A company which is managed and controlled in Cyprus, is considered tax resident in Cyprus and is liable to tax on income arising both from sources within and outside the Cyprus. A company which is not tax resident in Cyprus is liable to tax on income arising from sources within Cyprus only.
Corporation tax at the rate of 12.5% is imposed on all companies that are tax-resident in Cyprus for the year 2013 and onwards (10% tax rate for years up to 31 December 2012).
Foreign taxes paid can be credited against the corporation tax liability, irrespective of the existence of a double tax treaty with the foreign country.
The tax loss incurred during a tax year and which cannot be set off against other income, is carried forward subject to conditions and set off against the profits of the next five year period.
There are certain types of income which are exempt for tax purposes and allowances and deductions that may decrease your corporation tax. The main exemptions are as follows:
- Profit from the sale of securities including the redemption of units or other ownership interests in an open-ended or closed-ended collective investment scheme
- Interest not arising from the ordinary activities or closely related to the ordinary activities of the company **
- Profits of a permanent establishment abroad, under certain conditions
- Gains relating to foreign exchange differences (forex) with the exception of forex arising from trading in foreign currencies and related derivatives
*Dividend income may be subject to Special Contribution for Defence.
Excluding as from 1 January 2016, dividends which are tax deductible for the paying company.
**Interest income of Collective Investment Schemes is considered to be arising from the ordinary activities or closely related to the ordinary activities of the Scheme.
Interest income is subject to Special Defence Contribution.
The above should be used as a source of general information only. It is not intended to give a definitive statement of the Law and is subject to the Disclaimer.
For further details on these issues, please do not hesitate to contact us.