- Cyprus tax resident companies, that is, companies whose management and control are exercised in Cyprus, irrespective of their place of registration, are subject to tax on their worldwide income whether remitted to Cyprus or not, except for profit from a permanent establishment overseas. See EXEMPT INCOME, note 3, below.
- Non-Cyprus tax resident Companies are subject to tax only on their Cyprus-source income.
- See INTERNATIONAL BUSINESS COMPANIES (IBC), below.
Note that all amounts till December 31, 2007 have to be reported to the Cyprus Authorities in Cyprus pounds but are payable in Euro from January 1, 2008 at the rate of Euro1=0.585274CYP.
CORPORATE TAX RATE
Limited liability companies:
- 12,5% of chargeable income from January 1, 2013
- 10% of chargeable income till December 31, 2012.
- For the years 2003 and 2004, the chargeable income in excess of CY£1,000,000 is subject to an additional tax of 5%.
Companies that are:
- Public corporate bodies: - 25% of chargeable income
- IBCs and international branches: have the option to continue to be taxed at the lower rate of 4,25% for the years 2003, 2004 and 2005 (under transitional provisions, subject to certain restrictions), provided that during the year ended 31 December 2001 they had income or are expected to have income which has not yet arisen.
Type of income
Profits on disposal of shares
Profits from operations through permanent establishment abroad
1. The exemption also applies to disposal of shares in the ordinary course of business
2. Excludes interest arising from or closely related to the ordinary carrying on of a business.
3. The exemption does not apply if :
- The permanent establishment’s income is generated by more than 50% from investment income.
- The foreign taxes on the profits from the permanent establishment are significantly less than the tax burden in Cyprus.
- If tax deduction were given in the past for loses from the permanent establishment then profits from such source of an equivalent amount will be added to the Company’s taxable income.
Taxable losses are carried forward and are deductible from taxable income of the next five years from which such loses were incurred. Tax losses from the tax year 2007 can be transferred and used till 2012. Tax loss of the year 2006 can only be used till 2011.
Losses arising from a permanent establishment maintained outside the Republic can be offset against profits arising in the Republic. However, when a profit arises from such a permanent establishment, an amount equal to the losses that have been utilised in the past against profits arising in the Republic will have to be taxed in the year in which such a profit is realised. The losses of a permanent establishment abroad can be set off against the profits of the company in Cyprus However, future profits of the permanent establishment are liable to tax, to the extent of the losses allowed.
- Transfers of assets and liabilities between companies in the course of a reorganization (including provisions and reserves) are affected without any tax consequences.
- The term reorganization includes exchange of shares, transfer of commercial activities, mergers and de-mergers.
INTERNATIONAL BUSINESS COMPANIES (IBC)
From 1/1/2013 all IBC are subject to the normal Corporate tax rate of 12,5%.
FROM 2006 to 2012
From 1/1/2016 all IBC are subject to the normal Corporate tax rate of 10%.
For the years 2002 to 2005
Until 31 December 2002, IBCs, irrespective of where their management and control was exercised, and branches of overseas companies managed and controlled in Cyprus were taxed at the rate of 4,25%
As of 1 January 2003 (unless they qualify and opt to be taxed under the transitional provisions), these companies will be subject to tax at the rate of 10%, as follows :
- if Cyprus tax resident, on their worldwide income
- if non-Cyprus tax resident, only on their Cyprus source income
IBCs and international branches have the option to continue to be taxed at the lower rate of 4,25% for the years 2003, 2004 and 2005 (under transitional provisions, subject to certain restrictions), provided that during the year ended 31 December 2001 they had income or are expected to have income which has not yet arisen.
The profits or dividends from a company incorporated in Cyprus which owns ships registered under the Cyprus flag that are engaged in international traffic are exempt from taxation The exemption applies also to the emoluments of the crews of Cyprus flag ships Ship management companies, have the option to be taxed either at 4,25% or at 25% of the rates used to calculate the tonnage tax of the foreign ships under their management.
Insurance companies are taxed at the same rate of tax as all other companies However, where the corporation tax payable on the chargeable income of the life insurance business is less than 1,5% of the gross premiums, the insurance company has to pay the difference.
Donations to approved charitable institutions
Expenditure incurred for the purpose of maintaining a preserved building
Business entertainment expenses
Up to 1 % of gross income, with a maximum allowable amount of€17.086
Interest on loans to acquire assets used in the business
Amounts paid to an approved fund for the purpose of the education and maintenance costs of a student
All expenses incurred wholly and exclusively for the production of income
- In case of a loss, to the extent of the donation, the loss is not carried forward.
- Up to €700, €1.100 or €1.200 per sq. m. (depending on the size of the building).
- Interest paid for acquiring a saloon car is not allowable for the first seven years.
- Excludes the running expenses of private motor vehicles.
Annual wear and tear allowances, at the following rates, are granted on the acquisition cost of assets used in a business
Industrial, agricultural and hotel buildings
Plant & machinery
Furniture, fixtures & fittings
Computer hardware and operating software
Motor vehicles (excluding saloon cars)
Excavators, tractors, bulldozers, self propelled loaders and drums for petrol companies
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