Substance in Cyprus
The Republic of Cyprus is presently a rather appealing jurisdiction for conducting business, not simply in terms of its favorable climate but also with respect to its favorable tax rates (e.g., the corporate tax rate is 12.5%). Additionally, the Republic of Cyprus is a member state of the EU, which implies that doing business in Cyprus provides access to the European market as a whole, among other advantages.
However, the following must be understood: in order for a company in Cyprus to receive tax benefits, etc., it must have substance in Cyprus.
Why you need substance?
- The company needs to be tax payer of Cyprus, so no other countries can challenge it.
- To open bank account of the company in Cyprus.
Based on the established practice (at the legislative level, issues about how to form substance are not fixed), the following factors can be noted that indicate the formation of substance:
- Appointment of directors who are a tax resident in Cyprus (the majority of directors should be tax resident in Cyprus).
- Holding most of the company's board of directors' meetings and shareholders' meetings within the territory of Cyprus. Additionally, it is essential to ensure that the company representative with the power of attorney does not have excessively broad decision-making powers and doesn't execute such powers outside Cyprus, for instance, by signing contracts with foreign counterparts.
- Employing residents of Cyprus or obtaining the status of a foreign company to hire third country employees, as well as registering the company in all government offices.
- Operating out of a real office in Cyprus, which goes beyond a mere legal address.
- Opening a bank account in Cyprus or using EMI (Electronic Money Institutions).
- Registering the company to VAT office.
- Conducting the company's accounting and reporting within Cyprus.
- Having a real company phone number and website.
- Physically storing company documents at the company's office in Cyprus.
Dear journalists, use of material from the REVERA website in publications is only possible with our written permission.
To approve material, please contact i.antonova@revera.legal or Telegram: https://t.me/PR_revera