CYPRUS INCOME TAX

Personal tax rates

Taxable income		Tax	Tax	Accumulated
From	To	Rate	€	Tax
€	€	%		€
0	19.500	0	0	0
19.501	28.000	20	1.700	1.700
28.001	36.300	25	2.075	3.775
36.301	60.000	30	7.110	10.885
60.001	and above	35

Cyprus Income tax rates

Companies (up to year 2012) Companies (from year 2013 –  today)

10 % 12,5 %

Tax resident

Individuals:

Present in the Republic of Cyprus for more than 183 days in a tax year or if a taxpayer stays in Cyprus for one or more periods equal at least to 60 days, if certain conditions are met. Cyprus tax resident definition for the purpose of special defense contribution has changed. (See note in special defence contribution section)

Cyprus Companies:

Management and control is exercised in the Republic of Cyprus.

Company incorporated in Cyprus, whose management and control is exercised outside Cyprus, is considered as tax resident in Cyprus unless is tax resident in any other country.

Exemptions		Exemption limit
Applicable to individuals only
• Interest		Entire amount
• Specified lump sum received as retiring gratuity, commutation  of pension or compensation for death or injury		Entire amount
• Remuneration from salaried services supplied outside Cyprus to a non-resident employer or to a permanent establishment abroad owned by a Cyprus resident employer for more than 90 days in a tax year		Entire amount
• Remuneration from any office or employment exercised in Cyprus by an individual whose residence was outside Cyprus before the commencement of the employment. The exception is applicable for a period of five years for employment started during of after the year 2012 and it is allowable from the year following the year of commencement of the employment in Cyprus.		20% of Income or €8.550 whichever is the lower
• Income from employment that exceeds €100.000 annually by any individual whose residence was outside Cyprus before the commencement of the employment. The exception is applicable for the first 10 years of Employment. The exemption is allowable if certain conditions are met. The above two exemptions may not be allowed both at the same time.		50%
Applicable to Cyprus companies only
• Interest (does not apply for interest income arising in the ordinary course of business which is fully taxable as trading income)		Entire Amount (may be subject to SDC)
Applicable to both individuals and companies• Dividends • Gains from the disposal of securities • Profits from a permanent establishment abroad (Under certain conditions) • Gains derived from foreign exchange differences, with the exception of foreign exchange differences arising from trading in foreign currencies and related derivatives. • Profits from the production of films, series and other related audiovisual programs		Entire amount (the above exemptions may be subject to SDC and GESY)   The exemption is restricted to the lower of 35% of the eligible expenditure or 50% of the taxable income. (The restrictions can be carried forward for a period of 5 years).
Deductions		Deduction limit
Applicable to companies only •Interest expense incurred for the direct or indirect acquisition of 100% of the share capital of a subsidiary company will be treated as deductible for income tax purposes provided that the subsidiary company does not own, direct or indirect, any assets that aren’t used in the business. If the subsidiary owns, direct or indirect, assets not used in the business, the interest expense deduction is restricted to the amount which relates to assets used in the business. It applies for acquisitions of subsidiaries from 1st January 2012. •Profits from the exploitation and disposal of intellectual property rights. In case of loss, it can be carried forward up to 20%. Under conditions. •Notional Interest Deduction-(NID). Notional Interest Deduction is allowable when new equity introduced to a Cyprus company after 1 January 2015 in the form of share capital or share premium. Notional Interest Deduction is calculated on the new capital using the rate of 10 year government bond yield (of the year preceding the tax year) of the country in which the new capital is invested increased by 3%(the minimum amount of the deduction is restricted at the rate of the 10 year Cyprus government bond increased by 3%)		Entire amount           80%   The Notional Interest Deduction is restricted to 80% of the taxable income, as calculated, before the deduction of Notional Interest Deduction
Applicable to individuals only •Expenditure incurred for the acquisition of shares in an innovative business until 31/12/2016		Entire amount
•As from 1 January 2017-amounts invested each tax year in approved innovative small and medium size enterprise, directly or indirectly are deducted from taxable income •Expenses relating to rental income		Up to 50% of the taxable income prior to this deduction (subject to a maximum of €150.000 per year) 20% of rental income
Applicable to both individuals and companies
• Donations made to approved charities with receipts		Entire amount
• Contributions to trade unions or professional bodies		Entire amount
• Special contribution (Terminated from 1/1/2017)		Not applicable
• Maintenance expenses of a conservation building     • Expenditures for infrastructure and technological equipment in the audiovisual industry		Up to €700, €1100 or €1200 per square meter (according to the size of the building).   20%
Personal allowances		Allowance
• Life insurance premiums in respect of the life of the claimer • Life insurance premiums in respect of the life of the  claimers’ spouse which were in existence up to the 31.12.2002 where personal allowance was given, will continue to be deductible from the claimer• Contributions for social insurance, provident, medical or other approved funds.If a life insurance is cancelled or redeemed within 6 years from the start of the insurance, the previously paid and granted premiums as personal allowance will be taxable under the following rates: Cancellation within 3 years 30%, Cancellation between 4 and 6 years 20%.		Premiums are restricted to 7% of the insured capital sum. Premiums and contributions must not exceed 1/5 of the taxable income before any personal allowance.

Other important provisions:

• Registration with the Cyprus Tax authorities:

Cyprus Companies incorporated or registered or become tax residents of Cyprus are obliged to register with the Cyprus tax authorities and obtain their Cyprus Tax Identification Code within 60 days from that date. Also are obliged to inform the Cyprus tax authorities for any amendment on their records within 60 days from that amendment.

• Lifting the Cyprus Bank Secrecy:

The Cyprus Inland Revenue have the power to submit a written application to Cyprus Bank Institutions asking for the lifting of Cyprus Bank Secrecy, for an active or closed account of a person registered to Cyprus Income Tax Office for a period of seven years preceding the application by having necessarily the written consent of the Attorney General.

• Application for taxpayers’ information by civil servants:

The Cyprus tax authorities may ask for information, for the purpose of imposing tax, from other governmental departments and specifically by local authorities, semi-governmental authorities excluding the Central Bank of Cyprus and the Department of Supervision and   Development of Cooperative Companies.

• Accounting books and records:

Businesses accounting books and records should be updated by the end of the fourth month from the date of each transaction. Furthermore, invoices should be issued within thirty days from the date of the transaction unless a business obtained the written approval of the Commissioner for a longer period.

• The imposition of surcharges:

Late submission of declarations or supporting documents requested by The Cyprus Inland Revenue Office will result in surcharges of €100 or €200 depending on the circumstances.

• Tax imposed on profits arising from bets of OPAP and National Lottery

A new law is imposed for 20% taxation on profits in OPAP betting’s and profits of all National Lottery stakes that exceed €5.000.

• Widow pension

Taxpayer can elect, on annual basis, to be taxed either at the normal tax rates and bands or the widow pension to be taxed separately from any other income at the flat rate of 20% on the amount over € 19.500.

• Loan restructuring

With the aim to give motives for loan restructuring, tax incentives have been provided, in those cases that such a restructuring includes the transfer of immovable property to the lender against the loan obligation. (Subject to conditions). The disposal should take place until 31 December 2022.

If a part of the sale proceeds, will return to the borrower, then this amount is subject to IT, CGT and SDC, which must be withheld and paid to the authorities by the loan provider. The cost of acquisition is the amount had been agreed for the purpose of restructuring.

Also, it is not payable any transfer fees and stamp duties.

• Tax ruling: apply from 16/5/2016

Charge €1000 – without acceleration

Charge €2000 – with acceleration

 

Contact us

For more information please contact

Email: info@pkf-nic.com

 

Last update: March 2022

The authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication.

Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances.

PKF Cyprus firms are member firms of the PKF International Limited network of legally independent firms and do not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.