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RESIDENCY OF CYPRUS COMPANIES APPLICABILITY OF THE INCORPORATION RULE AS FROM 31/12/2022
As per the Law, 193(I)/2021, amending the Income Tax Law, 118(I)/2002, a company, which is established or registered pursuant to any law in force in Cyprus, will by default be considered as resident in the Republic, and in effect liable to Cyprus Taxation, on its worldwide income, provided it is not tax resident in any other country.
The following proviso of the definition of the meaning, “Resident in the Republic” in article 2 of the Income Tax Law 118(I)/2002, as from 31/12/2022, has been added as follows:
“It is provided that, a company which has been established or registered pursuant to any law in force in the Republic, of which its management and control is exercised outside the Republic, it is considered that it is resident in the Republic, unless the said company is tax resident in any other country”.
In Greek: «Νοείται έτι περαιτέρω ότι, εταιρεία που έχει συσταθεί ή εγγραφεί δυνάμει οποιουδήποτε σε ισχύ Νόμου στη Δημοκρατία, της οποίας ο έλεγχος και η διεύθυνση ασκούνται εκτός της Δημοκρατίας, θεωρείται ότι είναι κάτοικος της Δημοκρατίας, εκτός εάν η εν λόγω εταιρεία είναι φορολογικός κάτοικος σε οποιοδήποτε άλλο κράτος·».
In effect, the Incorporation Rule related to residency issues, is applicable in Cyprus as from 31/12/2022 in identifying the residency of Cyprus registered companies.
In view of this amendment, all Cyprus registered companies, by default, are considered as residents of Cyprus and are liable to Cyprus Taxation UNLESS they fall within the exception of the above provision.
In effect, all Cyprus registered Companies are considered as residents of Cyprus and are liable to Cyprus tax on their worldwide income, UNLESS, they are:
- Managed and controlled from abroad, AND
- Are tax resident in another country.
- It is incorporated in Cyprus (subject to the above exception) or
- The central management and control of its business is exercised in Cyprus, which in effect makes liable to Cyprus taxation foreign registered companies.