Corporation Tax
Cyprus tax resident companies are taxed at 12,5% from 1 January 2013 (previously at 10%) on their profits from all sources both in Cyprus and abroad.
A company is tax resident in Cyprus if it is managed and controlled from Cyprus. The criteria of management and control are fulfilled if the company is owned by Cyprus tax residents, the majority of the Board are Cyprus tax residents and the company has an Office in Cyprus
Income exempt from corporation tax:
-Profits from the disposal of securities
-Dividend income
-Interest (not from ordinary activities) Left Navigatio
Special Defense Contribution
Special contribution for defense is imposed on dividend, rent and interest income earned by Cyprus tax residents.
- Dividend income received from non-Cyprus resident Companies are taxed under special defense contribution at the rate of 20% for the years 2012 and 2013 and 17% for the year 2014 onwards , if more than 50% of the activities of the company paying the dividend result directly or indirectly from investment income and the foreign tax is significantly lower clarified by the tax authorities to mean below 5% than the tax burden in Cyprus.
- Rental income is subject to Special Defense Contribution at the effective rate of 2, 25%.
- Other interest income from passive activities is from 29 April 2013 subject to 30% special defense contribution. Non-tax residents are exempt from special contribution for defense.
Losses Carried Forward
Tax losses of one year which are not set off against other income may be carried forward and set off against future profits up to five years. Alternatively, the current year losses of a company can be set off against the profits of another company provided the companies are tax resident in Cyprus and are part of a group. A group is defined as:
- One company holding at least 75% of the shares of another company
- At least 75% of the voting shares of both companies are held by another company
Reorganisations
Assets and liabilities may be transferred without tax consequences within a reorganization structure and tax losses can then be carried forward by the receiving company. Reorganisations include mergers; demerger; transfer of assets and partial divisions.
Deemed Dividend Distribution
Where a Cyprus resident company does not distribute dividends within two years from the end of the tax year in which the profits were generated, then:
- 70% of the adjusted accounting profits are deemed to have been distributed
- 20% special defense contribution is imposed on the deemed dividend distribution applicable to Cyprus resident shareholders
- Deemed distribution is reduced with payments of actual dividends which have already been paid during the relevant year or paid during the two following years from the profits of the relevant year
In case the Cyprus Company is ultimately wholly owned by non-resident individuals, defense contribution provisions will not apply.
Capital Gains Tax
Gains from the disposal of immovable property situated in Cyprus including gains from the disposal of shares in companies which hold such immovable property in Cyprus will incur a capital gains tax at the rate of 20%.
Stamp Duty
On certain types of documents, there may be stamp duty payable at the rate of 0.15% for the first € 170.860 and 0.2% thereafter, subject to a cap of €17.086 up to 28 February 2013 and up to €20.000.
International Trusts
Cyprus International Trusts are not subject to tax in Cyprus. This provision means:
- All income of a Cyprus International Trust, whether trading or otherwise, is not taxable
- Dividend, interest and other income received by a Cyprus International Trust from a Cyprus company is not taxable nor subject to withholding tax
- Gains on the disposal of assets held by a Cyprus International Trust are not subject to capital gains tax
Shipping Companies
Where a Cyprus shipping company owns ships under the Cyprus flag and operates in international waters, no income tax will be payable on profits earned or dividends paid.
Double Taxation Treaties
Cyprus has signed Double Taxation Treaties with 43 countries allowing for the avoidance of the payment of double taxation. When tax is paid in the treaty partner’s country, this is allowed as a credit against the tax payable in Cyprus for the same income.
| Double Tax TreatyCountries
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| Armenia | Germany | Moldova | Slovakia Republic |
| Austria | Greece | Montenegro | Slovenia |
| Belarus | Hungary | Norway | South Africa |
| Belgium | India | Poland | Sweden |
| Bulgaria | Ireland, Republic of | Qatar | Syria |
| Canada | Italy | Romania | Tadzhikistan |
| China, P.R | Kuwait | Russia | Thailand |
| Czech Republic | Kyrgyzstan | San Marino | Ukraine |
| Denmark | Lebanon | Serbia | United Kingdom |
| Egypt | Malta | Seychelles | United States |
| France | Mauritius | Singapore | |
Under ratification: United Arab Emirates, Estonia, Finland.
