Check My Accounting & Tax Compliance
Establishing a company in Cyprus offers numerous benefits, but meeting substance requirements is critical to maintain compliance. In 2026, understanding what constitutes “real presence” can save your business from audits, fines, and reputational risks. This guide explains step-by-step how Cyprus defines company substance, who it applies to, and the actions required to demonstrate real operations locally. Whether you are an EU, UK, or non-EU company, following these guidelines ensures that your corporate tax obligations, including the updated 15% corporate tax rate, are fully met. By the end of this guide, you’ll know exactly how to structure your company’s activities in Cyprus to satisfy regulators, optimize tax positions, and avoid common mistakes.
Cyprus requires companies to demonstrate real presence in the country to benefit from local tax rules.
Substance requirements are evaluated by the number of directors, local employees, office space, and actual business operations in Cyprus.
In 2026, these rules apply to all corporate entities seeking the 15% corporate tax advantage, ensuring they are not considered shell companies.
1. Board Meetings: Regularly held in Cyprus with minutes documented.
2. Local Directors: At least one director resident in Cyprus.
3. Employees and Staff: Staff must perform core activities in Cyprus.
4. Office Space: Physical premises appropriate to the size and type of operations.
5. Decision-Making: Strategic and financial decisions must occur within Cyprus.
Compliance is monitored by the Cyprus Tax Department and the Registrar of Companies.
Companies must maintain records demonstrating substance, including contracts, invoices, and payroll.
Non-compliance can result in reclassification for tax purposes, penalties, or denial of 15% corporate tax benefits.
The rules distinguish between EU/UK and non-EU entities, with specific documentation requirements.
1. Using nominee directors only: Can lead to disqualification for tax benefits.
2. No local office or staff: Risk of being classified as shell company.
3. Failing to document board decisions: Could trigger audits.
4. Outsourcing core functions abroad: May void substance claims.
5. Ignoring updated 15% corporate tax rules: Direct financial loss and penalties.
| Parameter | Suitable | Not Suitable | Recommended Action |
|---|---|---|---|
| EU/UK Citizen | ✅ Meets local substance | — | Ensure real operations in Cyprus |
| Non-EU Citizen | ✅ If local management & office exist | ❌ If cannot meet 60/183 day presence | Seek expert advice |
This guide does not apply to companies that only hold passive investments or do not intend to carry out business activities in Cyprus.
Entities with no local staff, directors, or office space should seek tailored advice before claiming substance benefits.
Q: What does 'real presence' mean for Cyprus companies?
A: Real presence means that the company actively conducts operations in Cyprus, with local directors, employees, and decision-making occurring within the country.
Q: Who must comply with Cyprus substance requirements?
A: All companies claiming Cyprus corporate tax benefits (currently 15%) must demonstrate substance, including EU, UK, and non-EU entities.
Q: Can I use nominee directors to meet substance requirements?
A: No. Authorities require active involvement of local directors in strategic decisions to qualify for tax advantages.
Q: What are the consequences of non-compliance?
A: Non-compliance can result in denial of tax benefits, penalties, audits, and reputational risks.
Q: How can I ensure my company meets substance rules?
A: Maintain proper documentation of board meetings, office space, employees, and strategic decision-making within Cyprus.
Have a specific question or unsure how this applies to your situation?
You’re welcome to get in touch for guidance from verified professionals here:
Check My Accounting & Tax Compliance