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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