Advantages of Cypriot Companies
- Corporation Tax on net profits is only 12,5%.
- Dividend income is tax exempt.
- Profits realised on disposal of securities/shares in subsidiaries, bonds, derivatives, stocks etc., are not subject to taxation in Cyprus. This applies to all gains including capital gains and gains from trading in securities.
- A Notional Interest Deduction (NID) is allowed on paid, newly introduced capital.
- Being part of the European Union (EU) jurisdiction.
- Having a wide network of double tax treaties providing zero or low withholding tax rates on interest, dividends and royalties.
- No withholding tax on dividend, interest and royalties paid to non-resident individuals, and corporations.*
- Interest paid to non-resident group companies is tax deductible.
- Intellectual Property (IP) including copyrights, patented inventions and trademarks have an exemption of 80% of the overall profit derived from the qualifying intangible asset; the following rule applies for intellectual property assets developed after 30th June 2016.
- Losses offset against other sources of income, are carried forward for five years and can be set off against profits of another company of the same group (Group of Cyprus tax-resident companies).
- Capital gains are not taxable in Cyprus except for the 20 % tax on gains on immovable property located in Cyprus.
- Extensive Tax Treaty network with more than 60 countries.
*Note : Since 1 March 2019, the above types of income are subject to GeSY contributions , (at the rate of 1.7% from 1 March 2019 until the 29 February 2020, then increased to 2.65% from March 1, 2020), restricted to a maximum of EUR180,000 income annually
Advantages For Cyprus Tax Resident Individuals
For salaries, benefits of employment and the director's remuneration, the main advantages are:
Income Tax
a) The first €19.500 is taxed at 0%, see the table below:
| Taxable Income € | Tax Rate % |
|---|---|
| 0-19,500 | 0 |
| 19,501 – 28,000 | 20 |
| 28,001 – 36,300 | 25 |
| 36,301 – 60,000 | 30 |
| 60,001 and over | 35 (this rate is applicable as from the year 2011 onwards) |
Exemptions
i) 20% of the remuneration from any office or employment exercised in Cyprus by an individual who was a resident outside Cyprus before the commencement of their employment, or €8.543, whichever is lower. This exemption applies for a period of five years.*
*As from 26/7/2022, a "new 20% exemption" on remuneration (up to a maximum amount of exemption of EUR8.550 p.a.) applies for first employments commencing after the 26 July 2022 exercised in Cyprus, by individuals who immediately prior to the commencement of their employment in Cyprus were not a resident of Cyprus for a period of at least 3 consecutive tax years and were employed outside of Cyprus by a non-resident employer. For each individual the exemption will apply for a period of 7 years, starting from the tax year following the tax year of commencement of employment.
ii) 50% of the earnings of non-resident individuals taking up employment in Cyprus and earning over €100.000 will be exempt from tax for 10 years.*
*As from 1/1/2022, an allowance of 50% is given for first employments commencing in Cyprus with remuneration exceeding €55.000 p.a., for individuals who were not residents of Cyprus for a period of at least 10 consecutive tax years immediately prior to the commencement of their employment in Cyprus. The exemption applies for 17 years.
iii) 100% exemption on remuneration for salaried services rendered outside Cyprus for more than 90 days in a tax year to a non-Cyprus resident employer.
b) Deductions
Contributions to Cypriot us approved charities are deductible with no limits.
Special Defence Contribution (SDC) (Withholding Tax)
1. For resident and non-domiciled individuals, no withholding taxes apply (except for minimal GeSY contributions as outlined above)*
2. For residents and domiciled individuals:
On dividends: 17%
On investment interest: 30%
If SDC applies, then no income tax is payable.
3. Taxes withheld abroad can be credited against corresponding Cypriot tax.
4. Social Insurance Contributions
Total employee's contribution is 8,8%.
5. Gains on disposal of shares/titles are not subject to tax.
6. Overseas Pensions
The income of an individual who is a resident in Cyprus from a pension for services outside Cyprus is subject to tax at 5% if it exceeds €3.417.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
