In order for a Company to be deemed a “Cypriot tax resident”, and hence benefit from a number of double tax treaties entered into between Cyprus and numerous other countries, such as Russia, it must satisfy the following criteria:

  • Under our local tax laws, the established test of residency is where the “management and control” of the Company lies.

  • Although there is no statutory definition of “management and control” per se, in the case of Companies of which the business is managed by the Board of Directors, it is largely recognized that the test is satisfied if the majority of the Board of Directors are Cypriot tax residents and meetings of the Board of Directors take place in Cyprus.

  • However, if the Articles of Association of the Company provide that the business of the Company is managed and controlled by any other body, for instance the shareholders (General Meeting), then the tax residency of the Company will depend on the country in which such body is resident.

  • In case that certain matters only are reserved to such other body, it is a question of fact and degree, decided on an ad hoc basis, whether the list, nature and/or importance of such matters determined by such body are such that would link the management and control of the Company to such other body.

  • The consequence of a Company being deemed a tax resident of Cyprus is potential payment of taxation in Cyprus, noting nonetheless that the Cyprus tax authorities are not likely to take an aggressive approach on the issue of Cyprus tax residency.

Therefore, the question of what steps should be taken to ensure tax residency in Cyprus is, to a large extent, an issue under the laws of the respective jurisdiction of which tax treaty protection is sought by the Cyprus Company.