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Shell companies/entities

We inform you that on November 2nd 2018 the Central Bank of Cyprus has issued the circular letter № BS 6020 regarding "Shell companies/entities" which has entered into force immediately. This Circular was issued for all Credit, Payment and E-money institutions.

In accordance with the circular the term "shell company/entity" refers to a limited liability company or any other legal/business entity that bears the following characteristics:

  • It has no physical presence or operations in its country of incorporation/registration (other than a mailing address). Physical presence is construed as having a place of business or operations (own or rented premises) in the country of registration/incorporation. Also, absence of meaningful mind and management could be construed as lack of physical presence.
  • It has no established economic activity in its country of incorporation/registration, little to no independent economic value and no documentary proof to the company. The Circular also provides circumstances which could indicate economic activity.

If an entity falls within the above definition and
  • It is registered in a jurisdiction where companies/entities are not required to submit the authorities independently audited financial statements and does not voluntary prepare audited financial statements by independent qualified professional accounts who are licensed or regulated and/or
  • It has a tax residence in a jurisdiction included in the EU list of non-cooperative jurisdictions for tax purposes or the OECD’s list of non-cooperative jurisdictions for tax purposes or has no tax residence whatsoever,

then business relationship with such an entity shall be avoided.

In all other cases of companies/entities falling within the definition of a "shell company" the institution shall decide on whether to engage in or maintain a business relationship applying a risk based approach in accordance with legal and regulatory framework and proving fully substantiated justification of such a decision which should be appropriately documented and recorded.

In addition to registration and administration services for companies in Cyprus, Korpus Prava is equipped to provide services of redomiciliation of companies (change of jurisdiction), preparation of financial statements, organization and maintenance of Real Substance in Cyprus and other services. Korpus Prava performs its own tax and legal expertise. Therefore, our experts are ready to deliver advice and document control services that comply with the requirements of OECD, EU, the tax laws, and which reflect the requirements of the concept involving an actual income recipient.