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Cyprus Company Features

 

Cyprus company features

A Cyprus resident company is subject to income tax on its worldwide income. Non-resident companies are subject to income tax only on profits derived in Cyprus. Resident companies are those companies whose management and control is exercised from Cyprus.

Trading profits

Cyprus Company pays taxes on its net taxable profits. These are determined by pooling its worldwide income and deducting allowable expenses, charges and capital allowances. Non-resident companies pay taxes on their Cyprus-sourced income only.

Capital gains tax

Gains in respect of the sale of immovable property situated in Cyprus (including shares of a company whose assets include such immovable property) are subject to Capital Gains Tax. Both residents and nonresidents are subject to capital gains tax if they own immovable property in Cyprus. The applicable rate on the taxable income is 20%. No tax is levied in respect of immovable property situated abroad. No tax is levied on capital gains in respect of profits on disposal of shares of companies (other the ones which own immovable property).

Sales tax / Value Added Tax (VAT)

Cyprus VAT is generally imposed on taxable supplies of goods and services at the standard rate of 19%. 

Certain supplies of goods and services are charged at the reduced rates of 5% – 9%; others are zero-rated, notably ship management services. Some supplies of goods and services are exempt from Cyprus VAT: specifically, financial services, health and welfare, insurance, and education.

The annual Cyprus VAT registration threshold is EUR 15,600.

Cyprus has adopted the provisions of the EU Directive 2008/8/EC effective from 1 January 2010. Exports of goods or provision of services to non-EU or to EU VAT registered persons are subject to 0%.

Losses

Trading losses of a Cyprus company may be carried forward for a period of up to five years. Losses from overseas activities can be set off against chargeable income for the year and can be carried forward subject to the five year limit.

Restructuring

The restructuring legislation in line with the EU Merger Directive extending to companies in non-EU countries.

Related party transactions

Transactions between related parties do not need to be adjusted for tax purposes as long as they are on ‘an arm’s length’ basis.

Capital allowances

Annual wear and tear allowances are allowed on various assets including plant and machinery; fixtures and fittings; commercial vehicles; hotels; commercial buildings; industrial buildings; computer hardware and software; and loose tools. Allowances range from 3% to 33% per annum. No capital allowances are given for saloon cars.

Depreciation

Depreciation included in the financial statements of Cyprus companies is disallowed for tax purposes, as capital allowances are given instead. For accounting purposes, depreciation rates applied are those which write-off the assets over their useful life.

CYPRUS DOUBLE TAX TREATIES

The following table is a summary of the applicable withholding tax rates for the income between countries having a double taxation treaty with Cyprus. The tax rates below are valid under certain conditions which are determined by the provisions of each agreement.

TABLE OF CYPRUS WITHHOLDING TAX RATES (CYPRUS DOUBLE TAX TREATIES TABLE)

 

Received in Cyprus

Paid from Cyprus(1)

Treaty  country                                                                

Divden

Interest

Royalt

Dividen

Interest

Royalt

Armenia

0(24)

5

5

0(24)

5

5

Austria

10

0

0

10

0

0

Bailiwick of Guernsey (31)

0

0

0

0

0

0

Belarus

    5(14)

5

5

 5(14)

5

5

Belgium

    10(5)

 10(4,39)

0

 10(5)

10

0

Bulgaria

    5(20)

 7(4,23)

 10(23)

 5(20)

  7(4)

10

Canada

15

   15(3)

 10(12)

15

  15(3)

 10(12)

China                                        

10

10

10

10

10

10

CzechRepublic

0(27)

0

0(28)

0(27)

0

0(28)

Denmark (29)

   0(40)

   0

0

0(40)

   0

0

Egypt

15

15

10

15

15

10

Estonia

0

0

0

0

0

0

Ethiopia (43)

5

5(4)

5

5

5(4)

5

France

   10(6)

   10(7)

   0(2)

 10(6)

  10(7)

  0(2)

Finland

   5(33)

0

0

 5(33)

0

0

Germany

   5(6)

0

0

   5(6)

0

    0

Greece

   25(8)

10

   0(9)

25

10

   0(9)

Hungary

   5(5)

   10(4)

0

0

  10(4)

0

Iceland

    5(34)

0

5

5(34)

0

5

India                                          

   10(6)

  10(7)

  15(1)

 10(6)

  10(7)

15(11)

Iran (43)

5(44)

5(4)

6

5(44)

5(4)

6

Ireland

0

0

   0(9)

0

0

   0(9)

Italy                                            

15

10

0

0

10

0

Kuwait

0

  0

  5

0

  0

  5

Kyrgyzstan (36)

0

0

0

0

0

0

Lebanon

5

  5(15)

0

5

  5(15)

0

Lithuania

    0(37)

0

5

 0(37)

0

5

Malta                                          

0

10(7)

10

15

10(4)

10

Mauritius

0

0

0

0

0

0

Norway

    0(16)

0

0

0

0

0

Poland

   10(41)

   5(4)

5

 0(38)

   5(4)

5

Portugal

10

10

10

10

10

10

Qatar

0

0

5

0

0

5

Romania

10

  10(4)

  5(13)

10

  10(4)

  5(13)

Russia

   5(17)

0

0

 5(17)

0

0

San Marino

0

0

0

0

0

0

Serbia & Montenegro(25)

10

10

10

10

10

10

Seychelles

0

0

5

0

0

5

Singapore

0

10(18)

10

0

10(18)

10

Slovakia (30)

10

  10(4)

  5(13)

10

  10(4)

  5(13)

Slovenia

5

5

5

5

5

5

South Africa

0

0

0

0

0

0

Spain

   0(35)

0

0

0(35)

0

0

Sweden

   5(5)

  10(4)

0

  5(5)

  10(4)

0

Swiss Confederation (31)

0(40)

0

0

0(40)

0

0

Syria                                          

   0(5)

  10(4)

15(19)

  0(5)

  10(4)

15(19)

Tajikistan(36)

0

0

0

0

0

0

Thailand

10

10(21)

  5(22)

10

10(21)

  5(22)

Ukraine

5(32)

2

5(42)

5(32)

2

5

United Arab Emirates

0

0

0

0

0

0

United Kingdom

  15(10)

10

  0(2)

0

10

0(2)

United States of America

   15(26)

  10(7)

0

0

  10(7)

0

Uzbekistan(36)

0

0

0

0

0

0

 Cyprus double tax treaties notes:

1. Dividends and interest paid to non-residents of Cyprus, as well as royalties payable abroad and granted for use outside Cyprus are exempt from any  Cyprus withholding tax.

2. 5% applies only on television and film rights.

3. 0% applies if it is paid to a Government or for export guarantee.

4. 0% applies if it is paid to the Government of the contracting state.

5. 15% applies if it is received by a company that controls less than 25% of the voting rights and in all cases if received by individual.

6. 15% applies if it is received by a company that controls less than 10% of the voting rights and in all cases if received by individual.

7. 0% applies if it is paid to a Government, a financial institution or a bank of the contracting state.

8. The double tax treaty between Cyprus and Greece provides 25% withholding tax but according to the legislation of Greece 10% tax is withheld as from 1/1/2009.

9. 5% applies only on film rights.

10. The double tax treaty between Cyprus and United Kingdom provides 15% withholding tax no tax is withheld on dividends according to the legislation of the United Kingdom. Companies controlling at least 10% of the voting rights are not entitled to withholding tax.

11. 10% applies for payments of a technical, administrative or advisory nature.

12. 0% applies on theatrical, musical, literary or any other artistic work.

13. 0% applies for patents, production processes or any royalties arising from scientific research.

14. 15% applies in cases of investments which are less than €200.000. The withholding tax  can be reduced to 10% if the investment is over 25% of the company’s share capital.

15. 0% applies if is paid to the Government of the contracting state or to any other institution, local authority and any bank which is owned entirely by the state.

16. 0% applies if it is received by a company (other than a partnership) holding at least 10% of the share capital of the company issuing the dividend or if it is paid to the Government of any of the two contracting states. 15% applies in all other cases.

17. 10% applies when the dividends are received from a company which invested less than €100.000.

18. 7% applies if it is paid to a bank or a relevant financial institution.

19. 10% applies on artistic, scientific and literary work.

20. 10 % applies if it is received by a company holding less than 25% of the share capital of the company issuing the dividend.

21. 10% applies on interest paid to a financial institution or on interest paid in connection with commercial, industrial or even scientific equipment

22. 10% applies on royalties in connection with commercial, industrial or even scientific equipment increases to 15% for patents, production processes or any other royalties arising from scientific research.

23. The rates apply when the payment it is made to a Cyprus Company by a Bulgarian resident which holds directly or indirectly less than 25% of a Cyprus company’s share capital.

24. A rate of 5% if a dividend is paid by a company in which the beneficial owner has invested less than €150.000.

25. The provisions of the double tax treaty between the Republic of Cyprus and the former Socialist Federal Republic of Yugoslavia still applies. Bosnia also applies this provision.

26. 5% applies if it is received by a company which controls at least 10% of the voting rights.

27. Applies if it is received by a company owning directly 10% of the shares for an uninterrupted period of one year. In all other cases 5% applies.

28.10% applies for the following: patent, trade mark, design or model, plan, secret formula or process, computer software or industrial, commercial or scientific equipment, or for    information concerning commercial, industrial or scientific experience.

29. Under its provisions no withholding tax will apply, assuming that the company holds at least 10% of share capital and for a minimum shareholding period of 12 months, otherwise a 15% withholding applies.

30. The treaty between the Republic of Cyprus and the Czechoslovak Socialist Republic still applies.

31. The treaty is effective from 15 October 2015.

32.15% applies if the investment is less than €100.000 and lower of 20% of the company’s share capital.

33. 5% applies if the recipient is a company that owns at least 10 % of the company distributing the dividends, with voting rights in the company distributing the dividends. In all other cases a 15% applies.

34.  5% applies if the recipient is a company that owns at least 10 % of the company distributing the dividends. In all other cases a 10% applies.

35. 0% applies if the dividend is received by a company holding at least 10% of the issued share capital. 5% applies in all other cases.

36. The treaty between the Republic of Cyprus and the United Soviet Socialist Republic still applies.

37. 0% applies if the beneficial owner is a company which holds directly at least 10% on the capital of the company paying the  dividends. 5% applies in all other cases.

38. 0% applies if the beneficial owner is a company which holds directly at least 10% on the capital of the company paying the  dividends, where such holding is being possessed for an interrupted period of 24 months. 5% applies in all other cases.

39. Nil withholding tax is applied on interests derived from deposits in financial institutions.

40. 0% applies if it is received by a company (other than a partnership) holding at least 10% of the share capital of the company issuing the dividend for a minimum shareholding period of 12 months, or if it is paid to the Government of any of the two contracting states, pension fund or any similar institution. 15% applies in all other cases.

41. The treaty is effective from 18 September 2015 but may apply retrospectively. 5% applies if the recipient is a company that owns at least 10 % of the company distributing the dividends. In all other cases a 10% applies.

42. 5% applies for royalties in respect of copyrights of scientific work, patent, trade mark, secret formula, production process or information relating to industrial, commercial or scientific experience. 10% applies in all other cases.

43. The treaty has been published in the Gazette but has not come into force until the time of publication of this guide.

44. 5% applies if the recipient is a company that owns at least 25 % of the company distributing the dividends. In all other cases a 10% applies.

45. Other than the Double Tax Agreements which are presently in force, the conclusion of various other Agreements is pending. These Agreements are currently under negotiation.

Last Update: April 2016

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Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances.

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