Cyprus European Economic Interest Grouping (EEIG)
A form of partnership with min. two partners from different EU countries, which may provide interesting tax planning advantages
Cyprus European Economic Interest Grouping (EEIG)
The European Economic Interest Grouping, in short: EEIG, is an interesting company structure based on EU law on the basis of council regulation(EEC) No. 2137/85 (Official Journal of the EEC L199 of 25 July 1985) as well as on the national laws regarding EEIG regulation.
As EEIGs are not tax subjects themselves and are allowed to retain revenue generated for an unlimited time, EEIGs may be an interesting structure for tax planning.
Shanda Consult is the first service provider in Cyprus who registered EEIGs in Cyprus. Our firm is well experienced with EEIG registering and EEIG administration.
Warning: It came to our knowledge that there are some persons and firms that praise EEIGs as a an all-purpose vehicle for tax optimisation in general, and that offer registering of EEIGs in Cyprus for extremely overpriced fees, equalling the price of a small-range car. Neither are EEIGs all-purpose vehicles for tax optimisation in general, nor are the set-up costs of an EEIG equal to the price of a small-size car!
EEIGs are on par with limited partnerships in most European countries. They have to be comprised at least two members from two different European countries.
Members of an EEIG do have to be legally independent respectively, however the owners may be identical.
Hence, subsidiaries can establish an EEIG amongst themselves or with the parent company, as seen for example with the 12 Italian subsidiary companies of IMI Bank together with an IMI subsidiary in Luxemburg. Jointly, they established an EEIG in Brussels for following purpose: flow of information and lobbying with respect to the EU. Another example would be the auditing departments of the respective national subsidiaries of Winterthur Insurance in Switzerland, which jointly have established an EEIG.
Furthermore, members of an EEIG are not required to be homogeneous. Hence, an EEIG can be founded in any combination by freelancers and self-employed persons or a one-man business, limited companies or stock corporations as well as associations and public bodies (e.g. universities, chamber of commerce and industry, municipalities etc.).
There are no limits for professions. It would for example be possible that tax advisors, consultants, lawyers and possibly a data centre (hosting of accountancy software), all from different EU countries, could establish an EEIG in order to offer respective services to their clients.
EEIGs themselves are not subjected to tax. The EEIG’s net income is subject to taxation on the level of the members, where net income is distributed on par to the members according to their participation.
It is important to note in this context that an EEIG should, according to EU regulation, assist its members in the realisation of their goals and must not pursue profits in its own name. This is because one of the EEIG’s main feature is the fact that it does not accrue any profits in its own name and that it is therefore not liable for tax.
For persons employed by an EEIG income tax and insurance have to be paid.
EEIGs may register for VAT and are liable for VAT.
The purpose of an EEIG is the realisation and implementation of the common objectives of its members. Thus, the line of business must always refer to the cooperation of the members and must not replace they activities of a single member.
One of the best-known EEIGs is, for example, the European TV channel ARTE.
Advantages of EEIGs:
- EU-wide standardized legal form, hence no discrimination;
- Change of business location possible within all of the single European market (in contrast to for instance a domestic limited company);
- EEIGs are particularly attractive to small and medium sized businesses since EEIG is constructed in a simple and flexible manner and since no authorised capital is required when setting up an EEIG;
- Simple formal incorporation requirements: Written incorporation contract and entering in the company registry (exceptions in some countries);
- Profits of an EEIG are distributed equally or proportionally to the shares of the members; the same applies to taxation;
- Also possible: setting aside reserves; this model as a whole is an interesting concept with respect to taxation (profits made on the level of the EEIG and in the name of the members can be transformed into reserves of the EEIG und thus are not distributed to the members. The result: no taxation of reserves on the level of the members;
- EEIGs do not have to prepare balance sheets
- EEIGs are not required to publish results
- The members themselves decide how they want to distribute their liability and the risk related to cooperation;
- Members maintain their economic and legal autonomy, yet at the same time the EEIG maintains legal capacity;
- Legal liability lies primarily with the EEIG itself.
Disadvantages of an EEIG:
- Limited suitability for new entrepreneurs;
- Unlimited legal liability of members (although only subsidiarily). However: the liability of companies with limited liability as members of an EEIG is limited to their capital;
- The search for suitable cooperation partners of often laborious;
- In some cases, there are problems with regard to the distribution of deficits or allocation of additional contributions if this has not been properly sorted out prior to such event;
- An EEIG may not be shareholder in any of the member companies.
A few examples of EEIGs:
- EEIG as joint purchasing association;
- EEIG for exchange of personnel;
- EEIG for joint selling agencies in third countries or joint selling agencies from third countries (example: Lada vehicles from Russia);
- EEIG as cooperation between lawyers (for training purposes, exchange of personnel, literature research, joint handling of clients, joint data processing);
- EEIG of tax advisors, auditors, consultants;
- EEIG in Munich, comprised of advertising experts (EALA EEIG; European Advertising Lawyers Association), writes specialised books and offers a system of legal assessment of advertising campaigns;
- Freight forwarding EEIGs;
- Music instrument workshops of the Waldorf facilities form an EEIG;
- EEIG, whose members are animators from 8 EU countries;
- EEIG comprised of seed machine producers, seed producers and a seed research office from Germany, Portugal and Greece;
- Bus line operating on French and German border side of Freiburg/Breisgau is an EEIG;
- The German TÜV Rheinland and the French Bureau Véritas form the „VERITUV “EEIG in the area of environmental sustainability studies and quality management;
- EFGI- European Group of Financial Institutions EEIG: An EEIG which was established by the ‘Nassauische Sparkasse Wiesbaden’ bank together with other banks and financial service providers from 7 EU countries for cross-border loan projects or transnational mortgage for private persons;
- Groups of bidders for public procurement;
- Horse breeders from several EU countries.
EEIG members from third countries
Often, enterprises or institutions enter a combination with partners from third countries. Partners from third countries can become associated members of an EEIG. In order to avoid delays with the registration of an EEIG, associated members should be accepted through a member’s resolution after the registration.
Since EEIGs are in principle constrained to practise consensus-based management, there is a danger to degrading associated members to second-class members.
The representative or manager of an EEIG is not required to be resident within the EU. For instance, a Southern German EEIG has a manager who is resident in Istanbul/Turkey.
Descriptions and abbreviations of the EEIG in the official languages of the European Union:
- Bulgarian: Европейско обединение по икономически интереси (ЕОИИ)
- Danish: Europæisk økonomisk firmagruppe (EØFG)
- German: Europäische wirtschaftliche Interessenvereinigung (EWIV)
- English: European Economic Interest Grouping (EEIG)
- Estonian: Euroopa majandushuvigrupp (EMHG)
- Finnish: Eurooppalainen taloudellinen etuyhtymä (ETEY)
- French: Groupement européen d’intérêt économique (GEIE)
- Greek: Ευρωπαϊκός Όμιλος Οικονομικού Σκοπού (ΕΟΟΣ)
- Irish/Gaelic: Grupail Eorpach um Leas Eacnamaioch (GELE)
- Italian: Gruppo europeo di interesse economico (GEIE)
- lettisch: Eiropas Ekonomisko interešu grupa (EEIG)
- Latvian: Europos ekonominių interesų grupė (EEIG)
- Maltese: Grupp Ewropew ta’ Interess Ekonomiku (GEIE)
- Dutch: Europees economisch samenwerkingsverband (EESV)
- Polish: Europejskie zgrupowanie interesów gospodarczych (EZIG)
- Portuguese: Agrupamento europeu de interesse económico (AEIE)
- Romanian: Grup European de Interes Economic (GEIE)
- Swedish: Europeisk ekonomisk intressegruppering (EEIG)
- slowakisch: Európske zoskupenie hospodárskych záujmov (EZHZ)
- Slovak: Evropsko gospodarsko interesno združenje (EGIZ)
- Spanish: Agrupación europea de interés económico (AEIE)
- Czech: Evropské hospodářské zájmové sdružení (EHZS)
- Hungarian: Európai Gazdasági Egyesülés (EGE)