|
Cyprus tax resident companies
All companies
tax resident of Cyprus are taxed on all income accrued or derived
from all sources in Cyprus and abroad.
Non-Cyprus
tax resident companies
A non-Cyprus
tax resident company is taxed on income accrued or derived from a
business activity which is carried out through a permanent
establishment in Cyprus. A permanent establishment is a fixed place
of business through which the business of an enterprise is wholly or
partly carried on. The term permanent establishment includes a place
of management, a branch, an office, a factory and a workshop.
A Company is
a tax resident of Cyprus if it is managed and controlled in Cyprus.
There is no exact definition of management and control. However, the
basic requirements for management and control are as follows:
·
The residency of the majority of the directors.
·
The location where the board meetings of the Company
are held.
·
The location of the formation of the general policy
of the Company.
Corporation
tax rates
The following tax rates apply to
companies:
|
|
Tax Rates (%) |
|
Semi - government
organizations |
25 |
|
Other Companies |
10 |
Exemptions
|
Type of Income |
Exemption Limit (%) |
|
Profit from the sale of
securities |
100 |
|
Dividends |
100 |
|
Interest not arising from the
ordinary activities or closely related to the ordinary
activities of the Company (passive)
(if related then fully
taxable - active) |
50 |
|
Profits of a permanent
establishment abroad, under certain conditions (more than
50% of the income of the permanent establishment abroad
derives from trading activities and the tax rate applicable
overseas is not significantly lower than the tax rate
applicable in Cyprus) |
100 |
Tax deductions
All expenses
incurred, which are wholly and exclusively for the purpose of the
trade are allowable including the following:
|
Type of Expense |
Exemption Limit (%) |
|
Donations to approved
charities |
100 |
|
Bad debts of any business |
100 |
|
Entertaining expenses for
business purposes |
Up to €17,086.01
Nil, if the expense
exceeds 1% of the income |
|
Expenditure for scientific
research |
100 |
|
Employer’s contribution to
social insurance and approved funds on employees’ salaries |
100 |
|
Expenditure on patents or
patent rights or royalties |
100 |
|
Interest in relation to the
acquisition of business assets used in the business |
100 |
Deductions not allowed
|
Type of Expense |
Non-tax deductible Limit (%) |
|
Any expenses for private use |
100 |
|
Fines and penalties |
100 |
|
Mortgage fees |
100 |
|
Unrealised foreign exchange
loss |
100 |
|
Payment for immovable
property tax |
100 |
|
General provision of doubtful
debts |
100 |
|
Contributions to Social
Cohesion Fund |
100 |
|
Any expenses not made wholly
and exclusively for the purpose of the trade |
100 |
Tax losses
The tax loss
incurred during the year, which cannot be set off against other
income, is carried forward to be utilized from the first available
future taxable profits. This provision is applicable for all losses
incurred from 1997 onwards.
Set-off of
group losses are allowable only with profits of the corresponding
fiscal year. Both Companies should be Cypriot companies and should
be members of the same group for the whole year of assessment.
Two
companies are deemed to be members of the group if:
One is by 75%
subsidiary of the other; and Both companies are by 75% subsidiaries
of a third company (direct and indirect control).
A partnership
or a sole trader converted to a limited liability company can
transfer tax losses into the company for future utilization
Losses from
permanent establishment abroad can be set off with profits of the
company in Cyprus. Subsequent profits of the permanent
establishment abroad are taxable up to the amount of losses allowed.
Annual Wear
and Tear Allowances on Fixed Assets
The following
allowances which are given as a percentage on the cost of
acquisition deducted from the chargeable income:
|
Fixed Assets |
(%) |
A. Plant and Machinery
|
|
|
Plant and Machinery |
10 |
|
Furniture and fittings |
10 |
|
Televisions and videos |
10 |
|
Industrial carpets |
10 |
|
Boreholes |
10 |
|
Machinery and tools used in
an agricultural business |
15 |
|
B. Motor vehicles (except
saloons) and motorcycles |
20 |
|
C. Computer Hardware and
software |
20 |
|
Hardware and operating
systems |
20 |
|
Application software |
|
|
Up to €1,708.60 |
100 |
|
Over €1,708.60 |
33 1/3 |
|
D. Tractors, excavators,
trenches, cranes, bulldozers |
25 |
|
E. Buildings |
|
|
Commercial Buildings |
3 |
|
Industrial, agricultural and
hotel buildings |
4 |
|
Flats |
3 |
|
Metallic greenhouse
structures |
10 |
|
Wooden greenhouse structures |
33 1/3 |
|
F. Boats |
|
|
Sailing vessels |
4.5 |
|
Steamers, tugs and fishing
boats |
6 |
|
Ship motor launches
|
12.5 |
|
New cargo vessels |
8 |
|
New passenger vessels |
6 |
|
Used cargo/passenger vessels |
Over their useful lives |
|
G. Tools |
|
|
Tools in general |
33 1/3 |
Special type of companies
a.
Shipping and Ship Management Companies.
No income tax
is payable on the profits earned or dividends paid by a Cyprus
shipping company which owns ships under the Cyprus flag and operates
in international waters, or on the salaries of officers and crew of
such ships.
Cypriot companies not having ships
under the Cyprus flag are subject to the ordinary corporation tax
rate of 10%.
Local or international ship
management and crew management businesses (incorporated or
unincorporated) have the option to be taxed either at the rate of
4.25% or at rates equal to 25% of the rates used to calculate
tonnage tax of vessels under management which are registered outside
Cyprus.
b. Insurance companies
Profits of insurance companies
are liable to corporation tax similar to all other
Companies, except in the case where
the corporation tax payable on taxable profit of life insurance
business is less than 1,5 % on gross premium. In this case
the difference is paid as additional corporation tax. |
