WHERE DOES MANAGMENT AND CONROL LIE?
This short note is dedicated to the test of residency in Cyprus for the purposes of taxation.
It should be kept in mind that the test of management and control has never been defined but the rough guidelines still exist and to satisfy the test of residency the following issues must be taken into account:
a. There is no legal requirement to have majority of the Board of Directors in Cyprus;
b. To be able to come under the ambit of Cyprus local tax laws or be able to reap the advantages of the DTT network, a company should be a tax resident for the purposes of local tax legislation;
c. In turn local tax laws states that the residency is where the “management and control lies”;
d. The “management and control” is not defined;
e. However, in case the company adopts standard Articles of Association, based on Table A, whereby the company is managed by its board of directors it is recognised that the test is satisfied if (i) the majority of the board of directors are tax residents of Cyprus and (ii) board meetings take place in Cyprus.
f. Furthermore, given that a company is a tax resident of Cyprus, this can only result in possible taxation be paid in Cyprus and the Cyprus tax authorities are not likely to aggressively challenge the Cyprus tax residency, hence, the steps to be taken to ensure the Cyprus tax residency, is to a large extent, an issue under the law of the country where the treaty protection is thought.
For further information on this topic please contact Mrs. Liza Bokova at SOTERIS PITTAS & CO LLC, by telephone (+357 25 028460) or by fax (+357 25 028461) or by e-mail (lbokova@pittaslegal.com).
The content of this article is intended to provide a general guide to the subject matter. Specialist advise should be sought about your specific circumstances.
