TAX ALERT – Tax Residency Certificate Request

Tax Alert – Tax Residency Certificate Request

In accordance with Circular 2015/19 issued by the Cyprus tax office there is a new application which needs to be filled in order to issue a Tax Residency certificate. The details are illustrated below.

We firstly have to note that there is no change in the provisions of the Cyprus tax legislation, which provides that a company is considered to be tax resident in Cyprus if the place of its effective management and control is Cyprus. However, there is no definition of management and control in the Cyprus tax legislation.

As per the details of this form (T.D. 98/2015), there are various questions raised which in essence all of which are targeted towards ensuring that the management and control of the company is being exercised in Cyprus. The most important questions raised are the following:

  • Do the majority of the Board of Directors meetings take place in Cyprus?
  • Does the Board of Directors exercise control and make key management and commercial decisions necessary for the company’s operations and general policies?
  • Are Board of Directors’ minutes prepared and kept in Cyprus?
  • Is the majority of the Board of Directors tax residents in Cyprus?
  • Do shareholders’ meetings take place in Cyprus?
  • Are the corporate seal and statutory books and records maintained in Cyprus?
  • Are corporate filing and reporting functions performed by representatives located in Cyprus?
  • Are agreements relating to the company’s business or assets executed or signed in Cyprus?
  • Have all the tax returns that are due been filed?

One of the most important questions raised relates to whether the Company has issued any General Power of Attorney in order to assess whether the management and control may be exercised in another state. If the company has issued such General Power of Attorney then the form requires to specify the terms and conditions thereof.

Having said the above, our opinion is that this questionnaire will not cause delays/difficulties in obtaining tax residency certificates. At the end of the day, it is the Cyprus tax residency position per se which enables the Cyprus tax office to raise any taxations.

Nevertheless, we have to be very careful in applying the correct procedures regarding majority of directors, place of Board meetings, maintenance of records in Cyprus etc.

Moreover, what is of crucial importance is to avoid the issue of General Power of Attorney’s in order to safeguard the Cyprus tax residency position of the Company against any challenges from foreign tax jurisdictions. As an alternative, Special Power of Attorney’s to cover specific transactions may be issued.

At your disposal for any further assistance or clarifications required towards this.