Cyprus Tax


Dividends

The major advantage of a Cyprus holding company is that there is no withholding tax on dividends received from subsidiaries overseas. This does not apply if:
  1. The subsidiary paying the dividend engages in more than 50% of its activities in producing investment income
    And
  2. The foreign tax burden on the subsidiary is substantially lower than that in Cyprus.

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

No withholding tax applies on dividends received from EU subsidiaries.


Corporation Tax

Companies are considered tax residents of Cyprus if they are managed and controlled from Cyprus. Profits from activities of a permanent establishment outside Cyprus are exempt unless:
  1. The permanent establishment engages in more than 50% of its activities in producing investment income
    And
  2. The foreign tax burden is substantially lower than that in Cyprus.

Corporation tax rate is currently 10% the lowest in the EU.

Tax losses can be carried forward indefinitely and also Group loss relief applies for Cyprus companies.

Cyprus has signed treaties for the avoidance of double taxation with over 40 countries

There is no corporation tax on income from the sale of shares or securities.


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:



   
  %
0-19,500   0
19,501-28,000   20
28,001-36,300   25
36,301-60,000   30
Over 60,000   35

(For tax rates of previous years click here).

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 15% respectively).


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.


Defence Tax

Cyprus tax residents are liable to defence tax as follows:

  Individuals Companies
    %   %
Interest income   15   15
Dividends from
Cyprus resident
company
  17   -
Dividends from
overseas company
  17   -
75% of Rental
income
  3   3