Cyprus company substance


  1. In course of the Base Erosion and Profit Shifting (“BEPS”) project managed by the Organisation of Economic Cooperation and Development (“OECD”), new measures were introduced in an effort to develop new stringent standards concerning international tax systems. Accordingly, a “nominal” presence is not any longer suitable for conducting all activities for legal entities to be considered Cyprus tax residents.
  2. Thus, for a foreign entity registered in Cyprus is vital to demonstrate enough substance in the region to argue that it is located and operates in the country for reasons other than tax avoidance.
  3. In this sense for a Cyprus company to be considered a Cyprus tax resident the following conditions must be met:
    • Conducting the core income-generating activities from Cyprus;
    • Presence of an adequate number of full-time employees with necessary qualifications to be able to run and manage the company’s business in Cyprus;
    • An adequate number of operating expenditure incurred by such entity in course of its activities or within Cyprus
    • The majority of the Board of Directors of the Company must be Cyprus residents
    • The Annual General Meetings of the company must be held in Cyprus
  1. It is therefore important to avoid professional fiduciary relationships where you pay for nominee services which are not useful any longer in a sense of keeping tax residence (and therefore to keep operable bank accounts) for a company but for services that create benefits for you with the presence of your business and its management by a qualified employee representing your interests here in Cyprus.

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