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LOSSES AND SPECIAL TYPES OF TAXATION
Losses
Carry forward of losses (As from 2012)
If losses carried forward can not be fully set off against a Cyprus company’s profits, the amount of that loss is carried forward and is set off against the Cyprus Company’s taxable profit over the next five years.
Loss of permanent establishment abroad
Any loss arises from a permanent establishment outside Cyprus can be set off against the profits that arise in Cyprus. However, the subsequent profits of the permanent establishment abroad are taxable up to the amount of utilised losses.
Group relief losses
Loss of a Cyprus tax resident company can be set off against the profit of another company of the group which is also Cyprus tax resident. Two or more companies can be defined as a group when the one company hold at least 75% (direct or indirect) of the voting shares of the other company or the voting share of both companies are held at least by 75% (direct or indirect) by a third company.
As from 1 January 2015 interposition of a non-Cyprus tax resident company/ies will not affect the eligibility for group relief (subject to conditions).
Also as from 1 January 2015 a Cyprus tax resident company can claim the tax losses of a group company which is tax resident in another EU country. (Subject to conditions)
Special types of taxation
Former Cyprus offshore companies (International business companies)
Former Cyprus offshore companies (International business companies) are subject to Cyprus tax at the rate of 4.25% for the commencing years of the 2002’s tax year regardless of the place of their management and control. From the tax year 2003 and onwards when the management and control are exercised in Cyprus, former Cyprus offshore companies are subject to Cyprus tax at the rate of 10%. Former Cyprus offshore companies under certain conditions could choose to be taxed at 4.25% for the years 2003, 2004 and 2005.
As of 1st of January 2006, International Business companies are taxed at a tax rate of 10%.
Life insurance companies
Life insurance companies are subject to a minimum tax of 1.5% of their gross premiums.
The interest income is deemed to be the result of the original nature of business and therefore is considered as business income rather than interest.
Pensions from overseas
The individual resident’s received pensions from abroad up to €3.420 are exempt; any excess above €3.420 is taxed separately at a flat rate of 5%.
The taxpayer can choose to be taxed at normal Cyprus Tax rates if more favourable.
Income of professionals, artists, and athletes
The gross income derived by any non-resident individual of the Republic from the activity within the Republic of any profession or vocation is subject to 10% Cyprus withholding tax deducted at source.
Film rentals
The gross income from film projection in Cyprus for a non-resident is subject to 5% Cyprus withholding tax.
Royalties
The gross income from royalty, premium, compensation or other income derived from sources in the Republic, by a non-resident, is subject to 10 % Cyprus withholding tax.
Natural resources
The gross income derived from non-resident with no permanent establishment in Cyprus relating to extraction, exploration or use of the continental shelf as well as the establishment and use of pipelines and other installation on the Cyprus ground or exclusive economic zone, is subject to 5% Cyprus withholding tax.
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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.
