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 15%

Cyprus differs from most other offshore jurisdictions, in that it offers a big number of double tax treaties (44 in total), for the avoidance of double taxation. In general most of the conventions provide reduced rates of withholding taxes on dividends, interest and royalties paid out of the contracting state, or the avoidance of double taxation in the case where a resident in one of the contracting states derives income from the other contracting state. This is one of the key areas which makes Cyprus as an International and Offshore Business Centre unique and respectable. Cyprus has concluded an impressive number of Double Tax Treaties, something which tax heavens lack in almost all cases. The following treaties are currently in force: Armenia India Serbia Austria Ireland Seychelles Belarus Italy Singapore Belgium Katar Slovakia Bulgaria Kirzikstan Slovenia Canada Kuwait South Africa China Lebanon Sweden Czech Republic Malta Syria Denmark Mauritius Tajikistan Egypt Moldova Thailand France Montenegro Ukraine Romania Norway United Kingdom Germany Poland USA Greece Russia Uzbekistan Hungary San Marino The following table summarizes the withholding tax rates applicable for dividends, interest and royalties paid from the countries shown to residents of Cyprus (for numbers in parenthesis (n) refer to the notes below): Country Paid from countries Shown to residents of Cyprus Dividends Interest Royalties Armenia 0% 0% 0% Austria 10% 0% 0% Belarus 5% (26) 5% 5% Belgium 10% (25) 10% (4) 0% Bulgaria 5% (19) 7% (1) 10% Canada 15% 15% (1) 10% (2) China 10% 10% 10% Czech Republic 0% (20) 0% 10% Denmark (30) 10% (5) 10% (6) 0% Egypt 15% 15% 10% France 10% (7) 10% (6,10) 0% (8) Romania 10% 10% (4) 5% Germany 10% (5) 10% (4,10) 0% (8) Greece 25% (31) 10% 0% (11) Hungary 5% (12) 10% (4) 0% India 10% (7) 10% (4) 15% (9) Ireland 0% 0% 0% (11) Italy 15% 10% 0% Katar 0% 0% 5% Kirzikstan 0% 0% 0% Kuwait 10% 10% (4) 5% (3) Lebanon 5% 5% (4) 0% Malta 0% 10% (4,10) 10% (32) Mauritius 0% 0% 0% Moldova 5% (33) 5% 5% Montenegro 10% 10% 10% Norway 5% (13) 0% 0% Poland 10% 10% (4) 5% Russia 5% (18) 0% 0% San Marino 0% 0% 0% Serbia 10% 10% 10% Seychelles 0% 0% 5% Singapore 0% 10 (27,4) 10% Slovakia 10% (4) 10% 5% (3) Slovenia (28) 10% 10% 10% South Africa 0% 0% 0% Sweden 5% (12) 10% (4,10) 0% Syria 0% (20) 10% (1) 15% (21) Tajizikstan 0% 0% 0% Thailand 10% 15% (22) 5% (23) Ukraine 0% 0% 0% United Kingdom 0% (14) 10% 0% (8) USA 15% (15) 10% (34) 0% Uzbekistan 0% 0% 0% Notes to the table above: Nil if paid to the Government of the other State or for export guarantee Nil on literary, dramatic, musical or artistic work Nil for literary, artistic or scientific work, film and TV royalties Nil if paid to the Government of the other State 15% if received by a company holding directly less than 25% of the capital Nil if paid to the Government of the other State, or in respect of bank loans, or in connection with the sale on credit of any industrial commercial or scientific equipment or any merchandise 15% if received by a company holding directly less than10% of the capital 5% on film and TV royalties 10% applies to technical service fees. The 10% domestic rate will apply in all other cases as it is lower. As a result of changes in local legislation, there is no withholding tax on payments of dividends and interest to foreigners thus the rates provided in the treaty would not apply in practice 5% on film royalties 15% if received by a company holding directly less than 25% of the capital 0% if received by a company holding directly less than 50% of the voting power Under the treaty, the rate is 15%, but the domestic rate is 0% 5% if received by a company controlling 10% or more of the voting power. Nil if paid to the Government of the other State, banks or financial institutions 10% on literary artistic or scientific work, film and TV royalties 10% if received by a company that has directly invested in the capital of the paying company less than the equivalent of 100.000 US dollars. In the new treaty the amount will be 100.000 Euro. 5% if received by a company holding directly of least 25% of the share capital. Otherwise 10%. 15% if received by a company holding directly less than 25% of the voting rights. 10% on literary, artistic or scientific work including cinematograph films and films of tapes for television or radio broadcasting. 10% if paid to financial institution (including an insurance company) or if paid in connection with the sale on credit of any industrial, commercial or scientific equipment, or if paid in connection with the sale on credit of any merchandise by one enterprise to another enterprise. The 5% rate applies to copyright royalties paid in respect of literary, dramatic, musical, artistic or scientific work, including software, and film and broadcasting royalties. The 10% rate applies to royalties paid in respect of industrial, commercial and scientific equipment. The rate is 15% for patent and trademark royalties. 10% for industrial, commercial or scientific equipment. 15% if received by a company holding directly at least 25% of the share capital. 5% if received by a company that invested in share capital not less than € 200.000. 10% if paid to a person holding at least 25% of the capital. In all other cases 15%. 7% if received by a bank or similar financial institution. A new double taxation agreement has been agreed and will have effect when it has been formally ratified by both counties. The new rates will be 5% withholding tax on dividends, interest and royalties. 0% if received by a company holding directly less than 10% of the capital. 5% in all other cases. New treaty has been signed, but is not yet in effect. For 2011, the dividend withholding tax rate is 21%. The rate increases to 25% as from January 2012. As a result of changes in local legislation, there is no withholding tax on payments of royalties to foreigners, thus the rates provided by the treaty would not apply in practice. This rate applies if received by a company controlling more than 25% of the capital. In all other cases 10% rate applies. Interest is exempt if beneficially derived by a resident of a Contracting State with respect to debt obligations guaranteed or insured by that Contracting State (instrumentality), a bank or other financial institution, or a resident with respect to debt obligations arising in connection with the sale of property or the performance of services. Otherwise the rate is 10%. Comparison Chart of Different Jurisdictions <Back

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 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.

Cyprus Offshore, Author at Cyprus Offshore Companies formation

Q: Taxation of Dividends

Dividends are exempt from corporation tax Dividends received by a company are not subject to Special Defence Contribution (SDC) unless: The non-resident company paying the dividend engages directly of indirectly by more than 50% in activities that lead to investment income and the overseas tax burden on its income is significantly lower than the Cyprus tax burden (less than 5%) or The dividends paid by a resident company to another resident company are exempt from SDC.

Q: Tax losses carried forward indefinitely

The tax loss incurred during the year is carried forward and set off against future profits for a period of five years. In addition the loss can be set off against the profit of another group company provided both c ompanies are tax resident of Cyprus . Tax losses from a permanent establishment abroad can be set off with profits of the Cyprus Companies . However, Subsequent profits of the permanent establishment abroad are taxable up to the amount of losses allowed.

Q: Tax legislation approved by the EU

Cyprus is not a tax heaven. It is a highly respectful jurisdiction and its status was considerably improved after its accession to the EU. As a result registration of new International Business Companies (offshore) were significantly increased since 2004 and inwards.

Q: No withholding taxes on payments of dividends, interest and royalties outside Cyprus

This legislation reduces Cyprus taxes on payments outside Cyprus to 0% which makes Cyprus a very popular jurisdiction for holding, financing and royalty companies.

Q: Corporation tax

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 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.

Q: Capital gains tax

Capital gains is taxed at 20% on gains but gain on disposal of securities is completely exempt. Gains on disposal of property situated outside Cyprus is also exempt from any taxation.

Q: Capital gains on disposal of securities

All gains from trading in securities are tax exempt. This exemption makes the Cyprus holding companies very attractive and popular. The term “Securities” is defined as shares, bonds, debentures, founders’ shares and other securities or companies or other legal persons, incorporated in Cyprus or abroad and options thereon. A circular has been issued by the Tax Authorities in 2008 further clarifying what is included in the term Securities. According to the circular the term includes, among others, options on Securities, short positions on Securities, futures/forwards on Securities, swaps on Securities, depositary receipts on Securities (ADRS, GDRS), rights of claim on bonds and debentures (rights on interest of these instruments are not included), index participations only if they result on Securities, repurchase agreements or Reports on Securities, units in open-and or close-end collective investment schemes). The circular also clarifies specific types of participation in foreign entities which are considered as Securities. In cases where it is not certain whether a specific financial instrument falls under any of the categories included to the circular a request for a ruling may be submitted to the Commissioner of Income Tax.

Q: Access to EU parent subsidiary directive

The directive intends to estimate the double taxation of dividends received by a parent company located in one member state from its subsidiary located in another. The Cyprus legislation is more generous that the EU directive and dividends are usually exempt from taxation. Please see taxation of Dividends .

Taxation of Interest

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 [...]

Cyprus Offshore2017-12-27T15:52:44+00:00February 2nd, 2012|Tax Advantages|

Taxation of Dividends

Dividends are exempt from corporation tax Dividends received by a company are not subject to Special Defence Contribution (SDC) unless: The non-resident company paying the dividend engages directly of indirectly by more [...]

Cyprus Offshore2017-12-27T15:53:18+00:00February 2nd, 2012|Tax Advantages|

Tax losses carried forward indefinitely

The tax loss incurred during the year is carried forward and set off against future profits for a period of five years. In addition the loss can be set off against the [...]

Cyprus Offshore2017-12-27T15:53:53+00:00February 2nd, 2012|Tax Advantages|

Tax legislation approved by the EU

Cyprus is not a tax heaven. It is a highly respectful jurisdiction and its status was considerably improved after its accession to the EU. As a result registration of new International Business [...]

Cyprus Offshore2017-12-27T15:54:24+00:00February 2nd, 2012|Tax Advantages|

No withholding taxes on payments of dividends, interest and royalties outside Cyprus

This legislation reduces Cyprus taxes on payments outside Cyprus to 0% which makes Cyprus a very popular jurisdiction for holding, financing and royalty companies.

Cyprus Offshore2017-12-27T15:54:50+00:00February 2nd, 2012|Tax Advantages|

Double Tax Treaties

Cyprus differs from most other offshore jurisdictions, in that it offers a big number of double tax treaties (44 in total), for the avoidance of double taxation. In general most of the [...]

Cyprus Offshore2017-12-27T15:55:38+00:00February 2nd, 2012|Tax Advantages|

Corporation tax
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Corporation tax

Tax Advantages

Corporation tax

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 [...]

Cyprus Offshore2018-05-31T10:58:51+00:00February 2nd, 2012|Tax Advantages|

Capital gains tax

Capital gains is taxed at 20% on gains but gain on disposal of securities is completely exempt. Gains on disposal of property situated outside Cyprus is also exempt from any taxation.

Cyprus Offshore2017-12-27T15:56:43+00:00February 2nd, 2012|Tax Advantages|

Capital gains on disposal of securities

All gains from trading in securities are tax exempt. This exemption makes the Cyprus holding companies very attractive and popular. The term “Securities” is defined as shares, bonds, debentures, founders’ shares and [...]

Cyprus Offshore2017-12-27T15:57:11+00:00February 2nd, 2012|Tax Advantages|

Access to EU parent subsidiary directive

The directive intends to estimate the double taxation of dividends received by a parent company located in one member state from its subsidiary located in another. The Cyprus legislation is more generous [...]

Cyprus Offshore2017-12-27T15:57:45+00:00February 2nd, 2012|Tax Advantages|

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Corporation tax