Create a company in Cyprus — or move your company from India

Something happened to Indian tax law on 1 April 2026 that almost no page about moving a business offshore has absorbed: the Income-tax Act, 1961 was repealed and replaced. Assessment years are gone, "tax year" replaced them, and every section number changed. If a guide cites section 6(3) for place of effective management, it is quoting a statute that no longer exists.

Updated for 2026 Cyprus tax law and regulations.

From India to Cyprus, with the company, the books and every filing on one platform

Sumly is the fully digitalized, one-stop way for an Indian founder to create a company in Cyprus, relocate a business here, and then actually operate it — from Chennai, from Limassol, or from an aeroplane in between. We incorporate the company, switch your books on the same day you order, build every Cyprus return box by box, and run the tax residency and non-dom registration as one fixed-price service. One dashboard, one provider, four published prices.

This is Sumly — and what we actually do for you

Sumly is the fully digital provider for founders moving a company to Cyprus. You do not need to learn Cypriot company law, find a local auditor, or work out which form goes where. You get in touch, and we do the rest.

And we stay with you on both sides of the move. The Cyprus side we own outright. For the side you are leaving, we put you straight in front of an adviser or lawyer from our network who works on exactly your problem — company law, exit taxation, inheritance, employment — and we hold the thread between them and us. One point of contact for the whole move, however many specialisms your case turns out to touch. If your case is simple, we do all of it for a fixed price.

Part 1: What leaving actually costs you

Your home country does not let go the moment the plane does. What still runs after you have left, and in which order it has to be handled.

Why does almost every India-to-Cyprus guide now cite a repealed statute?

Because the statute changed underneath them. The Income Tax Department states that the Income Tax Act, 2025 comes into force on April 1, 2026, at which point the Income Tax Act, 1961 is repealed. That is not a consolidation exercise with the old numbering preserved. It is a renumbering of the whole body of law.

The scale is on the same page: the 2025 Act runs to 536 sections and 16 schedules where the 1961 Act had 819 and 14, with 333 rules and 190 forms replacing 511 and 399. The Act received the President's assent on the 21st August, 2025, and the Finance Bill for the current year charges income-tax for the tax year commencing on the 1st day of April, 2026 under it.

The practical consequence for a reader is a translation table, because the two systems overlap for one more filing season. Here are the provisions this guide relies on, old number and new:

The other thing that vanished is the assessment year. There is now one label — the tax year, running 1 April to 31 March — instead of a previous year and an assessment year for the same period. A founder reading this in late 2026 is filing a return for AY 2026-27 under the old Act while living inside tax year 2026-27 under the new one. Everything below is stated on the 2025 Act unless it says otherwise.

Does India have a CFC regime that reaches a Cyprus company?

No. This is the first question a founder asks and the one where the internet is least reliable, so here is how the answer was established rather than merely asserted. The complete gazetted text of the Income-tax Act, 2025 — the whole Act as published in the Gazette of India Extraordinary — was searched for the strings "controlled foreign" and "controlled foreign company". There are zero occurrences in the Act.

That is a negative established by exhaustive search of the primary instrument, not an inference from commentary. And it is a deliberate negative: India has now had two clear opportunities to legislate controlled-foreign-company rules, in the Direct Taxes Code drafts and again in the 2025 recodification, and took neither.

What it means in practice: profits retained inside a Cyprus company are not attributed to its Indian-resident shareholder merely because he controls it. There is no Subpart F equivalent, no United Kingdom-style CFC charge, no look-through into undistributed earnings. Indian tax bites when a dividend is actually paid, or when the shares are actually sold. If you have been told otherwise by a page that never quotes a section number, that is why it never quotes one.

Say this plainly to yourself before reading on, because it changes what you should be worried about. The risk in an Indian founder's Cyprus structure is not that India taxes the company's retained profit. It is that India taxes the company.

Can the Income Tax Department treat your Cyprus company as Indian?

Yes, and this is the mechanism that does the work a CFC regime does elsewhere — except that it is far blunter. Section 6(10) of the 2025 Act provides that a company is resident in India in a tax year if it is an Indian company or its place of effective management is in India in that tax year, and defines that place as one where key management and commercial decisions necessary for the conduct of business of the company as a whole are, in substance, made.

The Department confirms the test survived the recodification intact: company residence turns on incorporation or place of effective management according to both the Income Tax Act, 1961 and the Income Tax Act, 2025.

Read what that does. A CFC regime attributes a slice of foreign profit to a shareholder. Place of effective management does not attribute anything — it swallows the company whole and makes it an Indian tax resident on its worldwide income. A founder who incorporates in Limassol, appoints himself sole director, and then keeps taking every real decision from an office in Bengaluru has not moved his company anywhere. He has created a company that is resident in Cyprus by incorporation and resident in India by substance, and he will be arguing about it with a department that has the statute on its side.

Two words in section 6(10)(b) carry the whole test and are worth reading slowly. "As a whole" means a board that rubber-stamps decisions taken elsewhere does not create a Cyprus place of effective management, because the decisions for the business as a whole are not being made where the signatures land. "In substance" means the analysis follows where the deciding actually happens, not where the minutes say it happened.

What protects you is ordinary and unglamorous. Decisions taken, discussed and minuted in Cyprus by people who are in Cyprus. A board that genuinely decides rather than ratifies. Banking, treasury and material spending authority sitting here. Contracts negotiated and signed here. Records that match the story a tax officer would reconstruct from your calendar and your flight history. Where a structure genuinely needs local officers, our guide to nominee directors in Cyprus sets out what a nominee does and, more usefully, what a nominee cannot fix.

You will find pages quoting a turnover threshold below which the place-of-effective-management guidelines are said not to apply, and quoting a Central Board of Direct Taxes circular of quantitative active-business tests. We are not restating either here. The department's document repository was not reachable during this research, and — more importantly — section 6(10) carries no turnover threshold on its face. Any threshold is administrative guidance, not statutory relief, and a small company is not outside the section by operation of law. Ask your chartered accountant to check the current guidance against the current text before you rely on it.

Does India charge an exit tax when you move to Cyprus?

No. Established the same way as the CFC answer, and worth the same care. The gazetted Income-tax Act, 2025 was searched for "exit tax", "emigrat", "deemed disposal" and "ceases to be resident". There are no occurrences of any of those phrases in the Act.

Ceasing to be an Indian tax resident is not an occasion of charge. Unrealised appreciation in your shares — including the shares in the Indian company you built — is not brought to tax because you left. Compared with Norway, Germany or the Netherlands, all of which do tax unrealised share gains on departure, India simply lets you go. This is a genuine Indian advantage and a guide that pretends otherwise is not worth reading.

What does exist, and gets confused with an exit tax constantly, is the tax clearance machinery in section 420. There are two regimes inside it and only one is general. A person not domiciled in India who came here for business, profession or employment cannot leave without an undertaking from the employer or payer that his tax will be met; the authority then issues a no-objection certificate. For a person domiciled in India, section 420(3) requires the ordinary disclosure of a permanent account number, the purpose of the visit abroad and the estimated period of stay — that part is routine. The certificate itself is not. Section 420(6) provides that no income-tax authority shall require a person domiciled in India to obtain one unless he records the reasons therefor and obtains the prior approval of Principal Chief Commissioner or Chief Commissioner.

That is a deliberately high bar, and it tells you who the provision is aimed at. Note also what the certificate has to cover: liabilities under the current Act and, expressly, under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Founders with undisclosed foreign assets are the intended target of the whole apparatus. Founders with disclosed ones are not.

Is a Cyprus company a tax question or a foreign-exchange question for an Indian resident?

A foreign-exchange question, first and by a wide margin — and this is the single largest gap in everything else published on this subject. Before the Income-tax Act has anything to say about your Cyprus company, the Foreign Exchange Management Act and the Overseas Investment framework of 2022 decide whether you may lawfully own it, how you may fund it, and what you must file forever afterwards.

Start with the money. A resident individual may remit USD 250,000 per financial year under the Liberalised Remittance Scheme. Three things about that scheme are routinely misunderstood. It is for individuals only and excludes corporates, partnerships, HUFs, and trusts — an Indian company funding a Cyprus subsidiary is not using your personal limit and has its own route. It covers capital account transactions but does not itself grant investment permission: the FAQ routes you onward, requiring investments to be made in accordance with the Overseas Investment Rules and Regulations, 2022. And it carries prohibitions, including remittances for margin calls to overseas exchanges, forex trading abroad, and transfers to countries identified by the Financial Action Task Force as non-cooperative.

Now the characterisation, which is where founders go wrong. The Overseas Investment Directions define Overseas Direct Investment to include acquisition of any unlisted equity capital or subscription as a part of the Memorandum of Association of a foreign entity, with Overseas Portfolio Investment defined residually as investment, other than ODI, in foreign securities.

A Cyprus private limited company is unlisted. Subscribing for its shares is therefore Overseas Direct Investment, always, however small the stake and whether or not you control it. It is never the light-touch portfolio route that covers foreign listed stocks and employee share options. Any page telling an Indian founder that he can "just use his LRS allowance to buy shares in his overseas company" has collapsed that distinction, and the compliance load on the two sides of it is not remotely the same.

What does the Overseas Investment framework actually let an Indian founder do?

More than it used to, and less than most founders assume. Resident individuals have been permitted to make Overseas Direct Investment with effect from August 05, 2013, within the Liberalised Remittance Scheme limit. Four restrictions then bite, and each one has ended a structure we have seen founders design on a whiteboard.

No financial services. Resident individuals are not permitted to make ODI in foreign entities engaged in financial services activity. The single relief is for an entity in an International Financial Services Centre in India, and even there banking and insurance are excluded. A Cyprus fintech, payments, lending, brokerage or crypto-financial vehicle held personally by an Indian resident is off the table on the automatic route. Founders in these sectors need to have that conversation before incorporation, not after.

No debt. Resident individuals are barred from making financial commitment by way of debt. There is no shareholder loan from India into your Cyprus company. Working capital goes in as equity, inside the annual limit, or it comes from the company's own trading.

No gifting the shares out. Resident individuals are not permitted to transfer any overseas investment by way of gift to a person resident outside India. The obvious informal exit — hand the shares to a relative who already lives abroad — is closed.

A real business, not a shell. The investment must be in a foreign entity engaged in a bona fide business activity. This is a substantive gate and not boilerplate. A Cyprus entity with no operations, no people and no purpose beyond holding an interest that loops back to India fails it — and failing it also destroys the round-tripping relief in the next section, because that relief is conditional on bona fide business activity.

The instruments themselves, if you want to hand your chartered accountant the references: the Overseas Investment Regulations were notified as Notification No. FEMA 400/2022-RB, dated 22 August 2022, the Directions as A.P. (DIR Series) Circular No. 12 of the same date, and both are consolidated in the Reserve Bank's Master Direction – Overseas Investment dated 24 July 2024, updated 1 April 2026.

Can you put a Cyprus holding company above your Indian company?

Yes — up to a point that is drawn precisely, and this is the most valuable sentence in this guide. The 2022 regime liberalised round-tripping compared with the position before it, which required prior Reserve Bank approval outright. What it kept is a hard structural ceiling, and here it is in the Reserve Bank's own words:

That text appears in the Overseas Investment Directions, 2022 and identically in the Master Direction – Overseas Investment. The Directions add that no additional layers may be inserted into existing multi-layer structures after notification.

Translate it into the two structures founders actually draw:

The middle row is the one that gets built. A founder who wants a Cyprus holding company, a Netherlands or Singapore intermediate for a future investor, and the Indian operating company underneath has designed a structure that the Directions prohibit — and will find out at the authorised dealer bank, or later and far more expensively. There is a related trap for smaller stakes: a resident individual who has made ODI without control shall not acquire control in a foreign entity that subsequently acquires or sets-up a subsidiary/SDS outside India.

What does the ODI paperwork cost you, every year, forever?

More attention than founders price in, and the obligations do not end when the money has moved. Three items matter.

Form FC and the UIN, before any remittance. The initial investment is reported on Form FC and a Unique Identification Number is allotted before the money leaves. The Master Direction is careful about what that number is not: allotment of UIN does not constitute an approval from the Reserve Bank. Having a number is not having a blessing.

The Annual Performance Report, personally. An APR is required annually and shall be certified by a chartered accountant where the statutory audit is not applicable, including in case of resident individuals. Read that last clause again. An individual founder personally owes a chartered-accountant-certified annual filing on his Cyprus company, for as long as he holds it and remains an Indian resident. That is a recurring professional fee nobody includes in the "cost of a Cyprus company" comparison, and it is the honest answer to why the structure is not free.

We are not publishing a due date for the APR. The Reserve Bank material we were able to open confirms the obligation and the certification requirement but did not surface the date, and a filing deadline is exactly the kind of figure that should not be guessed at on a page people act on. Your chartered accountant will have it.

How much does 20% TCS cost you on the day you fund the company?

Enough to change your funding plan, and it is a real number rather than a scare. The Income-tax Act, 2025 sets tax collected at source on remittance under the Liberalised Remittance Scheme of an amount or aggregate of the amounts exceeding ten lakh rupees, collected by the authorised dealer, at 5% for purposes of education or medical treatment; 20% for purposes other than education or medical treatment.

The Finance Bill 2026 then cut the first of those two. Clause 73 substitutes 2% for 5%, with the explanatory note stating that for remittances for education or medical treatment tax will be collected at source at the rate of 2% instead of the existing rate of 5% … These amendments will take effect from 1st April, 2026. It leaves the other rate untouched.

Put a number on it. A founder remitting ₹1 crore to subscribe for Cyprus shares is above the threshold by ₹90 lakh, and 20% of that is ₹18 lakh collected by his bank at the moment of transfer. Remit close to the full annual limit and the figure is proportionately larger.

The important qualifier is that this is creditable against your final tax liability. It is a cash-flow cost, not a tax cost — you are not losing the money, you are lending it to the government until your return is processed. But for a founder whose Indian income has already largely stopped, the credit can take a full cycle to come back, and it lands precisely when the new company needs capital most. Plan the remittance around it: the timing of the transfer inside the financial year, and how much working capital the Cyprus company genuinely needs on day one, are both decisions worth making deliberately.

When does Indian tax residency actually end?

On day counts, with two carve-outs that matter enormously to a founder and one anti-avoidance rule that, counter-intuitively, does not apply to someone moving to Cyprus.

The basic test in section 6(2) makes you resident if you are in India for one hundred and eighty-two days or more in the tax year, or for sixty days or more during that year where you were also in India for 365 days or more across the four preceding years. For anyone who has been living in India, that second limb is the binding one — sixty days is nothing.

The employment carve-out is the single most useful provision in the departure year. The 60-day limb does not apply to an individual who is a citizen of India and leaves India in a tax year for the purposes of employment outside India. Leave as a passive shareholder and you are exposed at sixty days. Leave under a genuine employment or office with the Cyprus company and only the 182-day test applies to you that year. That is a structural difference of 122 days, and it is free.

The 120-day rule for later visits. Once you are outside India and coming back on visits, the 60-day limb is likewise disapplied for a citizen or person of Indian origin — except that where total income other than income from foreign sources exceeds fifteen lakh rupees in the tax year, the words "sixty days" are read as "one hundred and twenty days". So a departed founder still earning more than ₹15 lakh of Indian-source income can spend up to 119 days a year in India; below that, the ceiling is 181.

Deemed residency, and why it is not your problem. Section 6(7) deems an individual resident where he is a citizen of India, has total income other than foreign-source income above fifteen lakh rupees, and is not liable to tax in any other country or territory due to his domicile, residence, or similar criteria. Competing pages present this as a general bogeyman for anyone leaving India. It is not. It was aimed at people who anchor nowhere. A founder who becomes a Cyprus tax resident is by definition liable to tax in Cyprus by reason of residence, so that limb simply fails and the section cannot apply. Moving to an EU member state with a functioning tax system and a residence certificate is the fact pattern this rule was written to distinguish from.

One transition point that is easy to get wrong: per the Department's guidance, residential status for the year being filed now is determined on stay up to 31 March 2026 under the 1961 Act, and for the current tax year on stay from 1 April 2026 under the 2025 Act. Days do not carry across the two regimes.

Why is RNOR the most valuable status in the whole plan?

Because it does two separate things at once, and hardly anyone writes down the second. "Not ordinarily resident" is a middle status between resident and non-resident, and section 6(13) gives it four qualifying limbs: non-resident in nine out of the ten preceding tax years; in India for seven hundred and twenty-nine days or less in seven tax years preceding that year; caught by the 120-day rule with more than ₹15 lakh of non-foreign income; or deemed resident under section 6(7).

Those last two limbs are the modern additions and they are widely missed. Anyone caught by the 120-day rule, and anyone caught by deemed residency, lands in RNOR rather than in full residency. That is a very large softening of both rules, and it is the reason the section 6(7) panic in most articles is overdone.

The first prize is in section 5. Foreign income of a resident is included in Indian total income, but where the person is not ordinarily resident such income shall be included only when it is derived from a business controlled in or a profession set up in India. An RNOR pays Indian tax on Indian-source income only. Cyprus dividends, Cyprus salary and foreign capital gains sit outside the charge.

Note carefully how that interlocks with the earlier section. The exemption is disapplied for income from a business controlled in India — which is the same substance question that place of effective management asks. RNOR and POEM fail together. If your Cyprus business is genuinely run from Cyprus, RNOR shelters its income and section 6(10) leaves the company alone. If it is run from India, you lose both at once. That single sentence is the crux of the entire departure plan, and it is the thing no competing page has written down.

The second prize is compliance, and it is the best-kept secret in this area. The Income Tax Department's own guidance states that Schedule FA need not be completed if the taxpayer is classified as "not ordinarily resident" or a "non-resident" — and repeats it verbatim in its step-by-step guide to filling the FA schedule. Foreign income out of the charge, and the entire foreign-asset disclosure schedule off your return, from the same status.

How long does it last? That is arithmetic on the tests above rather than a separately published figure, so look at the tests rather than at somebody's rule of thumb. A founder who was non-resident throughout his time abroad satisfies the nine-out-of-ten limb for a period after resuming Indian residence, and the 729-days-in-seven-years limb can extend it in some fact patterns. Work it out on your own day counts with your chartered accountant, and structure the year of return around the answer.

Do you have to tell India about the Cyprus company?

Yes, while you are a resident, and the reporting obligation is wider and the penalty flatter than founders expect. The Department's guidance is unambiguous: for a resident in India, details of all foreign assets or accounts in respect of which you are a beneficial owner, a beneficiary or the legal owner must be mandatorily disclosed in Schedule FA.

Table B — financial interest in any entity outside India — is what captures a Cyprus shareholding, and its reach is deliberately wide: it covers a corporation in which the resident owns, directly or indirectly, any share or voting power, and any other entity in which he owns any voting power, equity interest, assets or interest in profits. There is no de minimis shareholding. Three details trip people up. Reporting runs on the calendar year ending 31 December rather than the Indian financial year. Values are converted at the State Bank of India telegraphic transfer buying rate on the relevant date. And ITR-1 and ITR-4 do not contain Schedule FA at all — filing one of those with a Cyprus shareholding produces a defective return.

Assume the Department already knows. India receives, automatically and annually, account holder name, address, tax identification number, account number, balance and income details, and under the Common Reporting Standard specifically the controlling person (individuals who have ultimate control over the entity) details including resident country code and tax identification number. Cyprus is an EU member state and a participating jurisdiction. Your Cyprus bank account and the controlling-person data behind your Cyprus company flow to India as a matter of routine, and the Department has run dedicated campaigns off exactly that data.

None of this is an argument against the structure. It is an argument for doing it in daylight, which is the only way it works anyway.

Is there an India–Cyprus tax treaty, and what can we honestly tell you about it?

A treaty is in force, and this is the section where we are going to disappoint you deliberately rather than guess.

Here is what we can stand behind. India's treaty-relief machinery sits in the 2025 Act under its double-taxation-relief division, foreign tax credit is claimed on Form 67 filed alongside Schedule TR, and Schedule FSI requires a taxpayer to mention the relevant article of the applicable Double Taxation Avoidance Agreement, with relief claimed under section 90, 90A or 91. The mechanism for claiming treaty benefits is on solid ground.

What we are not going to do is restate the treaty's dividend, interest or royalty withholding rates, its capital-gains article, its signature date or its entry-into-force date. The Income Tax Department's treaty repository refused every request made during this research, and the one further attempt made while writing this page returned a server error. Every other page you will find quotes those numbers. We could copy them from the same secondary sources everyone else copies from, and you would never know. We would rather tell you the truth: we could not verify the current India–Cyprus treaty position from an official Indian source, so we are not publishing figures for it. Check the treaty yourself on the Income Tax Department's own site, and have an Indian chartered accountant or tax counsel read the article you actually need against the current text before you rely on any rate.

One related point we can set out with authority, because it is in the gazetted Act, is what a "notified jurisdictional area" designation does — the machinery that gave Cyprus a reputation in some older articles. Section 176 provides that where a jurisdiction is notified having regard to the lack of effective exchange of information, parties to transactions with persons located there are deemed associated enterprises and the transaction a deemed international transaction, deductions for payments to financial institutions there are denied absent an information authorisation, unexplained sums received from there are deemed income, and withholding runs at the highest of the rates in force, the rate in the Act, or 30%.

The important structural facts about that section are that it is notification-driven and jurisdiction-specific: it applies only to jurisdictions currently notified under it, and a jurisdiction's status is a matter of published notifications rather than reputation. Blog posts from a decade ago about which countries were once on such a list are not evidence of anything about today. Check the current notified list at the time you act, and do not take it — in either direction — from a page that was written in 2013.

Does India tax wealth or inheritance on the way out?

No, on both counts, and Cyprus does not either — so this is a rare column where the two systems tie at zero rather than one beating the other.

India's net wealth tax is gone. The Income Tax Department states plainly that no wealth tax is levied from AY 2016-17 onwards, with the residual filing obligation running only to the two years before that. The Wealth-tax Act, 1957 survives in the 2025 Act only as spent legislation, listed among the Acts a departure certificate must cover.

India levies no estate duty and no inheritance tax either. That is verified the same rigorous way as the CFC and exit-tax answers: no charging provision for estate duty or inheritance tax exists anywhere in the 536 sections of the gazetted Income-tax Act, 2025. What India does have, and it is a different animal, is the "income from other sources" charge that can catch gifts received above a threshold — a receipt-side income charge, not a death duty. And in fairness to the reader: reintroducing an inheritance tax is a recurring subject of Indian political discussion, so "no death tax risk ever" is not a claim anyone should build a twenty-year plan on.

Cyprus, for its part, levies no net-wealth tax and no inheritance tax at all.

What does an Indian founder actually pay today?

Less than the internet implies at the company, and more than it implies at the shareholder. Getting this the right way round is the whole honest argument, and any page claiming India taxes companies punitively will be binned on sight by a reader who knows his own numbers.

Indian corporate tax composes multiplicatively: base rate, then surcharge as a percentage of the tax, then a health and education cess of 4% of such income-tax and surcharge. A profitable private limited company almost always elects the concessional regime in section 200, which charges income-tax payable for a tax year … at the rate of 22%, computed without any deduction under … Chapter VIII — the trade being a low rate in exchange for giving up incentive deductions. Surcharge on that regime is a flat 10% irrespective of income.

Compose those and the effective corporate rate is 25.168% — 22 × 1.10 × 1.04. That is materially below the OECD average and entirely defensible. The headline "30%" that competitor pages quote is the rate for companies that did not elect. Note also that the 15% new-manufacturing regime in section 201 is closed to new entrants: it requires a company to have commenced manufacturing or production of an article or thing on or before the 31st March, 2024, so nobody incorporating today can elect it. Pages still advertising "15% for new manufacturing in India" are advertising a door that is shut.

The shareholder side is where the money goes. Since dividend distribution tax was abolished, dividend is ordinary income of the shareholder — the 2025 Act charges any dividend under income from other sources, at slab rates, with the company deducting 10% at source on the way. There is one saving grace, and it is the detail most competing pages get wrong: the enhanced 25% and 37% surcharge brackets do not apply to dividend income. The statute now says so directly — where total income includes dividend income or capital gains under sections 196 to 198, the rate of surcharge … shall not exceed 15%.

So the maximum on dividend income is 35.88% — not the 39% or 42.744% you will see quoted, which are the ceilings on ordinary income under the new and old individual regimes. It is still the number that decides the argument. Stack 35.88% on top of 25.168% at the company and the combined burden on distributed profit is roughly 52%. The honest push factor for an Indian founder is not the corporate rate. It is the shareholder rate, and the capital controls.

Part 2: What Cyprus gives you

This is the straightforward half, and the half we build end to end. What you actually get on the other side.

What does the Cyprus side look like for an Indian founder?

Flatter, and denominated in euro. A Cyprus limited company pays 15% from tax year 2026 on taxable profit — one rate, no surcharge, no cess, the same on €50,000 as on €5 million. Qualifying intellectual property income can come down to an effective 3% from tax year 2026 under the IP Box.

Then the owner takes the money out, and the gap opens. A Cyprus tax resident who is not domiciled in Cyprus — the non-dom status virtually every relocating founder qualifies for — pays no Special Defence Contribution on dividends for 17 years of Cyprus residence, and dividends fall outside personal income tax altogether. What remains is the health contribution at 2.65% on income up to €180,000 a year — capped at €4,770 however large the distribution. Salary, if you take one, runs through bands starting at 0% to €22,000 rising to 35% above €72,000. A shareholder who is Cyprus-domiciled pays 5% on dividends from 2026 profits, which is why the non-dom registration is not an optional extra.

On the operating side, VAT registration is required above turnover of €15,600, with a standard rate of 19%. The full picture is in Cyprus tax benefits for foreigners and Cyprus non-dom status, and the arithmetic against your own numbers is in the calculator at the top of this page.

How does an Indian founder become Cyprus tax resident?

Through the 60-day rule for most founders, and the rule loosened in 2026. The familiar route is more than 183 days a year on the island. The alternative asks for far fewer days and rather more commitment on the ground, which for a founder is usually the better trade.

From tax year 2026 the rule has four conditions, the old fifth having been removed from the 60-day rule: at least 60 days in Cyprus; no more than 183 days in any other single state; a business, employment or office in a Cyprus tax-resident person held through the year; and a permanent home in Cyprus that you own or rent. The dropped condition — not being tax resident anywhere else — was the awkward one for mobile founders, because another state's claim no longer disqualifies you by itself.

Two things make this fit the Indian side unusually well. First, a directorship of your own Cyprus company can be the office the third condition asks for — which is the same fact that engages the employment carve-out in section 6(3) on the Indian side, so one arrangement does two jobs. Second, the "no more than 183 days in any other single state" condition and India's own 119-day ceiling for a founder with more than ₹15 lakh of Indian income are compatible without contortion.

On immigration, the honest position: the Yellow Slip is an EU-citizens-only registration under EU law, so it is not the Indian route, and we will not imply otherwise. Indian founders use the residence routes that apply to third-country nationals. We handle the company-side paperwork those routes depend on and bring in immigration specialists where a file needs them, and we will tell you where the boundary is before you pay anything. Cyprus company formation for non-residents is the service page that applies to you.

What happens to your existing Indian private limited company?

Three routes, and for most founders the answer is the third rather than either of the exits.

Keep it as an operating subsidiary. Often the right answer, because your Indian company probably has customers, staff and a track record that are worth more than the tidiness of closing it. This is the structure the two-layer rule governs: you above a Cyprus holding company above the Indian company is two layers and permitted, provided the Cyprus entity is engaged in bona fide business activity. Insert anything in between and you are outside the Directions.

Strike it off. The statutory route for voluntary closure is removal of the company's name from the register under section 248 of the Companies Act, 2013, applied for on Form STK-2 and processed by the Centre for Processing Accelerated Corporate Exit. We are naming the route and stopping there. The Ministry of Corporate Affairs site refused every page and document requested during this research, so the eligibility conditions, the list of companies that cannot use it, the fee and the timelines are not stated here rather than being guessed at. Your company secretary has them.

Voluntary liquidation under the Insolvency and Bankruptcy Code. The formal solvent-winding-up route where there are meaningful reserves or complexity that a strike-off cannot carry.

What is genuinely useful — and fully sourced above — is that the two questions which actually decide the shape of your structure are not the mechanics of closing the Indian company at all. They are whether the chain respects the two-layer limit, and where the Cyprus company's place of effective management sits. Get those right and either exit route works. Get them wrong and neither does.

Why do people choose Cyprus over other tax havens?

Because it is somewhere a family can actually live, which is not true of most of the alternatives an Indian founder gets pitched. The rate is what makes someone open a spreadsheet; it is almost never what makes them stay.

Cyprus operates in English in every way a business touches — banking, contracts, professional services, the courts — which for an Indian founder removes the language adjustment that makes most of continental Europe a two-year project. It records among the lowest violent crime rates in the European Union. The island is already full of people from somewhere else, so no one arrives as the only foreigner in the room, and there is an established Indian community here in shipping and technology rather than a theoretical one. Business and property are both running hot, and the state stays open to people who want to trade without wrapping it in regulation. Groceries — meat, fruit and vegetables — are noticeably affordable. And the beaches are not a footnote: in a Cyprus winter you can still go to the beach, and the summers are what people fly across the world for.

The honest push list from the Indian side is narrower than the marketing version, so here it is straight.

Currency mobility is capped and taxed on the way out, and this is the strongest argument by a distance. USD 250,000 a year is a hard ceiling on how much capital an individual can move, with 20% collected at source above ₹10 lakh on the way. That is a capital-controls argument, not a tax argument, and Cyprus — inside the EU and the euro — has no equivalent. The shareholder rate, not the company rate. Roughly 52% combined on distributed profit against 15% and a capped health contribution. The permanence of the compliance. Form FC and a UIN before remittance, a chartered-accountant-certified Annual Performance Report every year for as long as you hold the shares, Schedule FA on a 31 December basis while resident, and a flat ₹10 lakh penalty behind it. Structural rigidity. No ODI into financial services for individuals, no debt commitment, no gifting the investment abroad, no third layer. Founders discover these after incorporating, which is the expensive order. And regime churn. Capital gains were rewritten mid-year in July 2024 and the entire Act was replaced on 1 April 2026. Predictability has a price and founders pay it.

What we are not going to tell you is that India is a bad place to be incorporated. It is not. A profitable Indian company pays 25.168%, there is no CFC regime, no exit tax, no wealth tax and no inheritance tax, and long-term capital gains run at 12.5% before surcharge. If your business serves Indian customers and you intend to keep reinvesting there, stay. Cyprus earns its keep when you need euro banking, EU customers inside the single market, capital that moves without a permission, and a personal rate on distributions that is not 35.88%. That is the real case, and it is enough.

Can an Indian e-commerce brand run through Cyprus?

Yes, and for a seller shipping into Europe the single-market question is usually larger than the tax one. An Indian company faces the European Union as a third country: customs formalities, import VAT, and separate arrangements for selling digital goods or distance-selling to EU consumers. A Cyprus company sits inside the EU VAT system with a VAT number buyers can verify in VIES, zero-rates intra-EU business sales, and uses the one-stop shop for consumer sales across the whole bloc from a single registration. For a brand currently losing conversions at a European checkout because of duties and delivery times, that is the change that shows up in revenue rather than in a tax computation.

The bookkeeping is where this usually falls over, because a store throws off thousands of small transactions in several currencies with a VAT treatment that changes by customer type and country — and a founder running Indian rupee, euro and dollar settlement simultaneously will not reconcile that from an export at quarter end. Sumly's Shopify and WooCommerce plugins pull orders, refunds, fees and payouts straight into the books with the right VAT codes, so the return is built from the sales themselves. It puts the store's books on autopilot and, for a non-EU seller, it puts the store back inside the single market.

Two worked examples

Both are stated in euro at the company level so the two systems can be compared like for like; your own rupee figures depend on the rate on the day you convert. Both assume full distribution and the top of the Indian slab, which is the profile of a founder for whom this decision is live at all.

A services company at €300,000 of profit. In India the company elects the section 200 regime and pays 25.168% — about €75,500 — leaving roughly €224,500 to distribute. At the 35.88% ceiling on dividend income the shareholder pays about €80,500, and the founder keeps roughly €144,000 of the original €300,000. Through Cyprus the company pays 15%, or €45,000, and a non-dom shareholder distributing the remaining €255,000 pays only the health contribution, capped at €4,770 — keeping about €250,000. The gap on one year is around €106,000, and the calculator at the top of this page compounds it, because each year's difference is also invested and Cyprus does not tax the growth on it.

A SaaS company at €500,000 of profit with qualifying IP. In Cyprus, income that qualifies under the IP Box is taxed at an effective 3%, and the distribution still meets only the capped health contribution. In India the concessional 22% regime is available but, as the statute says in terms, it is taken without the Chapter VIII deductions — so electing the low headline rate is also electing out of the incentive regime, and the shareholder layer is unchanged either way. This is the profile where the difference stops being incremental and becomes structural. It is also the profile where place of effective management deserves the most attention, because a software company whose engineering and decision-making both stay in India has not moved anything except its letterhead.

Part 3: How the move runs

From the decision to the first invoice out of the Cyprus company: the order, the mistakes people make before you, and two calculations worked through in full.

What does the move look like, month by month?

Timelines depend on your own facts, your authorised dealer bank and the Registrar's queue, so read this as shape rather than schedule.

• Before anything moves — and this is where we start. We bring in an Indian chartered accountant from our network across your residency arithmetic and your ODI position. Together we settle whether you are leaving under an employment or office with the Cyprus company — that decision changes your day-count exposure this year from 60 to 182 — and we plan the remittance around the 20% collected at source.
• Month 1. We incorporate the Cyprus company, ordered online, with the books live from the same day. Your chartered accountant starts the ODI leg: Form FC through your authorised dealer bank, UIN allotted before any money leaves India, and we hold the Cyprus side until it is.
• Months 1–3. We get Cyprus VAT registered, and social insurance, employees and UBO where those apply to you, and we get banking and EU payments moving. You take up the directorship or employment that anchors both the Cyprus 60-day rule and the Indian employment carve-out.
• Months 3–6. You rent or buy the permanent home the 60-day rule requires, and we tell you what qualifies. You move real decision-making to Cyprus and we minute it here. Together with your chartered accountant we settle whether the Indian company stays as a subsidiary or exits, and check the layer count before anyone signs.
• Month 12 onward. We apply for the Cyprus tax residency certificate and the non-dom registration, and file your first Annual Performance Report on the Cyprus company. We keep the day counts and the board records clean; your chartered accountant keeps the Schedule FA position and tells you when the RNOR window opens.

What mistakes do Indian founders actually make?

The expensive ones are rarely exotic, and almost all of them are the same mistake in different clothes: treating a foreign-exchange transaction as a tax transaction.

Remitting money to subscribe for Cyprus shares as an ordinary LRS transfer, with no Form FC and no UIN, and discovering the Late Submission Fee later. Designing a three-layer structure with an intermediate holding company for a future investor. Setting up a Cyprus fintech or payments vehicle personally, when individual ODI into financial services is not permitted. Budgeting the formation cost and forgetting the annual chartered-accountant-certified APR. Filing ITR-1 while holding Cyprus shares, and filing a defective return. Leaving India as a passive shareholder rather than under an employment, and being caught by the 60-day limb in the departure year. Assuming section 6(7) deemed residency applies when Cyprus residence takes you outside it. Taking a large Cyprus dividend while still ordinarily resident. And the big one: incorporating in Limassol while continuing to run the whole business from India, which loses the place-of-effective-management argument and the RNOR exemption in the same breath, because both turn on the same question.

Part 4: Who does the work

You can do all of this yourself. Below is what that costs in time and in money, against what it costs to let us do it.

Do it yourself — or have Sumly do it

Both routes are real, and plenty of founders start on one and move to the other. Doing it yourself means the Registrar's forms and fees, a registered office you arrange, VAT and VIES registration, provisional tax twice a year, annual statements and books that will survive your auditor — on top of a two-country move and an ODI file you are already managing across a nine-and-a-half-hour time difference. Sumly's route is three published prices: formation from €950 one-time, the bookkeeping software from €39 a month, and your own Sumly certified bookkeeper at €390 a month, with books opened from day zero and every return prepared box by box.

The software alone runs the whole company from Cyprus or from India: invoicing, AI double-entry bookkeeping, live open-banking feeds, all VAT, VIES, provisional and corporate returns prepared box by box, live reports, a document inbox with its own email address, mobile receipt capture that books itself, multi-currency invoicing, team roles and the AI assistant — plus payroll at €15 per employee per month, IP Box tracking at €50 a month, Projects at €10 a month, and the e-commerce plugins.

Sumly, a law firm, and a traditional bookkeeping firm

Law firm vs Sumly — and what happens when it gets complicated

Sumly is cheaper and faster, and we work WITH lawyers, not against them. When a case gets too complicated for what Sumly handles directly, we simply connect you with the right expert in exactly the legal field you need help in, and everything gets done according to best practice, always. Either way, it starts the same place: contact us.

Sumly offers all of this to everyone who asks: a virtual address with PO box, with digital scanning of your post delivered into the dashboard wherever you are that week; nominee director and secretary where a structure genuinely needs them; every registration handled — VAT, social insurance, employees and UBO; audit through Partner Auditors; banking and EU payments sorted, though no provider can promise you a particular bank's decision; and the Yellow Slip, which is an EU-citizens-only route and therefore not the Indian one.

Each of those is an extra, scoped to your case. Tell us what you need in the meeting and you get one clear package-deal offer covering all of it, the IP Box application included where it fits, since that is complex expert work and exactly the kind of thing that should be looked at with you before anyone puts a number on it. No hourly billing and no surprises. That combination — a fixed Cyprus price, one dashboard, and honesty about where the Indian side needs an Indian professional — is what makes Sumly the best choice for Indian founders creating a company and relocating to Cyprus.

Why is Sumly the best bookkeeping system for a Cyprus company?

Sumly is the best accounting software for a Cyprus limited company — because it is built for exactly one thing, Cyprus tax law: all 16 Cyprus VAT codes mapped to the official VAT return boxes, VIES and provisional tax native, not a localization. That is the claim, and every line under it is checkable.

The two Cyprus-built alternatives an Indian founder will be shown are Cybooks and Balabook. We meet their former customers every week, and what they tell us, again and again: workflows that made simple bookkeeping overly complicated, rough edges and glitches, support that left them waiting — a messy experience they were relieved to leave behind.

On every one of these checkable dimensions, Sumly leads. That is a factual comparison — not a matter of taste.

Plainly stated, and we will defend each one: the best support, the best bookkeeping software, the best AI for bookkeeping, the best bookkeeper, the best prices — everything done easily. We publish the detail rather than asking you to take it on trust — Sumly vs Cybooks, Sumly vs Balabook, and against the international tools an Indian founder is most likely already running, Xero, QuickBooks and Sage.

On the IP Box specifically, one line bears repeating: the IP Box is the largest single line in a Cyprus product company's tax position — and the easiest one to forfeit through bookkeeping that was never set up for it. The application starts as a conversation rather than a form, which is a further reason the meeting comes ahead of any number. The IP Box service page sets out what qualifying income has to be able to prove.

What happens when you get in touch

You do not need to have decided anything before you speak to us, and you do not need your paperwork in order.

1. The meeting. Fifteen minutes. You tell us what you own and when you want to move. We tell you which rules at home catch you, and what the Cyprus side costs.
2. We tell you what kind of case you have. If it is simple, we do all of it — company, books, residency, non-dom — at a fixed price. If it is not, we say so immediately and bring in the specialist it needs.
3. We start. The company is registered, your books open the same day, and you have one point of contact for the whole thing.

Questions Indian founders actually ask

Frequently asked

Does India have controlled foreign company rules that catch a Cyprus company?

No. We searched the complete gazetted text of the Income-tax Act, 2025 — all 536 sections — for the phrases 'controlled foreign' and 'controlled foreign company'. There are zero occurrences. India has never enacted a CFC regime, and it declined to add one when it recodified the entire statute in 2025. Profits retained inside a Cyprus company are not attributed to an Indian-resident shareholder simply because he controls it. What India uses instead is place of effective management, which is a blunter instrument entirely.

Does India charge an exit tax when I leave for Cyprus?

No. The same full-text search of the 2025 Act returns nothing for 'exit tax', 'emigrat', 'deemed disposal' or 'ceases to be resident'. Ceasing to be an Indian tax resident is not a disposal event, and unrealised gains on your shares — including shares in your own Indian company — are not taxed on the way out. What exists is section 420, a tax clearance procedure, and it is not the same thing: for a person domiciled in India it can only be demanded where an officer records written reasons and a Principal Chief Commissioner or Chief Commissioner approves it.

Is buying shares in a Cyprus company allowed under FEMA?

Yes, but as Overseas Direct Investment, not as an ordinary remittance. A Cyprus private limited company is unlisted, and acquiring unlisted equity capital falls inside the ODI definition however small the stake — it is never the lighter Overseas Portfolio Investment route. That means Form FC and a Unique Identification Number before any money moves, funding inside your USD 250,000 annual Liberalised Remittance Scheme limit, and an annual chartered-accountant-certified Annual Performance Report for as long as you hold the shares.

Can I put a Cyprus holding company above my Indian private limited company?

Within limits, and the limit is specific. The Overseas Investment Directions 2022 prohibit a financial commitment by an Indian resident in a foreign entity that invests into India where the result is a structure with more than two layers of subsidiaries. Founder to Cyprus Ltd to Indian Pvt Ltd is two layers and is permitted. Insert an intermediate holding company anywhere in that chain and it is three, and it is not. The foreign entity also has to be engaged in a bona fide business activity.

What is the 20% TCS on money sent out of India?

It is tax collected at source by your bank on Liberalised Remittance Scheme remittances above ₹10 lakh, at 20% where the purpose is anything other than education or medical treatment — which includes subscribing for shares in a foreign company. It is creditable against your final tax liability, so it is a cash-flow cost rather than a tax cost, but on a large funding round it parks a very large sum with the government until your return is processed. Budget for it before you plan the remittance, not after.

Will the Income Tax Department treat my Cyprus company as an Indian company?

It will if its place of effective management is in India. Section 6(10) of the Income-tax Act, 2025 makes a company resident in India where the place at which key management and commercial decisions for the business as a whole are in substance made is in India. The consequence is not a slice of attributed profit — it is that the whole company becomes an Indian tax resident on its worldwide income. A founder who incorporates in Limassol but keeps deciding everything from Bengaluru has built a company resident in two places at once.

What is RNOR status and why does it matter so much?

Not ordinarily resident is a middle status under section 6(13), and it is worth real money twice over. First, section 5(1)(c) includes an RNOR's foreign income in Indian total income only where it is derived from a business controlled in or a profession set up in India — so Cyprus dividends and Cyprus salary sit outside the Indian charge. Second, the Income Tax Department's own guidance says Schedule FA need not be completed by a person who is not ordinarily resident. That is a materially lighter compliance position than full residency.

Do I have to disclose the Cyprus company on my Indian return?

If you are a resident, yes, in Schedule FA, and there is no de minimis shareholding. Table B captures a financial interest in any entity outside India, including where you own directly or indirectly any share, voting power or interest in profits. Reporting runs on the calendar year ending 31 December rather than the financial year. ITR-1 and ITR-4 do not contain Schedule FA at all, so filing one of those with a Cyprus shareholding gives you a defective return. India also receives Cyprus account and controlling-person data automatically under CRS.

Does Sumly advise on Indian tax or FEMA?

No. Sumly builds and runs the Cyprus side: the company, the books from day zero, Cyprus VAT, VIES and corporate returns, and the tax residency and non-dom application. This guide sets out India's own published law so you can see the shape of the decision, but how section 6, the Overseas Investment rules and your ODI filings apply to your facts is work for an Indian chartered accountant and, where FEMA is involved, an authorised dealer bank. Where a case needs a specialist, we connect you with expert lawyers from our network.

Keep reading

• Every country's route to Cyprus — the departure guide for wherever you are now
• Cyprus company formation for non-residents — the route that applies to Indian founders
• How to register a company in Cyprus and what it costs
• Cyprus non-dom status and the 60-day rule
• What changed in the 2026 Cyprus tax reform
• Nominee directors in Cyprus — what they do, and what they cannot fix

The calculator on this page uses headline rates, an assumed annual return and full distribution of profit, so it shows the shape of a Cyprus position rather than your own outcome, and it does not model the FEMA layer that sits underneath an Indian founder's structure. Indian figures are stated for tax year 2026-27 under the Income-tax Act, 2025 as gazetted, with rates from the Finance Bill, 2026; where a point could not be verified on an official Indian source it is stated qualitatively and said to be so. Cyprus figures apply from tax year 2026. All Sumly prices exclude VAT, and government expenses on a formation are invoiced separately once your application is approved.