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Corporation Tax

Corporation TaxAll companies that are tax residents of Cyprus are taxed on their income accrued or derived from all sources in Cyprus and abroad....

All companies that are tax residents 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

  • Companies: 12.5%
  • Semi-government organisations: 25%

Taxable income

  • Corporation tax is imposed on business profits, interest, discounts, rents, royalties, remunerations or other profits from property and net consideration in respect of trade goodwill.
  • Expenses incurred for the production of income are tax deductible.
  • Losses brought forward or surrendered by other group companies (group relief) can be set off against taxable profits.

Exemptions

  •     Profit from the sale of securities: 100%
  •     Dividends: 100%
  •     Interest not arising from the ordinary activities or closely related to the ordinary activities of the company: 100%
  •     Profits of a permanent establishment abroad, under certain conditions: 100%

Tax deductions

All expenses incurred wholly and exclusively in earning the income of the company including:

1. 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 following 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.

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.

2. 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.