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Cyprus registered company features
A Cyprus registered company, if it is also a Cyprus tax resident company, is subject to income tax on its worldwide income. Non-resident companies are subject to income tax only on profits derived in Cyprus. Resident companies are those companies whose management and control is exercised from Cyprus.
Trading profits
Cyprus registered Company if a Cyprus tax resident company pays taxes on its net taxable profits. These are determined by pooling its worldwide income and deducting allowable expenses, charges and capital allowances. Non-resident companies pay taxes on their Cyprus-sourced income only.
Gains in respect of the sale of immovable property situated in Cyprus (including shares of a company whose assets include such immovable property) are subject to Capital Gains Tax. Both residents and non-residents are subject to capital gains tax if they own immovable property in Cyprus. The applicable rate on the taxable income is 20%. No tax is levied in respect of immovable property situated abroad. No tax is levied on capital gains in respect of profits on disposal of shares of companies (other the ones which own immovable property).
Sales tax / Value Added Tax (VAT)
Cyprus VAT is generally imposed on taxable supplies of goods and services at the standard rate of 19%.
Certain supplies of goods and services are charged at the reduced rates of 5% – 9%; others are zero-rated, notably ship management services. Some supplies of goods and services are exempt from Cyprus VAT: specifically, financial services, health and welfare, insurance, and education.
The annual Cyprus VAT registration threshold is EUR 15,600.
Cyprus has adopted the provisions of the EU Directive 2008/8/EC effective from 1 January 2010. Exports of goods or provision of services to non-EU or to EU VAT registered persons are subject to 0%.
Losses
Trading losses of a Cyprus company may be carried forward for a period of up to five years. Losses from overseas activities can be set off against chargeable income for the year and can be carried forward subject to the five-year limit.
The restructuring legislation in line with the EU Merger Directive extending to companies in non-EU countries.
Related party transactions
Transactions between related parties do not need to be adjusted for tax purposes as long as they are on ‘an arm’s length’ basis. Cyprus introduced a circular on Cyprus Companies’ intra-group financing transactions that follow the OECD Transfer Pricing (TP) Guidelines.
The circular gives two approaches in determining the adequacy of interest rate profit margins on Cyprus Companies’ intra-group financing transactions.
Annual wear and tear allowances are allowed on various assets including plant and machinery; fixtures and fittings; commercial vehicles; hotels; commercial buildings; industrial buildings; computer hardware and software; and loose tools. Allowances range from 3% to 33% per annum. No capital allowances are given for saloon cars.
Depreciation
Depreciation included in the financial statements of Cyprus companies is disallowed for tax purposes, as capital allowances are given instead. For accounting purposes, depreciation rates applied are those which write-off the assets over their useful life.
Cyprus double tax treaties
A summary of the applicable withholding tax rates for the income between countries having a double taxation treaty with Cyprus can be found by following the link
http://pkfabas.com.cy/cyprus-tax-cyprus-double-tax-treaties/
The tax rates are valid under certain conditions which are determined by the provisions of each agreement.
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Last updated: March 2020
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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.
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