PHS tax intelligent team has managed to find the best ever solution for this substance and transparency action. PHS provides virtual and physical office spaces in a professional business structure.

Real economic Substance – the best ever way to comply with the new legislation

Why is economic substance important?

Since the introduction of BEPS (Based Erosion Profit Shifting) by OECD, countries will focus more and more on substance and transparency. As a result of this substance needs to be seriously addressed in order to avoid a high(er) tax burden on your business and to prevent serious tax-disputes arising with your tax authority.

May we inform you that under the BEPS initiative the OECD counters harmful tax practices, not only of multinational companies, but also of small and medium sized firms that are internationally operational.

What the international companies are chasing up in relation to real economic substance?

Tax authorities and courts around the world are attacking structures which lack substance. They focus on the following key issues:

1. Who is the decision maker?

2. Where the decision maker is based?

3. Does the company have real office?

4. Does the company have registered employ(ees)?

5. Does the company have telephone line, email and mail box?

PHS solution
Who said that a new tax-related legislation cannot be overcome?

PHS tax intelligent team has managed to find the best ever solution for this substance and transparency action.

PHS provides virtual and physical office spaces in a professional business structure. PHS can provide you with fully furnished and equipped workspaces with high quality furniture, communication infrastructure and facilities, to meet your companies’ needs, specifically in relation to their physical presence in Cyprus.

The best ever way to prove to tax authorities the real substance of your company is to have a fully-fledged office, and an employee with basic decision-making responsibilities. Without this, the tax authorities could conclude that decisions are made outside the jurisdiction in which the corporate entity is set up, resulting to lack of economic substance.

PHS can provide you with a dedicated employee who is going to act on your company’s behalf at a cost of your company.

Virtual vs. Physical office, which is the right one for you?
What's a Virtual Office?

A virtual office is an office that exists without actually existing. Ideal for small-size international companies that would still like to fulfil the substance criteria with minimum cost and to maintain a professional image. In many cases, virtual office will include additional incentives, including complimentary use of a private office or conference area. The virtual office is set up in the PHS building area.

What's a Physical Office?

A physical office, referred to as an executive suite, is an actual office that's rented out by PHS in a different building area. Renting a physical office gives you many of the same advantages of having your own office space, without the fees associated with renting traditional office space. In addition to the office space, you'll get access to office furniture, equipment, and common facilities. If you'd like a physical office space where you can meet clients, access to conference rooms with state-of-the-art technology, and a flexible lease with no long-term contract, renting an executive suite may be the right choice for you and your international company.

The Benefits of both

While both forms of office environments have their own unique benefits, the common benefit of both are:

1. Fully comply with the substance and transparency action introduced by OECD and BEPS

2. Fully comply with Article 5 of the OECD Model Treaty; and

3. Fully comply with Cyprus Income Tax Law of 2022 No. 118(I) as amended

4. Reduce overheads since you are leasing the office executive suite or virtual office services

5. You do not need to invest in property

6. You do not need to pay a deposit for renting an office and sign a rental agreement

7. You can cancel the lease at any time provided that 30 days’ notice is given

8. You have most of office facilities available other than your own computer

9. You just sign a Management Contract between PHS and your company

10. You have your “own office” where tax authorities, at any jurisdiction, can argue about the lack of economic substance.


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