How to avoid the blind spots of tax residency

The desired tax treatment of a Cyprus company, whether it be a top-tier holding company or a special purpose vehicle fitted in a greater multi-jurisdictional corporate structure, nowadays goes beyond being considered resident for tax purposes in Cyprus.

Practice suggests that where the ultimate beneficial interests of a Cyprus company are located outside Cyprus, their goal would be to prove to their respective national tax authorities that the Cyprus company is not considered resident for tax purposes in any territory other than Cyprus.

Managed and controlled

In principle, a company which is incorporated in Cyprus will be considered resident for tax purposes in Cyprus only if it is managed and controlled in Cyprus. The concept of “management and control” is not defined by statute but rather draws interpretation from case law. Overall it could be argued that it refers to high-level strategic decision-making rather than day-to-day management of the business of the company. The question of where management and control is exercised is a question of fact.

Nick Tsilimidos is an associate at L Papaphilippou & Co in Cyprus