Cyprus revised corporate tax residency test

On 21 December 2021, an amendment to the Cypriot Income Tax Law was published whereby an additional corporate tax residency test is introduced based on incorporation. This additional test aims to capture Cyprus incorporated / registered companies that are not tax resident in any other jurisdiction.

The amendment will enter into force on 31 December 2022.

Existing corporate tax residency rules based on management and control

In accordance with the Income Tax Law, a company is considered to be a tax resident of Cyprus if its management and control is exercised in Cyprus.

The existing corporate tax residency test will continue to apply, so that a company that has its management and control in Cyprus will continue to be considered as a tax resident of Cyprus.

Additional corporate tax residency test based on incorporation

In accordance with the Law amendment the definition of a “resident in the Republic” is enhanced so that a company established or registered in Cyprus, which has its management and control exercised outside Cyprus, is considered to be a resident in Cyprus, unless such company is a tax resident in any other jurisdiction.

This means that Cyprus incorporated / registered companies, with (i) management and control exercised outside Cyprus; AND (ii) not tax resident in any other jurisdiction will now be considered as Cyprus tax residents and as such, taxed in Cyprus on their worldwide income.

How can we help?

We are at your disposal to discuss the effect of the above provisions to your corporate structure and arrangements.

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