The Tax System in Cyprus Corporate Tax

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The Tax System in Cyprus Corporate Tax

Cyprus offers a range of tax benefits to companies that carry out business in Cyprus (by becoming a tax resident of Cyprus). These advantages derive from the favourable tax regime in Cyprus, which is in line with the Organization for Economic Co-operation and Development (OECD) and the European Union, as well as from the extensive network of double taxation conventions. In short, the main corporate tax provisions are:

a uniform corporate tax rate of 12.5% ​​the lowest rate in the EU;

no taxation of dividends or interest payments to non-residents of Cyprus;

no withholding tax on royalties in respect of the use of rights outside Cyprus;

Favourable treatment of losses;

no taxation on permanent establishment outside Cyprus, subject to conditions;

double taxation agreements with over 46 countries;

not to impose capital gains tax on the disposal of securities on a recognized Stock Exchange;

no tax on profits from reorganisations;

tax-free repatriation of profits and capital

Income Tax of Natural Persons:

Tax resident of Cyprus is a person resident in the Republic for 183 days in the fiscal year. Cypriot tax residents are taxed on income earned both in Cyprus and abroad. In contrast, non-residents are taxed only on their income from Cypriot sources.

The highest tax rate for income is 35% and tax-free income for each tax year is € 19,500.

The following income tax provisions apply to natural persons:

low income tax;

no taxation of income from dividends and interest, subject to certain conditions;

no tax is levied in case of permanent establishment abroad and for salary earned abroad under certain conditions;

Profits secured by the sale of securities are exempt from taxation;

loss for the current year and previous years is deducted from taxable income under certain conditions;

income derived from retirement bonuses, death or injury compensation, provident fund, pension fund or other approved funds is exempt from tax.

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