The concept of economic substance in tax planning is a continuously evolving, and increasingly important subject area, in the economy. The absence of economic substance triggers an alert for the possibility of tax avoidance. Recent developments in both domestic and EU laws place a great importance in economic substance, emphasizing that international cooperation is the only way to minimize tax avoidance.

Cyprus Tax Residency renders access to the Cyprus tax framework and to tax benefits arising from the Cyprus double tax treaty network.

Substance has a different meaning in each jurisdiction. For Cyprus, adequate measures will need to be taken proving that the company is managed and controlled in Cyprus and that substantive business operations are genuinely carried out in Cyprus.

As a minimum however, the following principles should form a starting basis for a foreign jurisdiction to treat the company as a Cyprus tax resident:

• Having the majority of the directors (or any other management body) of the Board to be Cyprus tax residents is quintessential to Cyprus tax residency and substance.

• Board meetings should be held in Cyprus, to discuss substantive issues relating to the management and control of the company.
• Books and records, books of account, minute books, company seal and share register should be kept in the Cyprus office.
• All financial and other transactions of the company should be prepared and kept in Cyprus.
• Personnel should be physically present in the office engaging in the company’s activities in accordance with the business plan. To prove genuine management operations; the company’s top management should be in Cyprus. A full-fleshed office (computer, printer, dedicated phone, e-mail address, fax lines, etc.) should be maintained.

• Office space - rental of fully furnished office located in Nicosia business district.
• Telecom and IT support Services, including set –up of dedicated telephone line for the company; receptionist answering phone calls from dedicated line on behalf of the company; e-mail domain registration; IT support.
• Boardroom facilities.
• Internet Access Services with fast line internet and WIFI.
• Creation of corporate website and logo design services.

• Set up of an independent IT environment.
• Assistance with immigration issues of the foreign employees.
• VAT and Payroll Services, including registration of the Client’s Employees with the Department of Social Insurance; preparation of the necessary PAYE and Social Insurance deductions on a monthly basis.
• Translation Services - translation of various documents required by the client in various languages.