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SUBSTANCE SOLUTIONS

SUBSTANCE SOLUTIONS

International developments necessitate the enhancement of economic substance for an effective global tax strategy. In order to assist our clients to safeguard their tax residency in the Republic of Cyprus, our team carefully considers each Company’s specific circumstances and proceeds to meticulously formulating the appropriate tailor-made substance strategy.

Our team has established expertise and hands-on experience in assisting clients in building economic substance for more than a decade, by advising, designing and helping in the implementation of appropriate and cost-effective measures which support the Company’s tax residency status and minimise the risk of potential tax challenges.

Some of measures our team frequently recommends to our clientele to enhance their economic substance in Cyprus include the following, which are supplementary to further recommendations and solutions our team provides on a client-by-client basis:

  • Define the reasons for operating in Cyprus: Apart from constructing a purpose and an organisational mission, the Company needs to demonstrate the reasons for operating in Cyprus as, for example, proximity to the target market.
  • Establishment of physical presence with offices: Purchase or rent corporate offices, set-up the requisite Information Technology (IT), corporate telephone lines and a website.
  • Appointment of a qualified, tax resident Director: The majority of the Directors appointed should be residents of Cyprus and must have the required knowledge and skills to properly manage and control the Company.
  • Major decisions being taken in Cyprus and minutes kept at the Company’s offices: It is important to demonstrate that the major decisions of the Cypriot Company are, in fact, taken in Cyprus. Original Minutes of the Directors’ and other meetings and conferences, contracts and other original records should be kept at the Company’s offices.
  • Employment of resident staff who perform the Company’s day-to-day operations: A reasonable number of employees residing in Cyprus, should man the corporate offices and handle day-to-day operations, such as answering the telephone calls and e-mails, providing customer support, produce invoices, and so forth.
  • Maintenance of accounting books and records: Further to the need to demonstrate that a Company is managed and controlled in Cyprus, the Companies Act (Cap.113), as amended, requires every Company incorporated in Cyprus to keep proper books and records at the Company’s registered office or at any place designated by the Directors.
  • Demonstrating enhanced business activity in Cyprus: There should be substantial sale and purchase transactions at the Headquarter offices, as well as acquisition of assets, opening and administering corporate bank accounts and maintain accounting books and records in Cyprus.
  • Justify the operations in Cyprus: At the formation stage, but also after a reasonable time-period, the Company must continue validating the reasons for establishment in Cyprus, by showing actual economic activity managed from Cyprus.
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