Cyprus
Financial Year – 1 January – 31 December
Currency – Euro (EUR)
Corporate Tax Summary
Residence – A company is resident in Cyprus if its management and control is exercised in Cyprus. Registration in Cyprus is not decisive.
The tax laws of Cyprus do not contain a specific definition of what constitutes management and control, but in practice and based on UK common law it is considered that management and control is exercised where the majority of the directors reside, the majority of board meetings of the company are held and the majority of significant decisions are taken.
A company that is not resident in Cyprus but has a permanent establishment in Cyprus may opt to be treated as a resident company in order to benefit from worldwide offset of losses.
Basis of Taxation – Resident companies are taxed on their worldwide income.
Non-resident companies are subject to taxation only on income accruing or arising from sources in Cyprus.
The net results of all types of income are aggregated to form the taxable income. There is no explicit general rule in the law on how income should be determined. However, if no tax rule provides otherwise, accounting rules based on International Accounting Standards are acceptable.
Taxable income is computed by aggregating income from all types of income for the tax year and then reducing this figure by allowable deductions incurred in the production of income and by any losses carried forward or surrendered by other group companies, i.e. group relief. The net figure is subject to corporation tax.
Income from shipping and ship management is subject to tax under a special tax regime, while the taxable income of insurance companies is determined under certain additional specific provisions.
Capital gains are taxed separately from income. However, most capital gains are exempt from taxation.
| Reference | ||
| Corporate Income Tax Rate (%) | 12.5% | Exemptions: Dividend income (under conditions), passive interest income, foreign exchange gains (unless trading in foreign currencies and related derivatives), gains on disposal of securities, gains arising from loan restructuring (under conditions), profits of permanent establishment outside Cyprus (under conditions), rent from preserved building (under conditions), income of companies operating in Cyprus in the audio-visual industry (under conditions). |
| Branch Tax Rate (%) | 12.5% | |
| Withholding Tax Rate: | ||
| Dividends – Franked | 17% | 0% if paid to non-tax residents or tax residents but not domiciled individuals |
| Dividends – Unfranked | 17% | 0% if paid to non-tax residents or tax residents but not domiciled individuals |
| Dividends – Conduit Foreign Income | 17% | 0% if paid to non-tax residents or tax residents but not domiciled individuals |
| Interest | 30% | |
| Royalties from Intellectual Property | 10% | For IP rights used in Cyprus. Treaty rates may be as low as 0% |
| Fund Payments from Managed Investment Trusts | ||
| Branch Remittance Tax | 0% | |
| Net Operating Losses (Years) | ||
| Carry Back | Non applicable | |
| Carry Forward | Five years |
Individual Tax Summary
Residence – An individual who spends more than 183 days in Cyprus is a tax resident of Cyprus.
An individual can be a tax resident of Cyprus even if he/she spends 183 days or less in Cyprus, provided that he/she satisfies all of the following conditions within the same tax year (1 January – 31 December):
- He/she does not spend more than 183 days in any other country.
- He/she is not a tax resident of any other country.
- He/she spends at least 60 days in Cyprus.
- He/she maintains a permanent home in Cyprus that is either owned or rented.
- He/she carries on a business in Cyprus, is employed in Cyprus or holds an office in a Cyprus tax resident company at any time during the tax year.
Basis of Taxation – Resident individuals are subject to income tax on their worldwide income.
Non-resident individuals are taxed on their Cypriot source income only.
Filing Status – Every individual must file a tax return annually
Personal Income Tax Rates
| Taxable Income | Tax Rates (%) – Residents & Non Residents |
| 0-19,500 euro | 0 |
| 19,501-28,000 euro | 20 |
| 28,001-36,300 euro | 25 |
| 36,301-60,000 euro | 30 |
| Over 60,000 euro | 35 |
Certain types of income are exempt, e.g. dividends.
There are special incentives for high net worth individuals relocating to Cyprus, e.g. 50% remuneration deduction when over EUR 100,000 annually.
Goods and Services Tax (GST)
| Rate | 0% – 19% |
| Taxable Transactions | VAT liability applies to the following transactions:
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| Registration | In general, VAT must be charged by the taxable person supplying goods or services. A “taxable person” is every person, individual or legal entity, resident in Cyprus or abroad, who carries on a business in Cyprus and has been registered as such in the VAT Register or is required to be registered according to the provisions of the VAT legislation. The term “business” has a very broad meaning and covers any economic activity carried out independently, regardless of the purpose or results of such activity. The term “business” includes any trade, profession or vocation. The following are also treated as taxable persons, if they do not otherwise qualify as such:
The place where a person has established his business is not decisive for determining whether or not that person must be registered for VAT purposes. The obligation to register depends on the place-of-supply rules. Therefore, non-resident suppliers must be registered in Cyprus if they supply goods or services for which the place of supply is in Cyprus, unless those supplies are subject to VAT under the reverse charge mechanism. Compulsory Registration A taxable person is also required to register for VAT purposes if they supply services to taxable persons established in another Member State (B2B supplies), irrespective of the volume of the supplies. A person providing B2B services to EU taxable persons is obliged to register for VAT Information System (VIES) purposes and declare such services on the VIES returns. In addition, where, in the course of the year, such a person’s intra-Community acquisitions of goods exceed the threshold of EUR 10,251.61, the acquirer must apply for registration within 30 days from the end of the month in which the threshold was exceeded. Registration is effective from the end of the following month. By the same token, where, at any time, the intra-Community acquisitions of goods in the following 30 days are expected to exceed the same threshold, the acquirer must apply for registration within 30 days from that date. In that case, registration is effective from the date the obligation to register arose. Under new provisions introduced in the First Schedule of the VAT Law, a non-established person carrying out taxable activities in Cyprus in the course of their business is obliged to register for VAT purposes without a VAT registration threshold. A non-established person is a person who does not have a business establishment or any other fixed establishment in Cyprus in relation to the business carried out. Voluntary Registration
In this context, “taxable supplies” also include zero-rated transactions. Registration can be effective either from the date of application or from an earlier agreed date. |
| Filing and Payment | Returns and Payment Every taxable person must file a VAT return (Form VAT 4) for the tax period and pay the VAT due, if any. The standard tax period is a quarter, which does not necessarily coincide with the calendar quarter. The 3-month tax periods may end at the end of:
When they are registered, taxable persons are informed which tax period applies.
Cash Accounting
Listing Intrastat |
Other Taxes Payable
| Tax | Reference | ||||||||||||||||
| Payroll Tax | Payroll Tax A contribution to the Social Cohesion Fund is chargeable at 2% on all salaries and wages of employees. This contribution is deductible for corporation tax purposes.Social Security Contributions The social security system in Cyprus is designed to provide benefits for unemployment, sickness, medical care, maternity, retirement, disability, death and various other events. The social insurance scheme is financed by contributions paid by the employers, the insured persons and the government of Cyprus. It is governed mainly by the Social Insurance Law. Employer contributions are payable as follows:
The employer’s contribution to the social insurance fund is 8.3%. The maximum amount of monthly earnings on which the contributions are payable is EUR 4,572, except for contributions payable to the social cohesion fund for which there is no maximum amount. Contributions made by the employer are deductible for corporation tax purposes. Cyprus has fully implemented the EU Social Security Regulations which govern the liability to pay social security within the common social security territory covering all EEA countries and Switzerland. The main principle of the regulations is that an individual is subject to the social security legislation of the country in which the work is performed, without regard to the country of residence. If the employee’s duties are performed outside Cyprus, social security contributions are not payable, unless the employee has opted to stay within the Cypriot social insurance system under bilateral social security agreements. However, this is subject to EU Social Security Regulations. Conversely, if an employee is sent from abroad to work in Cyprus on a temporary basis, he/she may elect to pay social security contributions in his home country, subject to conditions. General Healthcare System contributions
There is an annual cap of EUR 180,000 on gross income for the calculation of GHS contributions. Each company applies the cap without consideration of whether the recipient has any other income subject to GHS contributions from other companies. | ||||||||||||||||
| Stamp Duty | Stamp duty is payable on a document if it relates to any property situated in Cyprus or to any matter or thing to be performed or done therein, irrespective of the place where it is executed. This means that even if a document is executed in Cyprus, no stamp duty will be chargeable if it relates to any matter or thing to be performed or done outside Cyprus. This provision is particularly relevant for companies carrying on business outside Cyprus. The rates of stamp duty on commercial contracts are as follows:
The maximum amount of stamp duty payable per document is EUR 20,000. If no amount is specified in the contract, a stamp duty of EUR 35 is due. | ||||||||||||||||
| Land Tax | Transfer Tax on Immovable property Transfers of immovable property are subject to transfer fees calculated on the market value of the property as estimated by the Land Registry Department. The current rates, together with the amounts of tax payable, are as follows:
On the transfer of immovable property from a family company, whose shareholders are spouses, their children or relatives, to one of its shareholders, transfer fees are calculated on the value of property appearing on the title deed. The applicable rate is 4% for transfers to children and 8% for transfers to spouses or other relatives. On the transfer of immovable property by donation between spouses, parents and children or relatives up to the third degree of kinship, transfer fees are calculated on the value of property appearing on the title deed. The applicable rate is 0.2% of the property value for transfers to children and 0.4% for transfers to spouses or other relatives. Transfers of immovable property by a company to another company for the purpose of company reorganisations are exempt from transfer fees. Transfers of immovable property that take place after 2 December 2011 are exempt from immovable property transfer fees if the transfer is subject to VAT. In cases where transaction is not subject to VAT, an exemption of 50% of the transfer fees is granted. |
Last updated: 09.11.2020