Cyprus

Setting up a shell company without genuine substance

Fix: Cyprus tax authorities and the EU Anti-Tax Avoidance Directive require real economic substance. Ensure you have local directors who exercise genuine management, a physical office, and local administrative staff. Without substance, your Cyprus company risks being challenged under anti-avoidance rules in your home jurisdiction.

Assuming the IP Box applies to all intellectual property income

Fix: The IP Box follows the OECD modified nexus approach — only IP income from assets developed through qualifying R&D expenditure qualifies. Purchased IP or IP developed entirely by outsourced contractors may not qualify. Work with a Cyprus tax advisor to confirm eligibility before relying on the 2.5% rate.

Not understanding the non-dom rules for personal tax

Fix: Non-dom status in Cyprus exempts individuals from Special Defence Contribution (SDC) on dividends, interest, and rental income for 17 years — but you must become a Cyprus tax resident. Simply incorporating a Cyprus company does not grant non-dom status. You need to relocate and spend 60+ days in Cyprus (under the 60-day rule) or 183+ days (standard rule) to qualify.

Underestimating banking timelines

Fix: Cyprus banking is more limited than in larger EU states. Only two major domestic banks remain after the 2013 crisis. Account opening can take 4–6 weeks, especially for non-resident directors. Start the banking process immediately after incorporation and consider having a Cyprus-resident director attend in person.