Sovereign Cyprus - Domiciliary Services

Once a corporate entity – private or public limited company or limited liability company (LLC) or equivalent – has been registered in Cyprus, it is required to maintain a minimum presence in Cyprus: a registered office address and a resident company secretary and/or a resident agent. We generally provide these services for all our clients and describe them as Cyprus ‘domiciliary services’.

Sovereign provides directors for many of the companies that we incorporate in Cyprus to ensure that their affairs are properly managed and controlled from Cyprus. This service is often combined with our other ongoing company administration services.

Under the Cyprus Income Tax Law, to be considered Cyprus tax resident companies must be able to demonstrate that they are conducting legitimate business activities in Cyprus, have effective management and decision-making authority in Cyprus and maintain sufficient physical presence in Cyprus that is commensurate with their activities and income.

Failure to be fully compliant with substance requirements can result in the loss of Cyprus tax residency status, the loss of tax incentives, the potential application of financial penalties by Cypriot regulatory bodies and foreign tax authorities, increased scrutiny and potential banking restrictions or loss of banking services.

If management and control of a company is found to be in a different jurisdiction to Cyprus, it may be tax resident in that other jurisdiction and liable for pay tax there, as well as interest and penalties on any unpaid tax.

To establish substance, the majority of the Board of Directors must be Cyprus residents. The directors should have effective management and control of the company, and make decisions concerning the company’s strategic and operational activities in Cyprus.

If a company is controlled by its directors, the place of central management and control will be the place where directors meet to manage the company’s business and make all important strategic decisions. To show that significant decisions are taken in Cyprus, board meetings should be held in Cyprus, which should be reflected in the effective record-keeping.

However, the place where the directors meet is only relevant if the board of directors has the controlling power and exercises that power wholly or mainly at board meetings. The place of meetings will not be decisive if the directors are simply acting on the instructions of another person.

A company can be centrally managed and controlled by professional directors in Cyprus if those directors are seen to properly consider their decisions and take advice where appropriate. It is therefore essential that professional directors have authority and can make independent and informed decisions in respect of the central policies of a company.

Sovereign directors are experienced and knowledgeable individuals who understand the requirements of Cypriot corporate structures. Before any of our directors can be appointed, we need to have a thorough and comprehensive understanding of the company and its business, as well as the reason that our services are required.

Our directors are required to meet their directors’ duties, which require them to exercise independent judgment. It is a condition of any appointment that the director(s) are able to exercise their independent judgment and are fully involved in any decisions.