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ARTICLE · 13 AUGUST 2018

Clampdown On Companies Lacking Substance

Elias Neocleous & Co LLC
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Recent developments have underlined the need for businesses to have real substance in order to operate and benefit from tax residence in Cyprus.

CyprusWealth Management
Michalis Loizou
Michalis Loizou
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  • Shell and letter-box companies
  • Tax factors
  • Fundamentals of substance and ways to enhance it

Recent developments have underlined the need for businesses to have real substance in order to operate and benefit from tax residence in Cyprus. Lack of proper substance may not only lead to the denial of benefits under double tax agreements or EU directives, but may also mean that the company is unable to operate a bank account in Cyprus.

Shell and letter-box companies

On 14 June 2018 the Central Bank of Cyprus issued a circular to credit institutions that it regulates, advising them against opening new bank accounts or continuing existing accounts with companies that are regarded as so-called 'shell' or 'letter-box' companies. These guidelines are due to be incorporated into the Central Bank's Anti-money Laundering Directive in the near future.

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