Cyprus Tax Advantages

Efstathios K. Efstathiou > Articles  > Cyprus Tax Advantages

Cyprus Tax Advantages

The Cyprus Tax Regime is set to provide a business-friendly environment

In Cyprus, taxation of business profits is 12,5%.

Cyprus is probably the best place to do business in the EU. Because of the business-friendly Cyprus Tax Regime, there are around a thousand companies registered every month in Cyprus.

Cyprus dismissed its “offshore” legislation in 2002-2003. A new system of EU-conform tax advantages has been set up and refined daily.

The Cyprus Tax Regime:

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

● differentiation of ‘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 (special conditions apply with management residing abroad)
● no Cyprus tax on disposal or trading of securities
● no Cyprus tax on income from dividends at company level (for up to four years)
● no Cyprus withholding tax on dividends paid to shareholders outside of Cyprus
● no Cyprus tax on dividend income for non-domiciled but tax-resident individuals
● no Cyprus tax on interest income on account of non-residents with banks in Cyprus
● no Cyprus 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
● offshore entities from other countries are allowed as shareholders
● rigid appliance of all relevant EU directives

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 the companies do not conduct any business with natural or legal persons living in Cyprus.

Non-tax-resident companies cannot benefit from Double Taxation Avoidance Treaties and Double Taxation Avoidance Agreements fully apply.

Tax-resident Cyprus Companies pay 12,5 % corporate tax on their taxable income. However, income from dividends and the appreciation of shares and bonds is not taxable.

The profit that accrues from the exploitation of Intellectual Property is taxable at a favoured rate of only 2,5 %.

Cyprus Special Contribution for Defence

The Cyprus Defence Tax as per the Cyprus Special Contribution for Defence Tax Law is payable on income from dividends and interest. The EU Parent-Subsidiary Directive fully applies.

Cyprus tax-resident but non-domiciled individuals enjoy substantial tax benefits through the Cyprus Non-Domiciled Tax Regime.

The Cyprus Defence Tax on dividend income for tax-resident individuals is 17%. If a tax-resident person benefits from the non-dom tax status, Cyprus Defence Tax is not applied for several years. Please read our specific page for “non-doms”.

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

Please note: Interest income from loan agreements between companies that belong to or are under the control of the same beneficial owner (group companies) is considered as related to the business of the company.

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 as per the Cyprus Income Tax Law, at a rate of 20-35%, where the highest tax rate of 35% is applied to the portion of annual earnings over EUR 65.000.

Please do not hesitate to contact us for questions regarding Cyprus Tax Rates or Cyprus Company Incorporation.