The place to operate
The low corporate tax rate, the attractive income tax regime with multiple tax exemptions and deductions are the most important advantages, but Cyprus has much more to offer. A state member of the European Union, Cyprus provides the opportunity to companies and investors to operate under a secure legal framework and environment, protecting businesses and at the same time promoting their growth.
- Corporate tax rate 12.5%
- Low income tax
- Income Tax exemptions
- Income Tax deductions
- EU State Member
- IP Box
- Tonnage Tax System
Corporate Tax in Cyprus.
The corporate tax rate in Cyprus is 12,5% and is calculated on the annual profit of any Cyprus registered company.
Any Cyprus registered entity (Tax resident company) has to pay tax in Cyprus.
A Cyprus resident company is taxed on the income accrued or derived from sources in Cyprus and abroad. A non-Cyprus resident company is taxed on the income accrued or derived only from sources in Cyprus.
No there is not. All Cyprus companies are taxed on 12,5% on their profits.
Yes. Corporate tax exemptions apply. Check the table below.
Corporate Tax exemptions.
|Type of income||Exemptions|
|Profit from the sale of securities||Whole amount|
|Interest not arising from the usual activities or closely related to the ordinary activities of the company||Whole amount|
|Gains related to foreign exchange differences (forex) with the exception of forex arising from trading in foreign currencies and related derivatives||Whole amount|
|Profits of a foreign permanent establishment, under certain conditions||Whole amount|
|Benefits, profits or redundant obtained from restructuring||Whole amount|
Any expenses incurred wholly and exclusively in earning (taxable) income are deducted for corporate tax purposes.
|Type of expense||Deduction|
|Interest expense incurred for the direct or indirect acquisition of 100% of the share capital of a subsidiary company will be treated as deductible for income tax purposes provided that the 100% subsidiary company does not own (directly or indirectly) any assets not used in the business. If the subsidiary owns (directly or indirectly) assets not used in the business, the interest expense deduction is restricted to the amount which relates to assets used in the business.||Whole amount|
|Equity introduced to a company as from 1 of January 2015 (new equity) in the form of paid up share capital or share premium is eligible for an annual notional interest deduction (NID).|
The annual NID deduction is calculated as an interest rate on the new equity. The relevant interest rate is the yield on 10 year government bonds (as at December 31 of the prior tax year) of the country where funds are employed in the business of the company plus a 3% premium (subject to a minimum amount which is the yield on the 10 year Cyprus government bond as the same date plus a 3% premium).
|The NID deduction cannot exceed the 80% of taxable profit derived from assets financed by new equity (as calculated prior to the NID deduction)|
Donations to approved charities (with receipts)
|Royalty income, embedded income and other qualifying intangible assets according to the “new” Cyprus regime (1 July 2016)||80% of the net profit as calculated in accordance with the “new” regime|
|Royalty income, embedded income and other qualifying income derived from qualifying intangible assets according to the “old” Cyprus IP box.||80% of the net profit|
|Expenses for scientific researches including research for development that is carried out from small-middle size enterprises.||Whole amount|
|Employer’s contributions to social insurance and approved funds on employees’s salaries.||Whole amount|
|Employer’s contributions to medical funds from employees.||1% on employee’s remunaration|
|Employer’s contributions to Provident/Pension funds for employees.||Up to 10% on employee’s remunaration|
|Entertainment expenses for business purposes.||The lower amount of €17.086 or 1% on the gross company income|
|Type of expense||No deduction|
|Expenses the purpose of which was not the acquiring of income||Whole amount|
|Private car expenses||Whole amount|
|Interest applicable to the cost of acquiring a private vehicle regardless the use and on other assets that were not used for establishment purposes.||Whole amount for 7 years since the day of acquiring the relevant asset.|
|Salaries provided within a tax year, and of which the contributions to social insurance or other approved funds were not paid within the same year.||Whole amount|
Entities like non-profit organizations or Intellectual property Holdings may be treated or benefit from other tax approaches.
The tax loss occurred after a tax year and which cannot be set off against other income, is carried forward subject to conditions and is set off against the profits of the next five years.
Loses from permanent establishments abroad can be set off with profits of the company in Cyprus. Subsequent profits of an exempt permanent establishment abroad are taxable up to the amount of losses allowed.
Yes, you can download our free Cyprus Corporate Tax guide in our Library section.
We’ll be happy to help you find the right solution for your company!