to employ and their average salaries are lower than the jurisdiction of origin.<\/p>\n\n\n\n

    \"The<\/figure>\n\n\n\n

    The Importance of Economic Substance and the Right Jurisdiction<\/h2>\n\n\n\n

    The establishment of economic substance<\/u><\/a> for a company is increasingly more significant for compliance and transparency when operating globally. As more jurisdictions and international organizations such as the European Union are requiring economic substance for companies, the decision where to base that substance is as important as ever.<\/p>\n\n\n\n

    Some of the requirements to establish economic substance, in particular for EU businesses, include:<\/p>\n\n\n\n