Corporation Tax

Corporation tax rate is currently 12,5% and it is the lowest in EU

In order for a company to considered as a tax resident in Cyprus, then the company must be managed and controlled from Cyprus.

Dividends

Individuals

There is no withholding tax on dividends paid by a Cyprus company to its non residents shareholders (17% defence tax applies to Cyprus residents).

Group Companies

There is no withholding tax on Dividends when a company pays dividends to its overseas subsidiaries. This does not apply if:

  – More than 50% of the activities of the subsidiary receiving the dividend are from investments;

AND

  – The foreign tax burden on the subsidiary is substantially lower than that in Cyprus.

Capital Gains Tax

CGT applies only in the case of sale of immovable property located in Cyprus.

CGT rate is currently 20%.

There is exemption from CGT for capital gains up to €17,086 (this increases to €85,430 if the property is the primary residence of the seller).

Taxable profit for CGT purposes is the difference between selling price and indexed acquisition cost (or indexed price as at 1 January 1980 if acquisition has taken place earlier).

There is no CGT on the sale of shares and securities. CGT applies only in the case where the company whose shares have been sold owns immovable property.

Personal Income Tax

An individual is considered Cyprus tax resident if he/she spend more than 183 days in the Republic of Cyprus during a tax (i.e. calendar) year.

Cyprus tax residents are taxed on their worldwide income whereas non residents only on their income earned in Cyprus.

Current income tax rates are as follows:

Expatriates are allowed a discount period of 3 years following the year they become tax residents of Cyprus, during which 20% of their income or €8,543 whichever is the smaller is exempt from income tax.

New tax residents earning income from employment in excess of €100,000 per annum are entitled to 50% deduction of their income for tax purposes for the first 5 years of employment. This incentive is given to both Cypriots and not Cypriots on the condition that prior to their employment they were not considered as Cyprus tax residents.

Dividends and interest income are exempt for income tax purposes (however Cyprus tax residents pay defence tax on these at 17% and 30% respectively).

Defence Tax

Cyprus tax residents are liable to defence tax as follows: