Introduction of additional corporate tax residency test

December 2021

In summary

On 21 December 2021, an amendment to the Income Tax Law was published in the Cyprus Government Gazette (“Law amendment”) 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 (commonly referred to as “stateless companies”).

The Law 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 i.e. its tax residency status will not be affected by the Law amendment.

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 under any applicable Law in the Republic, which has its management and control exercised outside the Republic, is considered to be a resident of the Republic, 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 KPMG assist?

For more information and how this can impact your business, feel free to contact one of the following advisors, or, as appropriate, your local KPMG contact.

George Markides
Board Member
Head of Tax Services
KPMG Limited

 

Katia Papanicolaou
Board Member     
KPMG Limited
Direct Tax Services            

Costas Markides
Board Member
KPMG Limited
International Tax Services

Connect with us

Michael Halios
Board Member
International Tax Services
KPMG Limited

Stelios Stylianou
Board Member
Direct Tax Services
KPMG Limited

Michalis Loizides
Board Member
Tax & Legal Services
KPMG Limited

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