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Corporation tax

Cyprus' status as a full EU member, combined with a tax reform in its legislation has further enhanced the island's attractiveness to companies.
Cyprus companies benefit from a favourable tax regime and full European status. Cyprus based companies enjoy one of the lowest corporation tax at 12,5 % and numerous other tax advantages, which is one of the key reasons that Cyprus has become the favoured location for investments to and from other European Union countries, Russia, CIS and many other locations.
Cyprus also offers numerous additional advantages to businesses, such as its strategic location between three continents, excellent infrastructure and telecommunication network, efficient legal, banking and accounting services, highly skilled human capital and of course its stable economy.

 

BASIS OF CYPRUS TAXATION

All companies that are tax residents of Cyprus are taxed on their income accrued or derived from all sources in Cyprus and abroad. A non-Cyprus tax resident company is taxed on income accrued or derived from a business activity that is carried out through a permanent establishment in Cyprus and on certain income arising from sources in Cyprus. A company that is managed and controlled in Cyprus is considered resident.

 

The corporation tax rate for all companies is 12.5%

Cyprus companies enjoy the following major fiscal advantages:

  • International business branches which are managed and controlled from abroad and International Business Partnerships are fully exempt from Corporation or Income Tax
  • No withholding tax on dividend distribution and payments of interest and royalties
  • Dividend income is exempt from corporation tax provided the direct holding is at least 1% of the share capital of the overseas company. This exemption will not apply if the company paying the dividend engages in more than 50% of its activities introducing investment income and the foreign tax burden on the income of the company paying the dividends is substantially lower than that in Cyprus
  • Employees of foreign entities can get a work permit visa in Cyprus, provided they work in executive positions or in positions where similar skills cannot be found amongst the Cyprus labour force
  • Significant tax benefits enjoyed by personnel in executive positions or in positions where similar skills cannot be found amongst the Cyprus labour force relocating to Cyprus for employment by a Cyprus company
  • Receivable interest not arising from the ordinary or closely related to the ordinary business activities of the company is fully exempt from taxation (subject to Special Contribution for Defence)
  • Profits from the sale of shares and other financial instruments that carry a title such as bonds and debentures are exempt from taxation
  • 80% of the net income from royalties (income less direct costs i.e. amortization, royalties payable) from Intellectual Property (IP) rights is fully exempt from taxation and the remaining 20% is taxed at 12,5%
  • 80% of the profits from the sale of patents and trademarks are fully exempt from taxation and the remaining 20% is taxed at 12,5%
  • No tax on profits from the operation or management of a vessel registered under the flag of the Republic of Cyprus
  • Ability to choose between tonnage tax and 4,25% Corporation Tax if the vessel is not registered under the flag of the Republic of Cyprus
  • More than 52 double tax treaties
  • No capital gains tax except on the sale of immovable estate situated in Cyprus
  • Tax losses can be carried forward for up to 5 years
  • Group relief for utilization of tax losses
  • Capital allowances and expenses for the purpose of business are allowable for tax purposes
  • No stamp duties on normal trading activities
  • Exemption from estate duty on shares in foreign companies inherited in Cyprus
  • No exchange control restrictions (bank accounts in any currency, anywhere in the world)
  • Confidentiality and anonymity of the beneficial owners is assured


 

 

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