Cyprus Tax Facts

Cyprus Tax Facts

  • Cyprus has developed a wide network of Double Tax Treaty Agreements with no less than 57 countries to ensure that the same income is not taxed in more than one country. Cyprus is in the stage of negotiating the conclusion or awaiting ratification of Double Tax Treaty Agreements with several more countries.
  • The corporate tax rate of 12.5% ​​is one of the lowest in the European Union. Thanks to investor-friendly tax system as well as special tax deductions and rebates, effective tax rate may be much lower than this already low tax rate.
  • There are no Controlled Foreign Corporation Rules.
  • There are no Thin Capitalisation Rules.
  • Attractive Permanent Establishment (PE) rules and generous PE provisions available in DTT Network.
  • All Capital Gains from sale of securities are 100% exempt.
  • There is no withholding tax on interest, dividends as well as on royalties paid abroad if intellectual property is not used in Cyprus.
  • 80% exemption of the net royalty income from owned intangible assets as well as 80% of the net profit earned from the disposal of intangible assets, if certain criteria are met.
  • The Notional Interest Deduction granted annually on new capital issued from 1 January 2015. This deduction can apply up to 80% of the taxable income of the Cyprus Company.
  • Invoices from offshore companies are acceptable in Cyprus Company’s books and payments to offshore companies bear no withholding tax.
  • There is Group Relief availability (75% holding).
  • There are Tax Free Reorganisations (cross border permitted).
  • Tax Free Corporate Redomiciliation is permitted.
  • There is a Possibility for Establishing an SE (European Company).
  • All EU Directives are applicable.
  • Possibility to obtain Advance Tax Rulings.
  • Tax credit is provided for the amount of foreign tax paid, regardless of the Double Tax Treaty Agreement existence.
  • The Capital Duty on the issue of Share Capital is 0.6% (this can easily be mitigated).
  • Capital Gains from the sale of immovable property situated outside Cyprus are tax-exempt.
  • No Capital Gains tax or net worth taxes except with respect to Real Estate situated in Cyprus.
  • Tax credits are available to employees who were not Cyprus tax residents before commencement of the employment in Cyprus. This helps to reduce labor costs for companies.
  • There are relatively low contributions to the Pension Fund and other contributions for the social needs.
  • A simplified system for obtaining a working visa for middle and senior level employees.
  • The concept of domicile was introduced, exempting individuals who become tax residents of Cyprus from taxation of passive income (dividends, interest and partially rental income) for many years.
  • Shipping Companies are fully exempt from all direct taxes and are subject to taxation under the Tonnage Tax regime.
  • There are added commercial value and monetary benefits due to the ability to register for EU VAT in Cyprus.
  • The Tax Authorities and the Government of Cyprus are always being keen to help foreign investors.

Cyprus is a country which helps to avoid high taxation, but not a country for tax evasion purposes. Cyprus companies are European companies and enjoy all the rights of the EU. Cyprus is not an "offshore zone" and therefore is not included in any "black lists". In fact, Cyprus combines the benefits of European country and the low level of taxation.

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