Corporate Tax Advice in Cyprus

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Last Updated 12/11/2024

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AT A GLANCE

Cyprus offers one of the most favourable corporate tax environments in Europe, with competitive rates and attractive exemptions. But understanding how to take advantage of all of these is another story. Let our experienced network of tax advisors help you leverage Cyprus’ tax advantages to put your business in the best position possible.

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Corporate Income Tax

Corporate income tax (CIT) is levied on companies that are tax residents of Cyprus. The tax applies to income derived from all sources in Cyprus and abroad.

Non-Cyprus tax resident companies are taxed on income that arises from business activity carried out through a Permanent Establishment (PE) in Cyprus and certain other income arising from sources in Cyprus. The standard CIT rate in Cyprus is 12.5%.

Special Defence Contribution (SDC) is imposed only on non-exempt dividend income, ‘passive’ interest income, and rental income earned by Cyprus tax resident companies and Cyprus PEs of non-Cyprus tax resident companies.

Non-tax residents of Cyprus with non-Cyprus PEs are exempt from SDC. Dividend income may be exempt from SDC, subject to participation exemption criteria.

Tonnage tax applies to ship-owning companies. Instead of CIT, ship owners, charterers, and managers pay tonnage tax on the net tonnage of the ships they own, charter, or manage.

In addition, there is no tax on dividends paid at all levels of distribution by the above persons out of profits subject to tonnage tax and there is no taxation on the sale or transfer of a ship, share in a ship, or shares in a ship-owning company and their distributions.

There are no local government taxes on income in Cyprus.

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Corporate residence in Cyprus

To determine if a company is a tax resident of Cyprus, it must be managed and controlled within the country. From 2023, a Cyprus incorporated company is automatically considered a tax resident of Cyprus, as long as it is not a tax resident of any other country.

Cyprus tax legislation includes provisions for determining if a non-Cyprus tax resident company has a taxable permanent establishment (PE) in Cyprus.

These provisions are largely in line with the relevant article of the 2014 OECD model DTT, with the addition of activities related to the exploration, extraction, or exploitation of natural resources and pipelines or other installations on the seabed.

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Types of corporate income and gains

Capital Gains:

If a company disposes of shares, bonds, debentures, founders’ shares, or other legal entities incorporated in Cyprus or abroad and options on them, then the profits are not subject to Corporate Income Tax (CIT).

Futures, forwards, swaps, and other investments related to such titles are also exempt from CIT.

However, capital gains on immovable property situated in Cyprus or non-quoted shares holding such property are taxed separately (see below).

Dividend Income:

If a Cyprus-based company receives dividends from another Cyprus-based company, then those dividends are exempt from all taxes. However, anti-avoidance provisions apply.

Dividends earned from foreign investments are also exempt from CIT in Cyprus, except for those dividends that are deductible for tax purposes for the paying company. If more than 50% of the foreign paying company’s activities result in investment income, then foreign dividends that are not deductible are also exempt from Special Defence Contribution (SDC), unless the foreign tax is significantly lower than the tax burden in Cyprus. In such cases, foreign tax credits are available to avoid double taxation.

Stock Dividends:

Cyprus corporations can distribute tax-free dividends of common stock (bonus shares) to all common stock shareholders proportionately, subject to certain conditions.

Interest Income:

Interest income is subject to SDC.

Royalty Income:

Royalty income is taxed at 12.5% under CIT, after deducting allowable expenses.

Rental Income:

Rental income is subject to SDC.

Foreign Currency Exchange (Forex)

Forex differences are not taxable or deductible for CIT purposes, except for those arising from trading in foreign currencies and related derivatives, which are subject to CIT.

Foreign Income:

Resident corporations are taxed on their worldwide income, but foreign income may be exempt from taxation in Cyprus. Foreign PE income is exempt from CIT, subject to certain anti-avoidance rules, unless the foreign PE’s activities result in more than 50% investment income or the foreign tax on income is significantly lower than the tax burden in Cyprus.

Losses of an exempt foreign PE can be offset against other profits of the Cyprus head office. In cases where foreign income is taxed in Cyprus, foreign tax credits are available to avoid double taxation.

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Capital gains for companies

Capital gains tax (CGT) is a tax that applies to gains made on property located in Cyprus. This tax only applies if the disposal is not subject to corporate income tax (CIT).

A disposal can include a sale, exchange, lease, gift, abandoning use of right, granting of right to purchase, and any sums received upon cancellation of disposals.

The rate of CGT is 20% and it is imposed on gains from the disposal of immovable property located in Cyprus or shares in companies that own Cyprus-situated immovable property.

If shares in companies indirectly owning immovable property situated in Cyprus derive at least 50% of their market value from Cyprus-situated immovable property, then CGT is also imposed on disposals of these shares. However, shares listed on any recognized stock exchange are excluded from CGT.

In the case of disposal of company shares, the gain is calculated only on the basis of the gain relating to Cyprus-situated immovable property. The value of the immovable property will be its market value at the time the shares were disposed of.

The taxable gain is generally calculated as the difference between the disposal proceeds and the original cost of the property plus any improvements, adjusted for inflation up to the date of disposal on the basis of the consumer price index in Cyprus.

If the property was acquired before 1 January 1980, the original cost is deemed to be the value of the property as at 1 January 1980 based on the general valuation conducted by the Land Registry Office under the Immovable Property Law.

Other expenses related to the acquisition and disposal of immovable property are also deducted from the gain, subject to certain conditions such as interest costs on related loans and legal expenses.

It is important to note that land, as well as land with buildings, acquired at market value (excluding exchanges, donations, and foreclosures) from unrelated parties in the period 16 July 2015 to 31 December 2016 will be exempt from CGT upon their future disposal.

Certain disposals are also totally exempt from CGT based on their nature, such as gifts from parents to children or between spouses.

Property transfer taxes

Immovable property transfer fees are charges that buyers must pay to the Department of Land and Surveys when acquiring property in Cyprus.

The fee is determined based on the market value of the property being purchased. For properties worth up to €85,000, the fee is 3%, for properties worth between €85,001 and €170,000, the fee is 5%, and for properties worth over €170,000, the fee is 8%. However, no transfer fees are payable if Value-Added Tax (VAT) applies to the purchase of the property. If VAT does not apply, then the transfer fee is reduced by 50%.

Mortgage registration fees are also applicable, and they are calculated as 1% of the current market value of the property.

As of February 22, 2021, a new levy of 0.4% is imposed on all disposals of immovable property that are within the current control of the Republic, including both trading-nature and capital-nature disposals. Starting on November 18, 2022, the levy also applies to disposals of shares of a company that directly or indirectly holds immovable property. The levy is imposed on the disposal consideration in the case of a direct disposal of immovable property and on the latest general valuation undertaken by the Department of Land and Surveys in the case of a disposal of shares of a company. The seller is responsible for paying the levy.

Debt-for-asset swaps and qualifying reorganizations are exempt from the levy. Additionally, shares listed on a recognized stock exchange are also exempt. However, during the period between February 22, 2021, and November 17, 2022, the levy only applied to disposals of immovable property itself and disposals of shares of a company that directly held immovable property to the extent that the buyer of the shares assumes control of such a company.

SPOTLIGHT ARTICLE

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The Adviser Native is a care-free soul and has made no other commitments to his fellow Tax Natives to generate content or curate a jurisdictional page. That’s cool.

However, the Adviser will be eligible to pay the full monthly membership fee.

	Become a curator TAX NATIVES: CURATOR — Curator The Curator is a fully-fledged member of the Tax Natives team. As such, they are capable of making introductions to other Tax Natives and are also able to take leads from their fellow Natives. The Curator is a fully-fledged member of the Tax Natives team. As such, they are capable of making introductions to other Tax Natives and are also able to take leads from their fellow Natives. However, the Curator has additional responsibilities. They are tasked with the responsibility of managing and updating one of the jurisdiction pages. There is only one Curator membership available for each jurisdiction. Where a Curator fulfils their commitments then they receive a 100% discount against their monthly membership fee. READ MORE	Become a creator TAX NATIVES: CREATOR — Creator The Creator is a fully-fledged member of the Tax Natives team. As such, they are capable of making introductions to other Tax Natives and are also able to take leads from their fellow Natives. However, the Creator has additional responsibilities. They commit to their other Natives that they will produce at least one piece of quality content each quarter – whether an article, video or other valuable content. There are multiple Creator memberships available for each jurisdiction. Where a Curator fulfils their commitments then they receive a 100% discount against their monthly membership fee.	Become an adviser TAX NATIVES: ADVISOR — Adviser The Adviser is a fully-fledged member of the Tax Natives team. As such, they are capable of making introductions to other Tax Natives and are also able to take leads from their fellow Natives. The Adviser Native is a care-free soul and has made no other commitments to his fellow Tax Natives to generate content or curate a jurisdictional page. That's cool. However, the Adviser will be eligible to pay the full monthly membership fee.
Initial admin fee	£250 Free	£250 Free	£250 Free
Minimum membership term	12 months	12 months	12 months
Article contentCreator and Curators must create at least one piece of original, quality-approved content each quarter.	No	YesCreator and Curators must create at least one piece of original, quality-approved content each quarter.	No
Managing and updating your jurisdiction page	Yes	No	No

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Curator

The Curator is a fully-fledged member of the Tax Natives team. As such, they are capable of making introductions to other Tax Natives and are also able to take leads from their fellow Natives.

However, the Curator has additional responsibilities. They are tasked with the responsibility of managing and updating one of the jurisdiction pages.

There is only one Curator membership available for each jurisdiction.

Where a Curator fulfils their commitments then they receive a 100% discount against their monthly membership fee.

Initial admin fee	£250 Free
Minimum membership term	12 months
Article contentCreator and Curators must create at least one piece of original, quality-approved content each quarter.	No
Managing and updating your jurisdiction page	Yes

FREE

Become a creator

TAX NATIVES: CREATOR —

Creator

The Creator is a fully-fledged member of the Tax Natives team. As such, they are capable of making introductions to other Tax Natives and are also able to take leads from their fellow Natives.

There are multiple Creator memberships available for each jurisdiction. Where a Curator fulfils their commitments then they receive a 100% discount against their monthly membership fee.

Initial admin fee	£250 Free
Minimum membership term	12 months
Content creationCreator and Curators must create at least one piece of original, quality-approved content each quarter.	YesCreator and Curators must create at least one piece of original, quality-approved content each quarter.
Managing and updating your jurisdiction page	No

£65 / month

Become an adviser

TAX NATIVES: ADVISOR —

Adviser

The Adviser is a fully-fledged member of the Tax Natives team.

As such, they are capable of making introductions to other Tax Natives and are also able to take leads from their fellow Natives.

The Adviser Native is a care-free soul and has made no other commitments to his fellow Tax Natives to generate content or curate a jurisdictional page.

That's cool.

However, the Adviser will be eligible to pay the full monthly membership fee.

Initial admin fee	£250 Free
Minimum membership term	12 months
Content creationCreator and Curators must create at least one piece of original, quality-approved content each quarter.	No
Managing and updating your jurisdiction page	No

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Corporate Tax Advice in Cyprus

Ask a free Corporate Tax Advice in Cyprus tax question

AT A GLANCE

Corporate Income Tax

Tax experts in the region

How Tax Natives works.

STEP ONE

STEP TWO

STEP THREE

Ready to strengthen your tax strategy in Cyprus?

Contact

Corporate residence in Cyprus

Types of corporate income and gains

Capital Gains:

Dividend Income:

Stock Dividends:

Interest Income:

Royalty Income:

Rental Income:

Foreign Currency Exchange (Forex)

Foreign Income:

Capital gains for companies

Property transfer taxes

Mali’s Mining Tax Dispute Drama: Detention of Staff Tax Dispute

What are the membership types available?

Curator Native

FREE

Creator Native

FREE

Adviser Native

£65 / month

Curator

Creator

Adviser

FREE

Curator

FREE

Creator

£65 / month

Adviser

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