Tax system

A. Legal Entities: Tax Rates for Companies

Taxable Income Tax Rate %
Companies 10
Public Law Constitutions 25

Exemptions

  • Dividend income from abroad and from Cyprus is exempt from Income Tax.
  • Profits earned from a permanent establishment abroad are exempt from income tax.
    The exemption does not apply if:
    • the permanent establishment activities lead to less than 50% investment income, and
    • the income tax charged on these profits is not substantially less than the corresponding Cyprus Income Tax.
  • Profit on the disposal of securities.
    The exemption stands for both shares in public companies and private companies as long as the profit is in the nature of income and not capital gain.
  • Interest received from non-trading activities.
    Interest received in the normal course of business will be considered as business profit taxed at normal rates.

Allowable expenditure

  • Donations or subscriptions for educational or other charity purpose are allowable without restriction.
  • Business entertaining expenses are only allowable if their total does not exceed 1% of the total turnover for the year up to a maximum of € 17.086.

Not allowable expenditure

  • Private motor vehicle expenses.
  • Professional tax.
  • Interest attributable to the cost of a private motor vehicle (either used or not used for business purposes), and any other fixed asset not used in the business. This provision is only valid for seven years since the acquisition day of the fixed asset.
  • Company’s levy paid to Registrar
  • Employer’s contribution to social cohesion fund

Goodwill

Proceeds from the sale of trade goodwill are taxed after deduction of any payments made to acquire such goodwill.

Tax losses

  • Losses incurred can be carried forward indefinitely until they are set off.
  • Group loss relief is available to a group of Cyprus resident companies in relation to current year losses. Two companies will be considered as part of a group if:
    • a company is 75% subsidiary of another
    • both companies are 75% subsidiaries of a third company
  • Losses from overseas activities can be set off against chargeable income for the year and can be carried forward.
  • On the conversion of a sole trader to a company, the accumulated losses of the sole trader can be transferred to the company and carried forward.

 

B. Physical Entities

Tax Rates for individuals

Taxable Income Tax Rates
0-€19.500 0%
€19.501- €28.000 20%
€28.001 - €36.300 25%
€36.301-€60.000 30%
€60.000 and above 35%

Personal allowances

The following personal allowances are deducted from the taxable income:

  • Social insurance contributions
  • Provident fund contributions
  • Life insurance
  • Donations up to €256

Exemptions

  • All the interest income earned by an individual.
    The interest earned by an individual from the usual business activities is not considered as interest but as profit.
  • Dividends received both from Cyprus and from abroad.
  • Profit from the sale of shares.
    The exemption applies both for the shares of private companies as well as the shares of public companies, provided that such profit is of an income nature.
  • The remuneration from the provision of salaried services outside Cyprus for a total period in the tax year exceeding 90 days in an employer other than a Cyprus resident or in a permanent establishment of an employer who is resident in Cyprus.
  • 20% of the remuneration from every employment exercised in Cyprus from an individual who is not resident in Cyprus prior the commencement of his employment in Cyprus, or £5.000, whichever is lower.
  • 50% of any remuneration earned by a non resident person taking up residence in Cyprus for the purpose of being employed by a Cyprus employer and whose annual income from employment exceeds €100.000 per annum. The exemption is given for 5 years starting from the year of commencement of the employment in Cyprus.

Further information you may find in our associate company Dinos Antoniou & Co Ltd web site www.dinoscpa.com

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