Are you a business owner looking for a tax-friendly destination to expand your operations?
Look no further than Cyprus, where the Cyprus corporate tax rate is competitive and one of the lowest in the European Union. The country offers a competitive tax regime and a range of other advantages for businesses looking to establish a firm in Cyprus.
Not only does Cyprus offer an attractive tax regime, but it also boasts a strategic location, a skilled workforce, and a stable political and economic environment.
The country also has a network of double taxation treaties with over 60 countries, which aim to avoid the double taxation of income that may arise when a company carries out business in two or more countries.
In this article, we’ll take a closer look at corporate taxes in Cyprus and explore why the country has become a popular destination for businesses seeking to optimize their tax position.
Corporate Taxes in Cyprus
Cyprus is a favored destination for international businesses because of the profitable tax system. The corporate income tax is one of the main taxes paid by companies on their profits earned in Cyprus. However, the tax rate is 12.5% and the tax base is the taxable income earned by the firm in Cyprus.
In addition to the low corporate tax rate, Cyprus also offers other tax incentives to businesses, such as a notional interest deduction on new equity capital, tax exemptions on profits from the sale of securities, and tax exemptions on profits from permanent establishments abroad.
Furthermore, Cyprus has a network of double tax treaties with over 65 countries, which can help companies avoid paying taxes twice on the same income.
Overall, Cyprus has a competitive tax system that is designed to attract international businesses and encourage economic growth.
Here is the revised Cyprus corporate tax structure for February 2023.
|Tax Type||Tax Rate||Tax Base|
|Corporate Income Tax||12.5%||Taxable income earned by the company in Cyprus|
|Capital Gains Tax||20%||Gains shares in firms that emanate more than 50% of their value from rooted assets in Cyprus|
|Value Added Tax (VAT)||19% (standard rate)
5% or 9% (reduced rates)
|Sales of goods and services in Cyprus, as well as imports into Cyprus|
|Special Defence Contribution||17%||Dividends, interest income, and rental income received by Cyprus tax residents|
|Stamp Duty||Varies||Various transactions, such as the transfer of immovable property or shares in a company|
|Social Insurance Contributions||Employer: 7.8% – 11.45%
|Gross remuneration paid to employees|
|Payroll Tax||Employer: 2.65% – 3.7%
|Gross remuneration paid to employees|
Various Corporate Tax Rate in Cyprus
Corporate taxes in Cyprus are taxes that are levied on the profits of companies registered in Cyprus.
Here are some key points about the corporate tax rate in Cyprus:
Cyprus Tax Regime: Individuals
The resident in Cyprus will be taxed on income that accrues or arises from both within and outside of Cyprus. Cyprus island. Non-residents’ income can be taxed within Cyprus when it is earned or originates within Cyprus.
Cyprus Tax Regime stipulates that anyone who is in Cyprus for more than 183 consecutive days is considered to be a tax resident.
Cyprus Tax Regime: Companies
For a resident business, the tax rate is imposed on the total income of the business. In contrast in the case of a non-resident corporation only the revenue that is earned or derived in Cyprus is assessed tax in Cyprus. The tax rate for a business is 12.5 percent.
Value Added Tax (VAT): It is a tax on the value added to goods and services at every phase of exhibit or allotment. In Cyprus, the common VAT rate is 19%, although there are decreased rates of 5% and 9% for certain products and aids.
Capital Gains Tax: It is a tax on the profit that is made from plenty of certain acquisitions, such as possessions or shares. In Cyprus, capital gains tax is currently set at 20%.
Double Tax Treaties: The Cyprus tax regime allows for double tax agreements between Cyprus as well as other nations. These double tax treaties set the maximum amount of withholding tax rates necessary to be taken out of income that a Cyprus tax resident who is an individual who is a resident of a different country that is a member of under the Double Tax treaty.
Who pays Cyprus corporate taxes?
Below we have got a list of The following types of corporations that are subject to business taxes in Cyprus:
- Firms that are enlisted in Cyprus and have earned profits during the tax year.
- Non-resident firms that have a permanent establishment in Cyprus and have earned income in Cyprus.
- Organizations that are engaged in trading, manufacturing, or other business activities in Cyprus.
- Companies that own property or assets in Cyprus and earn income from them.
- Companies that provide services in Cyprus, such as conferring, legal, or computation services.
- Companies that receive income from investments, such as dividends, interest, or royalties, in Cyprus.
- Firms that conduct R&D work in Cyprus earn profits from those activities.
- Companies that have subsidiaries or joint ventures in Cyprus earn profits from them.
In general, any company that carries on business activities or earns income is subject to the corporate tax rate in Cyprus on its profits.
Another form of business taxes in Cyprus
Besides corporate tax, there are several other forms of business taxes in Cyprus that companies may be subject to, here are some examples:
- Social Insurance Contributions: These are contributions paid by employers and employees to fund the social insurance system in Cyprus. The employer contribution ranges from 7.8% to 11.45% of the gross remuneration paid to employees, while the employee contribution is 7.8% of their gross remuneration.
- Immovable Property Tax: This tax is levied on the market value of immovable property owned by the company in Cyprus. The tax rate can be up to 0.1% of the market value.
- Payroll Tax: This is a tax on gross remuneration paid to employees. The employer contribution ranges from 2.65% to 3.7%, while the employee contribution is 1.2%.
- Local Authority Taxes: Companies may also be subject to local authority taxes, such as municipal and sewerage taxes. The rates of these taxes differ relying on the regional authority in question.
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If you’re looking for a tax-friendly destination to expand your operations, Cyprus is worth considering. With its commitment to transparency and foreign investment, Cyprus is poised to continue to be a leading destination for businesses in the years to come. The country has also implemented measures to combat tax evasion and improve transparency, which has further enhanced its reputation as reputable and trustworthy.
To simplify corporate taxes in Cyprus, businesses should work with experienced tax professionals of Odint Consultancy, who can explain the complexity of the tax code and ensure they maximize their benefits.
The corporate tax rate in Cyprus is 12.5%, which is one of the lower in the EU.
Both resident and non-resident companies that generate income in Cyprus are subject to corporate taxes.
Yes, there is a range of tax incentives available to businesses in Cyprus, including tax credits for research and development activities and tax exemptions for specific industries.
Yes, Cyprus has a network of double taxation treaties with over 60 countries, which aim to avoid the double taxation of income that may arise when a company carries out business in two or more countries.
The punishments for tax evasion in Cyprus can contain penalties, jail, and seizure of acquisitions.