Interest earned from financing activities is taxed as ordinary business income at a rate of 12.5% (after deducting all business expenses). A very low profit margin of as little as 0,35% is acceptable for tax purposes which it can decreased up to 0,125%. This legislation makes Cyprus financing companies very attractive. Also group companies can benefit from this legislation since the low margins are acceptable for financing group companies.
If interest does not qualify as business income then it is subject to SDC at a rate of 30%.