SHANDA CONSULT

Cyprus Tax Advantages

Cyprus provides the most tax advantages within the EU, yet being fully compliant with all legal provisions of the EU and of the OECD

Cyprus is the best place to do business in the EU. Currently (end of 2016) around thousand companies are registered every month in Cyprus – a clear proof of the many advantages of Cyprus' legislation.

Cyprus Tax Advantages

In the course of harmonisation, focusing on the then future EU-membership, Cyprus dismissed its "offshore" legislation in 2002 and 2003 step by step. Simultaneously, a new system of EU-conform tax advantages has been set up, and the refinement is still continued day by day. Today, Cyprus is even more attractive as a place of doing business, providing not only tax advantages but many other advantages as well.

Some of the many tax advantages that Cyprus Companies benefit from:

  • differentiation between 'tax residents' and 'non tax residents'
  • corporate tax is only 12,5 %, very low tonnage tax for ship-owning and shipping companies, 2,5 % on income from Intellectual Property (conditions apply, please read our specific page)
  • no corporate tax for 'non tax resident' companies (with management residing abroad; special conditions apply)
  • no tax on disposal or trading of securities
  • no tax on income from dividends on company level (for a period of four years)
  • no withholding tax on dividends paid to shareholders outside of Cyprus
  • no tax on dividend income for non-domiciled but tax-resident individuals, please read our specific page
  • no tax on interest income on account of non-residents with banks in Cyprus
  • no tax for International Trusts
  • full adoption of the EU-Parent-Subsidiary-Directive (dividend payments of the subsidiary to its parent are tax-exempted)
  • full tax group relief (profits of one group company are offset against losses of another group company)
  • offshore entities from other countries are allowed as shareholders
  • rigid appliance of all relevant EU directives

 

Main Cyprus Tax Classes in Brief:

Corporate Tax in Cyprus

Non tax-resident Cyprus Companies are not liable for corporate tax in Cyprus, provided that

  • the directors do not reside in Cyprus, and
  • that the companies do not conduct any business with natural or legal persons residing in Cyprus.

Non-tax-resident companies cannot benefit from Double Taxation Avoidance Treaties. Non-tax-resident companies must furthermore prove that their profit is subject to tax (in another country).

Tax-resident Cyprus Companies pay 12,5 % corporate tax on their taxable income. However:

  • income from dividends, appreciation of shares and bonds and from the purchase and sale of the aforementioned or from the sales of participations is not taxable; certain conditions apply.

Double Taxation Avoidance Agreements fully apply.

The profit that accrues from the exploitation of Intellectual Property is taxable at a favoured rate of only 2,5 %. As per the new EU regulations from 2016, a number of condition applies. Please read the related information.

Special Contribution for Defence

The so-called Defence Tax as per Special Contribution for Defence Tax Law is payable, under certain circumstances, on income from dividends and interest. The EU Parent-Subsidiary Directive fully applies.

The Defence Tax on dividend income is 17 % (for tax-resident individuals).

The Defence Tax on income from interest that is not related to the business of the company is 30 %.

Note: Interest income from loan agreements between group companies (companies that belong to or are under the control of the same beneficial owner) is generally considered as related to the business of the company. The rate of interest must be at arm-length, please read our specific news.

Personal Income Tax in Cyprus

Annual earnings of an individual up to EUR 19.500 are not taxable in Cyprus. Earnings over EUR 19.500 are taxed by 20 – 35 %, where the highest tax rate of 35 % is applied for the portion of annual earnings over EUR 65.000.

Cyprus tax-resident but non-domiciled individuals enjoy substantial tax benefits through the Cyprus Non-Domiciled Tax Regime. Please read our specific page for “non-doms”.

 

Please do not hesitate to contact us for questions regarding Cyprus Tax Rates, or Cyprus Company Incorporation at info@shandaconsult.com.