Cyprus Tax Legislation
Cyprus has very favourable tax system with lots of intensives to attract foreign investments. Cyprus has the lowest Corporation tax rate in Europe of 12,5% and combined with the double tax treaties with many countries and income that is exempt from taxation in many cases this can be reduced up to 0%. Those incentives render Cyprus one of the most attractive jurisdictions for International Business Companies (offshore).
The main advantages of Cyprus tax legislation are:
- Favourable tax rate of 12.5%
- No tax on disposal of securities
- No capital gains tax except from sale of immovable property located in Cyprus
- Notional Interest Deduction (NID) on new equity
- Exemption from defence tax for non Domiciled
- Intellectual Property Box reducing effective taxation to less than 2,5%
- Tax legislation approved by the European Union
- Profits from permanent establishment abroad are fully exempt subject to conditions
- Dividend income is tax exempt subject to conditions
- Low profit margin for financing companies is allowed
- Extensive list of Double Tax Treaties reducing withholding taxes up to 0% on dividends, interest and royalties outside Cyprus
- No withholding taxes on payments of dividends, interest and royalties outside Cyprus
- Tax losses are carried forward for five years
- Access to EU parent subsidiary directive
- Access to EU interest and royalties directive
- Advance ruling practice exists
- Low personal tax rates for individuals with tax-free amount, significant reduction for first time employment of non residents in Cyprus and for overseas employment
- No tax on income earned outside Cyprus for non residents
A company is considered as a Tax Resident in Cyprus, if the management and control of the board meetings, take place in Cyprus.
If the majority of the Directors is tax resident of Cyprus, the board meetings and the major business decisions are made in Cyprus then the Company should be tax resident in Cyprus.
If it is Tax Resident in Cyprus, it pays Cyprus Tax at the rate of 12,5% and it also takes advantage of the Double tax treaties of Cyprus and the tax exemptions of the Cyprus tax legislation. Corporation tax is payable on the worldwide income of a Cyprus tax resident company.
Cyprus has one of the lowest tax rate in EU. Corporation tax is 12.5% on business profits which in many cases can be reduced up to 0% due to expectations of various types of income. For example the gain from disposal of securities is tax exempt. The same applies for dividend income in most of the cases.