Cyprus corporate income tax.
Cyprus tax resident companies are taxed on their income arising from sources either within or outside of the country. A non-tax resident company is taxed only on income arising from sources outside the country. A company is considered a tax resident if the management and control take place in the republic of Cyprus. In this article we share some points of the deductible expenses (excluded expenses) from the calculated income tax of a Cyprus company.
Deductible expenses of a Cyprus company.
All expenses of a Cyprus company incurred exclusively for the acquisition and production of income are deductible when calculating the taxable income.
- The whole amount of interest incurred for the acquisition of fixed assets used in the business, is deducted.
- The whole amount of donations to approved charities is deducted.
- Up to €50.000 is deducted from amounts donated to political parties.
- Up to 80% of the profits arising from the exploitation of intellectual property rights.
- Profits from disposal of intellectual property rights can be deducted up to whole amount.
- The whole amount spend by the employer as a contribution to approved funds on employees’ salaries, is deducted.
- The whole amount of expenditure made for scientific research, research and development by innovative small to medium size businesses, is deducted.
- Deduction of up to 20% of the expenditure (subject to conditions) on film infrastructure and technological equipment.
Wear and tear allowances.
Cyprus tax resident companies are eligible to deduct wear and tear allowances from their taxable income. The wear and tear deduction is valid for equipment, vehicles, products and premises.The deduction rate is calculated as a percentage on the cost of acquisition of the asset used in the business and can reach 25% for some categories.
Some categories that fell under the wear and tear include heavy machinery (excavators, loading vehicles, bulldozers etc.), motor vehicles (not private saloon cars), computers, software, furniture, tools, premises and facilities of agriculture, hotels, ships and boats, energy systems such as wind generators or photovoltaics, new aircrafts such as planes and helicopters. Some of the aforementioned have also subcategories. Finally, intangible assets can also be included to wear and tear deductions.