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Establishing substance in Cyprus

Cyprus Tax Residency establishes that the entity will be subject to Cyprus tax law and to tax benefits arising from the Cyprus double tax treaty network.

Cyprus’ strategic location, full EU membership, developed legal system, competitive corporate tax rate of 12.5%, personal tax incentives, well-educated local workforce and business-friendly environment make Cyprus an ideal country for this purpose. Under the Cyprus tax legislation, a company is a tax resident in Cyprus if it is managed and controlled from Cyprus. Cyprus tax residents can take advantage of reliefs and other benefits emanating from tax treaties signed by Cyprus with other countries

Cyprus follows the OECD model convention, where a company may qualify for tax treaty benefits if the following criteria (normally contained in tax treaties) are met:

  • The company is a tax resident of the State it is registered in;
  • and The company is the “beneficial owner” of the income distribution (i.e. dividends, interest, royalties).

Cyprus tax residency benefits

Cyprus tax residents can take advantage of reliefs and other benefits emanating from tax treaties signed by Cyprus with other countries. The main benefit of a tax treaty is the avoidance of double taxation on income earned. Other significant objectives of the tax treaties include the reduction of source country withholding rates on passive income such as interest, dividends and royalties, prevention of tax evasion on income and capital gains, tax administration cooperation, encourage cross-border trade and providing a mechanism for resolving tax disputes between the treaty countries

What will be required to achieve sufficient business substance?

In order to support the tax residency position of the company, appropriate corporate governance procedures and indicators of substance should be in place such as:

  • Strategic decisions actually being taken by directors’ meetings in Cyprus;
  • The board of directors to be suitably qualified Cypriot resident individuals and to have the relevant knowledge
  • The company maintains employees and an office in Cyprus, through which day to day operational functions are exercised;
  • The employees must be registered with social insurance and are substantially involved in the operations of the Company.
  • All financial and other transactions of the company should be prepared and kept in Cyprus
  • The Company maintains a website with the proper email address
  • The Company has its own telephone, fax and internet lines.
  • One of the bank accounts of the Company recommended being with a Cypriot Bank Institution and a local resident as a signatory.
  • All accounting records must be kept in Cyprus
  • The annual audit must take place by local Auditors registered with the Institute of Certified Public Accountants of Cyprus (ICPAC).
  • Employees and premises must be insured.

We help you with

We can provide recommendations on a ‘case to case’ basis to clients who wish to enhance their presence in Cyprus and to built-up substance either by establishing themselves in Cyprus with a fully-fledged office and employees relocating or through other relevant means in order to adopt best practices.

Our services include but not limited:

    • Identifying suitable office space and residential accommodation;
    • Assistance with setting-up of an office, hiring local personnel and dealing with visas and work permits of foreign employees;
    • Support with respect to ongoing administrative functions of companies (fiduciary, accounting, payroll and HR solutions);
    • Tax services including corporate, personal and indirect tax compliance and advisory for domiciling of companies to Cyprus
    • Independent IT environment set up
    • Creation of website
    • Receptionist answering phone calls from a dedicated line on behalf of the company and much more

Would you like to know more?

Book a free consultation with us today to discuss your substance needs.

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Members of the Cyprus Investment Funds Association (CIFA) Member of the Cyprus-India Association. Our team are Certified Persons in the Public Register of the Cyprus Securities and Exchange Commission (CySEC) and members of ICPAC