Companies which are considered to be tax resident in Cyprus are taxed at 12.5% on worldwide income.
A company is considered to be tax resident in Cyprus if the management and control of the company is exercised in or from Cyprus.
Income exempt from Taxation:
- Profits from trading in securities
- Interest not arising from the ordinary activities of the company
Tax losses which cannot be offset in one year can be carried forward and set-off against profits for up to five years.
Losses can also be offset against profits made by another company of the same Group of companies if both companies are tax resident in Cyprus.
Capital Gains Tax
Profits from the sale of immovable property located in Cyprus (including profits from the sale of shares of companies who hold immovable property located in Cyprus) are subject to 20% Capital Gains Tax.
Stamp Duty of 0.15% is imposed in certain instances on the first €170,886 and 0.2% thereafter, capped at €17,086.
Special Defence Contribution
Cyprus tax residents have to pay special defence contribution on income earned in Cyprus and dividends.
Non-tax residents are exempt from this tax.
Value Added Tax (VAT)
VAT of 19% is imposed on the provision of goods and services in Cyprus, on goods and services from the European Union and goods imported from Third Countries.
A Cyprus Shipping company who owns ships under the Cyprus or foreign flag and operate in international waters will not be subject to income tax.
Cyprus Holding Companies
- Not subject to Inheritance or Estate Tax.
- Not subject to Wealth Tax.
- Dividends are tax exempt.
- Profit from the sale of qualifying titles is tax exempt.
- Not subject to capital gains tax on the disposal of immovable property located outside Cyprus.
- Passive interest is not subject to taxation.
- Profits of a permanent establishment abroad not subject to tax in Cyprus if the permanent establishment does not participate by more than 50% in activities which lead to passive income or the foreign tax imposed on the permanent establishment must not be lower than the tax imposed in Cyprus.
- Income arising from trading in securities is exempt from corporate tax.
- No thin capitalization rules imposed.
- No explicit transfer pricing legislation in Cyprus.
A Cyprus Tax Resident can benefit from numerous tax incentives some of which include:
- Cyprus tax residents but non-domiciled individuals are exempt from taxation, including special defence contribution imposed on dividends, interests and rental income.
- Personal tax rates are progressive from 20% to 35%.
- Tax free allowance of €19,500.
- Profits from the sale of securities are tax exempt.
- No Wealth, Gift, Inheritance Tax or Estate Duty imposed.
- No Capital Gains Tax on the sale of immovable property located outside Cyprus.
- No Capital Gains Tax imposed on the sale of immovable property located in Cyprus if the asset was purchased between 16/07/15 and 31/12/16.
- Pension received from other countries taxed at 5% with a tax free allowance of €3,420.