Cyprus Taxation System

We outline below the major advantages of using Cyprus as an International Business Centre.

Corporate tax rate

A uniform corporate tax rate of 10% for all companies. This is the lowest corporate tax rate in Europe.

A holding company jurisdiction

Any dividend income is exempt from tax irrespective of its source. This exemption does not apply if the non resident company paying the dividend carries on more than 50% investment activities which give rise to investment income and the overseas tax burden on its income is significantly lower than the Cyprus tax burden (less than 5%)

Trading in securities

Any profit from the disposal of securities, irrespective of whether this profit forms part of a company’s trading activity or is of a capital nature, is exempt from Cyprus tax.

Permanent establishment abroad

Any profits from a permanent establishment maintained abroad are exempt from taxation in Cyprus. This, in conjunction with the use of Cyprus’ extensive double taxation treaty, can result in such profits escaping taxation altogether.

Non- resident companies

Companies managed and controlled outside Cyprus are considered to be non-resident and will be taxable on their Cyprus source income only. As a result a company deriving income from sources outside Cyprus will escape taxation in Cyprus altogether.

No withholding taxes

Dividends paid to non-resident shareholders are not subject to any withholding tax in Cyprus, irrespective of the existence of a double tax treaty with their country of residence. Also, no withholding tax applies to interest derived from Cyprus as well as on royalties receiving from sources outside Cyprus.

Exemption of capital gains

No capital gains tax is payable, except on the disposal of immovable property which is situated in Cyprus, or of shares in a company which owns immovable property situated in Cyprus. Therefore, Cyprus companies can be used to hold real estate outside Cyprus with no capital gains tax implications in Cyprus on their disposal.

Double taxation treaties

What distinguishes Cyprus from most other international business centres is its extensive network of double taxation treaties (currently with 40 countries). Generally, most treaties provide for reduced rates of withholding tax on dividends, interest and royalties paid out of the treaty country, or the avoidance of double taxation in the case where a resident in one of the treaty countries derives income from the other treaty country.

Non-residents working in Cyprus

Non- residents physically present in Cyprus for less than 183 days are taxable in Cyprus only on income derived from sources within an employment exercised in the Republic of Cyprus.

Personal tax rates

The personal tax rates are progressive and reach a maximum of 30% on income in excess of Euro 36300.

Relief for overseas employment

A Cypriot resident working abroad for an overseas employer is exempt from taxation on the salary attributed to overseas duties if these duties result in spending more than 90 days in any tax year abroad.

Relief for non-residents taking up employment in Cyprus

A non-resident taking up employment and becoming resident in Cyprus will be given a 20%allowance on employment income for the three years following the year of becoming resident in Cyprus. The allowance cannot exceed Euro 8543 each tax year.