Management and Control
The Residence of a Company is based on the effective passing of “management and control” test as included in the Tax Department’s application form for the issuance of a Tax Residency Certificate. Key factors for the establishment of Residence are:
Where the key decisions which are necessary for the conduct of the business of the company are taken,
Where the location of the directors’ and shareholders’ meetings are held,
Where the directors of the Company are residents, and
Where minutes and statutory and other records are kept.
However, amendments to the law were published on 21 December 2021 which alter this position and mean that from 31 December 2022, a Cyprus-incorporated company will, by default, be considered a tax resident of Cyprus (in addition to those passing the existing “management and control” test) unless they are able to prove that they are already tax resident in a different jurisdiction. However, there is a risk to be taxed at higher rates in other jurisdictions.
In accordance with the relevant announcement published in the Official Gazette of the Republic:
“Currently, the definition of corporate tax residency is solely based on the management and control criterion.
As of 31 December 2022, the definition of corporate tax residency is expanded to additionally include the incorporation test. More specifically, a company which is incorporated or registered in Cyprus, and its management and control is exercised outside Cyprus, should be considered a resident of Cyprus for tax purposes unless it is a tax resident in another country.”