Substance in Cyprus

Substance in Cyprus

It is imperative that each company considers its structure, as well as the management and operations that will be evaluated based on Cyprus tax rules.

There are minimum requirements for a company to be considered a tax resident of Cyprus. It may include, but not necessarily, any of the following:

• Board of Directors. Most members must be tax residents of Cyprus. Top managers of the company should be able to fully perform management functions.
• Meetings of the board of directors should be held in Cyprus to make all important decisions regarding the management and control of the company and its investments. Documentation is very important. The board of directors should be held at least once a year. All directors (residents and non-residents) should be present at it.
• The Memorandum and Articles of Association shall not contain evidence of the taxable presence of the company in another jurisdiction.
• Keeping records: Archiving books and records, such as minutes, company stamps and stock registries, should be kept in an office in Cyprus.
• Accounting function: Accounting and all financial transactions of the company must be properly executed and stored in Cyprus. This requirement includes the issuance of bills and receipts, paperwork, as well as compliance with reporting requirements and legal requirements. Accounting, preparation of management accounts, financial statements and financial statements in accordance with IFRS should be carried out in Cyprus. The accounts must be verified in Cyprus and their discussion and approval must be carried out in Cyprus.
• Personnel and office space: the company must hire personnel in accordance with the company’s activities in Cyprus and social security contributions in Cyprus. There should be a full-fledged office with telephone, Internet, etc.
• Banking: corporate account in Cyprus (regardless of whether there are other bank accounts abroad). Local expenses associated with the activities of the company are paid from this account.
• Formation of company attributes, for example, domain, company website, company logo and stationery.

  In general, structure requirements should be reasonably followed. Without fulfilling the above rules, a taxpayer may be considered a tax resident in another jurisdiction and taxed accordingly.
  It is advisable for companies to carry out a diagnostic analysis of the tax risks of the existing company structure and to comply with restructuring requirements.
  Cyprus offers many economic benefits for companies that have decided to locate regional offices on the island. This, combined with the strategic location of Cyprus, EU membership, low maintenance and high quality of life, can be an effective management decision.

We draw your attention to the fact that this article is for informational purposes only. For more advice, contact us at the contacts listed on the site.