Your Handy Guide to The Cyprus Corporate Tax Regime

Cyprus, as one might already be aware, is one of the first countries people think of when they want to start new businesses without having to worry about paying exorbitant taxes. Not many countries offer a legitimate and globally respected economy with such low tax rates and numerous other direct and indirect benefits.

Unlike many other tax-haven countries Cyprus can be better defined as a low-tax jurisdiction and not a tax haven. It is well respected internationally, as a member of the European Union and one of the few select low-tax countries to be included in the OECD white list.

Here’s a quick list of all the advantages Cyprus has over other similar low-tax jurisdictions or tax-havens:

  • Geographical proximity to Asia, Europe, and Africa with unique access to many major trade routes.
  • An unparalleled number of double tax-treaties (over 55) for any low-tax jurisdiction.
  • Business-friendly procedures and regulations.
  • High human development index and a highly skilled workforce.
  • Modern taxation system and sound infrastructure.
  • Favourable corporate and trade laws.
  • A detailed list explaining all the benefits of incorporating in Cyprus can be found here.

All About the Business-Friendly Tax Regimen

  • The corporate tax in Cyprus is 12.5%. This is not just one of the lowest in the EU but also among all the reputed low-tax jurisdictions of the world. Add to this the 55 double tax treaties and there are enormous tax benefits to be reaped by companies which qualify as resident companies. It is very convenient to attain the tag of a Cyprus company, as a person doesn’t need to be personally present to incorporate a company nor does a company need to be run from within the country. Hiring professional services remotely and providing all the required documentation is often, all that is required.
  • The income accruing from a permanent foreign establishment is fully exempt.
  • There is no tax on any sort of capital gains in Cyprus, except when there is a disposal of immovable property within Cyprus jurisdiction or on similar disposal of unlisted shares of a company holding real estate in Cyprus.
  • There is no tax on dividend income whether dividends are being paid to shareholders or are being received from a subsidiary company, except in case of resident companies under the SDC. There are also complete exemptions from the SDC (Special Contribution for Defence) and almost all general companies qualify for such exemptions. Thereby making taxes on dividend incomes almost always nil.
  • Just like dividend, there is no tax on interest income except when interest arises in the ordinary course of business meaning is an integral part of the business itself.
  • Profits arising out of any sale or disposal of qualified securities such as shares of a listed company on any recognized stock-exchange are completely tax-free.
  • There is no tax on foreign exchange gains. The tax only applies if such gains are made in the process of dealing and trading in foreign currencies or in any derivatives of such.
  • There’s no provision of withholding taxes on dividends, interests, and royalties except only when the intellectual property in case of royalties is being used within the jurisdiction of the country.
  • Losses from one source of income are allowed to be set-off against other sources. The leftover losses are then permitted to be carried forward for the next five years.
  • Companies can be capitalized by the way of loans from their parent company while still enjoying deductions on loan interest as there are no Thin-Capitalisation restrictions. Nor are there any transfer pricing regulations.
  • Gifts and inheritance are completely untaxable in Cyprus.
  • Processes like re-domiciliation of the corporation are also completely tax-free.
  • There is no capital gains tax on the exchange of equally valued immovable properties or on the transfer of any such property in accordance with a company reorganization.
  • There is no immovable property tax since 2017.

All the above-mentioned benefits make Cyprus finely cut-out to support and assist entrepreneurs with its uncomplicated corporate regulations and simple procedures along with one of the friendliest tax systems in the world.