Cyprus Corporation Tax Information

Did you know that in the Republic of Cyprus, corporation tax rates are the lowest in the European Union?

Aside from the fact that Cypriot corporate tax stands at just 10%, there are a number of good reasons why the formation of a company in the Republic makes perfect sense. For instance, according to Cypriot tax laws, dividends paid are exempt from income tax.

Main Tax in Cyprus Page
Cyprus Property Tax
Cyprus Income Tax
Cyprus Capital Gains Tax
Cyprus V.A.T.
Cyprus Corporation Tax
Tax Glossary

A quick overview of Corporation Tax in the Republic of Cyprus

Deemed Dividends
Resident Companies are deemed to have distributed to the resident shareholders 70% of their after-tax accounting profits at the end of two years from the end of the tax-year to which these profits relate, and account to the Inland Revenue Department for a 15% special contribution for defence. The aforementioned deemed distributable profits are liable to a 15% special defence withholding tax in regards ONLY to the resident shareholders, individuals or companies, and not to non-resident entities.

Resident companies: For Interest received inside or outside Cyprus, corporation tax is payable, but 50% of the interest is exempt from income tax in Cyprus.

Non-resident: Any interest received is not subject to corporation tax.

Special Defence Contribution

Resident companies are liable to a 10% special defence contribution on interest income from any source, whether from inside or outside Cyprus. This deduction is made at source if received from within Cyprus, or by assessment on the basis of returns, if received from sources abroad; foreign tax is allowed for.

Non-resident companies: are not subject to tax on interest

Note that:
a) Interest received from the ordinary carrying on of a business, including interest closely connected with the ordinary carrying on of that business is not treated as interest but as business profit.
b) Interest deemed to be payable to a company according to Cypriot Income Tax Law, under the provision in respect of loans to directors e.t.c. is subject to special defence contribution.

The Republic of Cyprus' Corporation Tax on Rents Received

Resident companies: For rents received by resident companies, either from inside or outside Cyprus, corporation tax is payable at a rate of 10%.

Non-Resident companies: Are taxed on their rents from Cypriot sources ONLY.

Special Defence Contribution

Resident companies: All gross rents, less 25%, are subject to a special defence contribution of 3%.

Non-Resident companies: Foreign corporate entities are not liable for a special defence contribution.

Taxation on Profits received from abroad

Profits from a permanent establishment abroad are completely exempt from tax; this exemption is of importance to companies which derive their business income from a permanent establishment outside the Republic of Cyprus. The exemption, however, is subject to the rule that the company's activities do not lead to more than 50% of its income deriving from investments, and the foreign tax burden is not substantially less than the burden of tax in Cyprus. Investment income is defined at the income which does not derive from running a business, employment, or pensions.

Losses: It is noteworthy that general losses may be carried forward indefinitely.

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