Substance Requirements for Companies in Cyprus: Key Aspects for Successful Business Operations

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The Republic of Cyprus has rightfully earned its reputation as the “Most Convenient Jurisdiction for European Business.” Cyprus is an ideal choice for entrepreneurs, offering unique conditions and advantages. Low tax rates, a wide range of international agreements, and excellent business infrastructure provide optimal conditions for growth and development on the international stage. For more details, read: Why Cyprus is the Best Choice for Business in Europe in 2024.

However, to fully benefit from conducting business in Cyprus, companies must pay particular attention to meeting substance requirements.

What is Substance?

Substance refers to the concept of having genuine economic activity and presence in the jurisdiction where a company is registered. It means proving that registered companies genuinely operate and conduct business in Cyprus, rather than merely using it for tax benefits.

As a member of the European Union, Cyprus strictly adheres to all EU regulations and substance requirements. Cyprus’s absence from the EU and OECD “black” or “grey” lists confirms its compliance with international standards and regulatory requirements. This guarantees stability and predictability for international businesses operating in Cyprus.

Why is Substance Important?

Key Substance Requirements in Cyprus

 

Each case should be assessed individually based on the type of business, and there is no universal solution. However, companies are advised to meet the following key requirements to confirm their economic presence in Cyprus:

1.Physical Presence

The company must have an office in Cyprus used for conducting its activities. Having a physical office with rent expenses confirms the company’s real presence and management in Cyprus. The management of the company (holding shareholder meetings and board of directors meetings) should take place in Cyprus.

2. Cyprus-Resident Director

To meet the requirements, the company’s director must be a resident of Cyprus and possess the necessary qualifications for the position (relevant or similar experience).

3. Contact Information

The company should have valid contact details, including a phone line, email, website, and social media pages.

4. Employees

The company needs to have employees in Cyprus who are registered in the social insurance system and actively participate in the company’s operations. Employees should receive real salaries, with actual payments made through Cypriot banks.

The company must be registered as an employer with the Department of Labor and maintain payroll records showing contributions to social insurance and the General Healthcare System (GESY).

5. Economic Activity

The company must demonstrate real economic activity, documented by valid contracts, transactions, and business operations directly related to its core activities.

6. Corporate Bank Account

The company should open a corporate bank account with a local Cypriot bank, and a local resident/director should act as a signatory.

7. Accounting in Cyprus

The company needs to keep accounting records in Cyprus that accurately reflect all financial transactions and activities. This includes tracking income, expenses, assets, and liabilities. Accounting records must be accurate, up-to-date, comply with local standards and regulations, and be available for audit and tax inspection.

 

Adhering to substance requirements is crucial for successful business operations in Cyprus. It ensures legal protection, tax advantages, and enhances your business reputation.

 

Our company offers comprehensive services to ensure your business in Cyprus meets substance requirements!

 

✔️ Legal support for registering companies in various organizational forms

✔️ Assistance in opening bank accounts

✔️ Tax consultation and optimization

✔️ Administrative and fiduciary services (providing a registered address, secretary services)

✔️ Accounting services

✔️ Preparation and submission of tax reports

📌LEGAL SERVICES IN CYPRUS

 

 

LEARN MORE:

🔹 How to register a company in Cyprus and what taxes you need to pay

🔹 Which is more beneficial: registering a company in Cyprus or working as a sole proprietor?

🔹 The Cypriot tax system

🔹 Construction trends in Cyprus for 2024

🔹 Tax optimization for individuals in Cyprus

 

Article author

Anastasia Taran Head of Corporate Services
Ukraine
In 2013, she graduated in law from the National University «Odessa Law Academy» with honors and received a Master of Law degree. Anastasia Taran has experience in international and contract law, as well as corporate and tax law in Europe. Within the framework of Feod Group, she specializes i...
In 2013, she graduated in law from the National University «Odessa Law Academy» with honors and received a Master of Law degree. Anastasia Taran has experience in international and contract law, as well as corporate and tax law in Europe. Within the framework of Feod Group, she specializes in immigration and corporate law of European countries, particularly:
  • family and corporate immigration solutions.
  • establishing a business in Europe.
  • personal and corporate taxation in Europe.
  • opening accounts in European banks.
  • obtaining a tax resident status.
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