Cyprus: Corporate Taxation - Important Practical Quidelines In Ascertaining The Place Of Effective Management Or Place Of Management And Control Of A Cyprus Company

1. The Courts approach, where doubts arise about a particular company's residence status, is to ask the following questions:

  • Do the directors really, in fact exercise effective management and control of the Company?
  • If they do, where do they actually exercise it?
  • If the directors do not exercise such control, it must established who does and where they do it.

2. Examining each of these questions in turn:

2.1 The answer to the first question is one of fact. What the Court looks at, in determining the reality of the situation, is the nature of the business transacted and whether:

  • The directors concerned have the right type of experience and qualifications to enable them to make the decisions;
  • That they have sufficient information to enable them to make those decisions;
  • That they in fact did make those decisions.

If either (a) or (b) is not satisfied, then Tax Authorities will argue that the directors in question could not in reality have been in a position to make the decisions and were merely "rubber stamping" decisions made by a third party.

In this respect, documentary evidence e.g. board minutes, can be vitally important. If a decision is actually made at a board meeting, then the minutes should evidence that full and proper consideration was given at that meeting to all relevant facts effecting the decision. This can help to demonstrate that the decision was actually taken at the meeting. If a decision did not in reality take place at a board meeting, then any documentary evidence will again be an important indicator, of who made the decision and where it was made. If for example a major contract is initiated and negotiated in Cyprus by Cypriot resident persons and there is little documentary evidence to support the fact that the Cypriot resident directors, were fully and properly involved, in the more important aspects of the decision making process, then there is severe danger that foreign tax authorities would use this as evidence, to show that the Cypriot company, is in fact centrally managed and controlled in the country, where the foreign directors of the Cypriot Company, or the person who actually take such important decisions, reside.

2.2 Turning to the second question; documentary evidence is obviously a very important indicator of, where central management and control is exercised. It is important to remember, that if board meetings constitute the medium, through which central management and control is exercised, then such meetings, should all take place in Cyprus.

The constitution of the board of directors of the Cyprus Company is very important. You have to secure that the majority of the members of the Board of directors, are Cyprus resident directors.

In addition, it is advisable that those Cyprus resident directors, include some "heavyweights" with knowledge of the Company's business.

2.3 Where the directors are not actually running the company, but are merely "rubber-stamping" the decisions made by a third party residing overseas, then there is a risk that the authorities of the country of the resident of the third party, would deem that person to have effective management and control. In such circumstances it will be the residence of that person that will be relevant in determining whether management and control does in reality take place outside Cyprus.

2.4 Finally, one should always bear in mind that in tests of the company residence, it is a pure conclusion of the facts that is important, legal formalities do not in any way alter the character of those facts. For example, explicit terms of the Articles of Association, or other agreements, as to where and by whom central management and control is to be exercised will be ignored in determining the facts.

2.5 Management and Control

2.5.1 A Company's residence status is determined according to the facts of the case and not on the basis of the constitution and bye-laws governing it. The latter may however provide useful guidance in achieving residence status, and helpful secondary evidence of intention.

2.5.2 The registered office, register of members, company seal etc., should be located in Cyprus, and statutory functions related to corporate status should be carried out there.

2.5.3 The constitution should vest all power of management in the board of directors.

2.5.4 The constitution should require that all board meetings be held in Cyprus.

2.5.5 The constitution should preclude the granting to a non Cypriot resident person of any powers analogous to those which may, under Cypriot law, be delegated to a managing director.

2.5.6 The constitution should fix a quorum for board meetings such that a majority of those present must be Cyprus residents.

2.6 The Directors

2.6.1 A majority of the company directors should be Cyprus residents.

2.6.2 At least one director from Cyprus, should hold an executive position with the company and if possible be given the position and power equivalent to those of a Cypriot managing director.

2.6.3 The directors must be or include persons with sufficient knowledge and competence to manage the company's business independently and must receive remuneration, commensurate with their duties and the scale of the business. If not, they should seek (preferably independent), expert help.

2.6.4 Cyprus resident directors must have sufficient information to enable them to make decisions.

2.6.5 In particular, no Cypriot resident directors should be able to exert a dominant influence over the non Cypriot resident directors. In addition, the non-Cypriot directors must not inadvertently exercise central management and control actively or tacitly through oversight.

2.6.6 No individual director (particularly the non Cypriot resident directors residents) should be allowed to make unilateral decisions on significant matters. These should be made, and be seen to be made, by the board within Cyprus.

2.7 Conduct of the Company's Business

2.7.1 All major decisions should be made, negotiations carried out and contracts signed by the directors at board meetings. Concise, but accurate Minutes should be kept of such meetings, and full documentation supporting the Minutes should be kept on file, to put it beyond dispute that the meetings are the sole forum for arriving at relevant decisions, and are demonstrably not held merely to ratify decisions already taken elsewhere.

2.7.2 Any decisions not made at board meetings should be supported by documentary evidence that the directors were fully and properly involved in Cyprus in the more important aspects of the decision making process.

2.7.3 Board meetings should be held regularly and at frequent intervals, to establish that the board is operating effectively to manage and control the business.

2.7.4 Board meetings should be held in Cyprus and preferably not at airports or hotels, but if possible at permanent premises of the company.

2.7.5 The board should be provided with such accounts and other information as is reasonably necessary for it, to control the company's activities, and such accounts and information should be discussed in board meetings and the discussions minuted.

2.7.6 If functions of central management and control are delegated by the board, e.g. to a committee of directors, the same guidelines must be adopted by the committee as would be adopted in relation to the full board (e.g. all meetings of the committee should be held in Cyprus.

2.7.7 Books and records of the company should be kept in Cyprus.

2.7.8 It is important that all communications relating to the Cypriot Company should be in terms of giving information about, rather than asking approval for, decisions relating to the Cypriot company and should be in terms of general advice or guidance, rather than of specific instructions or orders, on the conduct of the company.

2.7.9 Decisions not made at board meetings should be supported by documentary evidence that the directors were fully and properly involved in Cyprus, in the more important aspects of the decision making process (if this were the case).

2.7.10 The company must not use any foreign address or telephone number in any of its business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions