Cyprus Tax Planning

Planning your taxes is a crucial key to your business’ success. Cyprus with a Corporate Tax Rate at only 12.5% and ZERO Tax on Dividends offers tremendous opportunities to international companies. Make the low Cyprus Corporate Tax Rate your high end tool to your success. Our team will be the architects of your tax planning around the low Cyprus Corporate Tax Rate, advising you along the way without reservations to avoid pitfalls and mistakes.  The Cyprus Tax System is a very concise and rich system which provides for every possibility covering onshore but also offshore operations and activities and cross border trading and other activities. The Cyprus system comprises all the following taxes:

  1. Cyprus Corporate Tax
  2. Cyprus Income Tax
  3. Cyprus Capital Gains Tax
  4. Immovable Property Tax
  5. Immovable Property Transfer Tax
  6. VAT
  7. Special Defence Contribution Tax
  8. Double Tax Treaties

Every tax is regulated by a relevant legislation, which provides for the tax rate and its collection. Cyprus Taxes are approved by the Cyprus Government and in particular by the Cyprus Parliament.

Who Pays Cyprus Corporate Tax 

The Tax legislation, its regulatory provisions, its executions and its interaction with the business community is straightforward and predictable. The Cyprus Tax Authorities are fair and have excellent relations with the taxpayers. By providing an efficient and transparent environment, the Cyprus Tax enhances Cyprus’s competitiveness and contributes to making Cyprus a jurisdiction, which is attractive for international tax planning of every serious businessman.

Every Cyprus Company can be separated into two categories. A Cyprus Tax Resident Company and as a non-resident Company.

If the company is not managed and controlled in Cyprus the company is regarded as non-resident and no Cyprus tax will be imposed on the company’s income arising from sources outside Cyprus, but only on income arising from activities in Cyprus.

A Company shall be regarded as managed and controlled outside Cyprus if the majority of its directors are non-Cyprus residents and the board of directors does not meet regularly in Cyprus, it doesn’t have any operational office in Cyprus and generally there is no management of the day to day operations of the company in Cyprus.

Companies which are considered as Cyprus Tax Residents should prove that they are managed and controlled in Cyprus. The main determining factor for establishing management and control in Cyprus is to ensure that all board of directors meetings take place in Cyprus. Minutes of such meetings should be prepared and maintained at the company’s registered office in Cyprus.

The Tax Residents in Cyprus are liable to tax on their worldwide income, which is received both in Cyprus and abroad. Therefore, it pays Cyprus Corporate Tax and of course it benefits of the 12.5% Corporate Tax Rate and of the Double Taxation Avoidance Treaties.

Exemptions:

  1. No corporate tax is charged, on dividends paid to the shareholders who are not tax residents in Cyprus or on dividends received by the company as a shareholder of any companies abroad.
  2. No tax on profits from trading in securities.
  3. No tax on interest earned.
  4. No withholding tax on royalties paid from Cyprus in respect of intellectual property exploited outside Cyprus.
  5. No tax or capital gains and no tax on profits of sale of immovable property held by the Cyprus Company, which is situated outside Cyprus.
  6. No tax on profits made through a permanent establishment, like a chain of supermarkets, which is situated wholly abroad.
  7. Tax losses can be carried forward indefinitely.

 Cyprus Double Tax Avoidance Treaties 

A Cyprus Company (maybe good idea to put link) can take advantage of an extensive network of Double Tax Avoidance Treaties, with at least 42 countries, such as the USA, China, India, Canada, Russia, UK, European Countries etc. Cyprus Corporate Tax at 12.5% flat is one of the lowest in the European Union. A Double Tax Avoidance Treaty with your country guarantees that you get at least preferential treatment when the time comes to pay corporate tax of your company in your country. The general rule is that you will pay the lower tax of the two. You can check the list of Double Tax Treaties of Cyprus with third countries and check if your country has signed one with Cyprus by following this link: Double Tax Treaty List (should be the link)

 Special Defence Contribution Tax.

This Cyprus tax is paid only by Cyprus companies which are Tax Resident in Cyprus and carry out trading in Cyprus. Special Defence Contribution Tax has been increased recently by Law 117(1)/2002 as follows: Dividends 20%.  Interest income (15% up to 28 April 2013) today 30%.  Interest received by an individual from Government Savings Certificates 3%. Interest received by an individual from Government Bonds 3%. Interest earned by an approved provident fund 3%.  Interest earned by the Social Insurance Fund 3%.  Rental income (less 25%)   3%.

Above, we have given you a short description of the most important taxes, with particulars of rates and legislation. They are for your general guidance and not for a source of tax advice to regulate your business in detail. If you need any professional advice, please get in touch with us for a responsible and professional approach and advice to your particular Cyprus tax problem, query or need.

Our Cyprus tax planning team can provide among others:

  • Efficient tax planning to ensure minimization of global tax burden
  • International taxation structures – Different types of holding structures based on the client’s needs
  • Tax efficient funding and extraction of profits
  • Transfer pricing issues
  • Obtaining tax rulings from the tax authorities
  • Preparation and submission of personal and corporate tax returns to the Inland Revenue
  • Filing of requests for issuance of tax residency certificates
  • Tax efficient financing of the company’s/group’s activities
  • Tailor-made solutions through International Tax Planning Structures
  • Withholding tax advice and compliance