Corporate Income Tax Rate                                           (%)12.5 

Capital Gains Tax Rate                                                    (%)20 

Branch Tax Rate                                                               (%)12.5 

Withholding Tax                                                               (%)  

Dividends0                                                                        (a)

Interest0                                                                            (b)

Royalties from Patents, Know-how, etc.0/5/10.        (c)

Branch Remittance Tax                                                   0 

Net Operating Losses                                                     (Years)  

Carryback                                                                           0 

Carryforward                                                                      5

​

(a)A Special Contribution to the Defence Fund at a rate of 17% is withheld from dividends paid to resident and domiciled individuals.

 

(b)A Special Contribution to the Defence Fund at a rate of 30% is withheld from interest paid to resident companies and resident and domiciled individuals, if the interest is not considered to arise in the ordinary course of their business or to be closely connected to their ordinary course of business.

 

(c)Cyprus levies withholding tax at a rate of 10% on the gross amount of royalty payments that are connected with the economic utilization of intellectual property rights in Cyprus and technical assistance payments made by tax resident persons to nonresident persons that do not carry on any business in Cyprus. A 5% rate applies to royalties paid with respect to films and television. A 5% withholding tax is also imposed on payments made to nonresident persons in consideration for services performed in Cyprus with respect to activities connected with the exploration or exploitation of the seabed or subsoil or their natural resources or with respect to activities relating to the installation and exploitation of pipelines and other installations on the soil, seabed or sea surface, if such payments are not connected with a permanent establishment in Cyprus. Withholding tax may be reduced or eliminated on the basis of the European Union (EU) Interest and Royalty Directive and/or on the basis of a double tax treaty.

​

TAXES ON CORPORATE INCOME AND GAINS​

​

Corporate income tax. Companies resident in Cyprus are subject to income tax on their worldwide income. A company is resident in Cyprus if its control and management are exercised in Cyprus. Nonresident companies are taxed only on income derived from a permanent establishment in Cyprus and on rental income from property located in Cyprus.

​

Rate of corporate tax. The standard rate of corporate income tax is 12.5%.

​

Capital gains. A capital gains tax of 20% is levied on gains derived from the disposal of the following:

​

• Immovable property located in Cyprus

• Shares in companies whose assets include, among others, immovable property located in Cyprus

• Shares in companies that participate (either directly or indirectly) in a company or companies that own immovable property located in Cyprus and at least 50% of the market value of such shares is derived from the relevant property

​

The disposal of shares of companies listed on a recognized stock exchange is exempt from capital gains tax. In addition, no capital gains tax is imposed if the transfer is made in the course of a qualifying company reorganization.

​

The gain subject to tax in Cyprus equals the disposal proceeds less the greater of the cost or market value on 1 January 1980, adjusted for inflation. Inflation is calculated using the official Retail Price Index. In the case of disposal of shares, the gain subject to capital gains tax in Cyprus is restricted to the gain attributable to immovable property located in Cyprus.

​

Gains from the disposal of immovable property that consists of land or land and buildings is exempt from capital gains tax if the property is acquired between 16 July 2015 and 31 December 2016 from an independent third party and not through an exchange of property or through a donation or gift.

​

Administration. The income year in Cyprus is the calendar year. Tax is payable on 1 August following the income year. However, an estimate of tax due is made by 31 August of the income tax year, and provisional tax is payable in two equal installments by 31 August and 31 December.

Overdue tax is subject to interest (currently at the rate of 3.5% per year) beginning on the due date. In addition, a flat 5% penalty is imposed on the tax due in the event of a delay in payment. As of 14 July 2017, this penalty is doubled if the outstanding tax is not paid within two months from the due date.

​

Dividends. Dividends paid to nonresident persons are not subject to withholding tax.

​

A 17% Special Contribution to the Defence Fund is withheld from dividends paid to resident and domiciled individuals. This is a final tax. Also, see Section D.

​

If a company does not distribute as dividends at least 70% of its after-tax accounting profits within two years after the end of the relevant income year, a 17% Special Contribution to the Defence Fund is imposed on a deemed distribution of 70% of the profits. For the purposes for determining the amount of profit subject to deemed distribution, any capital expenditure incurred in the acquisition of plant and machinery (excluding private saloon cars) and buildings during the period of 2012 through 2014 is deducted from the after-tax profits. If a company distributes more than 0% but less than 70% of its profits, the amount of the deemed distribution subject to tax is reduced by the amount of the actual distribution. The tax on a deemed distribution is reduced proportionally by the percentage of shares held directly or indirectly by nonresidents and non-domiciled residents.

​

Deemed distribution does not apply to profits that are directly or indirectly attributable to shareholders that are nonresidents of Cyprus and to individual shareholders that are resident but do not have a domicile in Cyprus.

 

Non-domicile rule. A Cyprus resident individual who is not domiciled in Cyprus is effectively not subject to the Special Contribution to the Defence Fund in Cyprus on interest, rents or dividends regardless of whether such income is derived from sources within Cyprus and regardless of whether such income is remitted to a bank account or economically used in Cyprus (see Dividends and Section D). This rule took effect on 16 July 2015.

​

Foreign tax relief. Foreign tax on profits and gains of Cyprus resident persons is credited against Cyprus tax payable. Such foreign tax relief cannot exceed Cyprus tax payable on the same profits or gains. Any unused foreign tax relief is wasted.

​

To continue reading, and to obtain the full publication, please visit: https://www.ey.com

​

The content is based on information current as of 1 January 2018, unless otherwise indicated in the text of the chapter. Changes to the tax laws and other applicable rules in various countries covered by this publication may be proposed. Therefore, readers should seek independent tax advice from their local and international firms to obtain further information.

​

This publication contains information in summary form and is sourced from the Ernst & Young Worldwide Corporate Tax Guide, and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither Aston & Willson LLP  or EYGM Limited nor any other member of an organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.