Corporation Tax
Corporation Tax in Cyprus
Corporation Tax
All companies tax resident of Cyprus are taxed on their income accrued or derived from all sources in Cyprus and abroad.
A non-Cyprus tax resident company is taxed on income accrued or derived from a business activity which is carried out through a permanent establishment in Cyprus and on certain income arising from sources in Cyprus.
A company is resident of Cyprus if it is managed and controlled in Cyprus.
Corporation Tax Rates
The corporation tax rate for all companies is | 12,5% |
Exemptions
Type of Income | Exemption Limit |
| The whole amount (Note 2) |
| The whole amount |
| The whole amount |
| The whole amount |
| The whole amount |
Notes:
- Interest income arising in the ordinary course of business including interest closely connected with the carrying on of the business, and interest earned by open-ended or closed-ended collective investment schemes, is not considered interest but trading profit and is not exempt
- Such interest income is subject to Special Defence Contribution
- The term “Securities” is defined as shares, bonds, debentures, founders’ shares and other securities of companies or other legal persons, incorporated in Cyprus or abroad and options thereon. A circular has been issued by the Tax Authorities in 2008 further clarifying what is included in the term Securities. According to the circular the term includes, among others, options on Securities, short positions on Securities, futures/forwards on Securities, swaps on Securities, depositary receipts on Securities (ADRs, GDRs), rights of claim on bonds and debentures (rights on interest of these instruments are not included), index participations only if they result on Securities, repurchase agreements or Repos on Securities, units in open-end or close-end collective investment schemes). The circular also clarifies specific types of participation in foreign entities which are considered as Securities.
Deductions
All expenses incurred wholly and exclusively in earning the income of the company including:
Type of Income | Exemption Limit |
| The whole amount |
| The whole amount |
| 80% |
| The whole amount |
| Lower of €17.086 or 1% of the gross income of the business |
| € Per m² 1.200 1 – 120 1.100 121 – 1.000 700 1.001 – over |
Notes:
- Intangible assets include copyrights, patents and trademarks.
- Additionally any expenditure of a capital nature incurred for the acquisition or development of such intangible assets may be claimed as a tax deduction in the year in which it was incurred and the immediate four following years on a straight line basis.
But not including:
Type of Income | Exemption Limit |
| The whole amount |
| The whole amount for 7 years |
Losses carried forward
The tax loss incurred during a tax year and which cannot be set off against other income, is carried forward and set off against future profits of the next five years.
The current year loss of one company can be set off against the profit of another provided the companies are Cyprus tax resident companies of a group. Group is defined as:
- One company holding at least 75% of the shares of the other company.
- At least 75% of the voting shares of the companies are held by another company.
A partnership or a sole trader transferring business into a company can carry forward tax losses into the company for future utilisation.
Losses from a permanent establishment abroad can be set off with profits of the Company in Cyprus. Subsequent profits of the permanent establishment abroad are taxable up to the amount of losses allowed.
Reorganisations
Transfers of assets and liabilities between companies can be effected without tax consequences within the framework of a reorganisation and tax losses can be carried forward by the receiving entity.
Reorganisations include:
- mergers
- demergers
- partial divisions
- transfer of assets
- exchange of shares
- transfer of registered office