Taxation
CORPORATION TAX
Basis
Corporation tax is imposed on every legal entity which is a tax resident of Cyprus on its worldwide income. A company is considered to be a tax resident of Cyprus if it is managed and controlled in Cyprus.
Non- tax residents of Cyprus are only taxed on their income that is accrued or derived from a business activity which is carried out from a permanent establishment in Cyprus.
Tax rate: 12.5% on NET income.
Some types of income exempt from taxation:
| Type of income | Exemption limit |
|---|---|
| Dividends | The whole amount |
| Profits from the sale of securities | The whole amount |
| Interest income (under certain conditions) | 50% |
| Profits of a permanent establishment abroad | The whole amount (conditions apply) |
SPECIAL CONTRIBUTION FOR DEFENCE FUND
Special contribution for defence fund is only imposed on income earned in Cyprus by tax-residents of Cyprus. Non-tax residents are exempt of the special contribution for defence fund.
Tax Rates:
| Type of Income | Persons | Companies |
|---|---|---|
| % | % | |
| Dividend income from CY- resident companies | 17 | NIL |
| Dividend income from non-Cyprus resident companies* | 17 | NIL |
| Interest income (under certain conditions) | 30 | 30 |
| Interest income earned from savings certificates and development stock issued by the government | 3 | 10 |
| Interest income earned from the ordinary activities in the course of business or closely related to the ordinary activities of the business | NIL | NIL |
| Rental income | 3 | 3 |
l *Note: - Dividend income from abroad is exempt from the special contribution for defence fund provided that the company receiving the dividend owns at least 1% of the company paying the dividend. This exemption does not apply if more than 50% of the paying company’s activities result directly or indirectly in investment income and the foreign tax burden on the income of the non-resident company paying the dividend is substantially lower than the tax burden of the company which is tax-resident in Cyprus.
Credit against foreign tax withheld
Any foreign tax paid on income that is subject to the defence tax can be credited against the defence tax liability irrespective of the existence or not of double taxation treaty.
Deemed dividend distribution
Tax-resident companies not distributing a dividend within 2 years from the end of the tax year are liable to 15% defence tax on 70% of their accounting profits.
Profits attributable to non-tax residents are not subject to the deemed distribution.
Capital Gains TAX
Capital gains tax is imposed at the rate of 20% on gains from the disposal of immovable property situated in Cyprus including gains from the disposal of shares in companies which own immovable property in Cyprus and not listed in any recognized stock exchange.
Estate Duty
No estate duty.