CYPRUS TAX MATTERS

The favorable tax scheme of the Republic of Cyprus combined with the straight forwards procedures urge many business people worldwide to choose Cyprus as the base of their business activities. Among others, Cyprus maintains double tax treaties with more than 50 countries.

Corporate Tax:

The corporate income tax in Cyprus is 12.5%.

All Cyprus tax resident companies are taxed on their income accumulated or derived within and outside Cyprus.

A company is considered as a resident of Cyprus if it is managed and controlled in Cyprus.

Non-Cyprus tax resident companies are taxed on income accumulated or derived from business activities carried out throughout a permanent establishment in Cyprus and on specific income deriving from sources in the Republic of Cyprus.

Exceptions:

  • Dividends;
  • Profits deriving from the disposal of Securities;
  • Foreign Exchange (FX) profits, apart from FX gains deriving from amount trading in foreign currencies and related derivatives;
  • Interest not arising from the ordinary business activities or highly related to the business activities of the company;
  • Loan Restructuring;
  • Profits from maintaining a permanent establishment outside Cyprus (subject to certain conditions);

Capital Gains Taxation:

Capital gains tax is imposed at the rate of 20% on:

  • Profits deriving from the disposal of immovable property located in the Republic of Cyprus
  • Profits deriving from the disposal of shares of companies not listed on a recognised stock exchange that own immovable property in Cyprus.
  • Profits deriving from the disposal of shares of companies which indirectly own immovable property in Cyprus and generate at least 50% of their market value from such immovable property.

Exceptions:

  1. The disposal of shares listed on any recognised stock exchange.
  2. Subject to certain conditions, land, buildings and land with buildings, acquired within 16th of July 2015- 31st of December 2016.
  3. Transfers by reason of death.
  4. Gifts to a company where the company’s shareholders are members of the disposer’s family and the shareholders continue to be members of the family for five years after the day of the transfer.
  5. Gifts by a company of which all the shareholders are members of the same family, to any of its shareholders provided that the company acquired such property as a gift too. The donee must have ownership of the property for at least three years.
  6. Gifts to charity organisations.
  7. Gifts to the Government of the Republic of Cyprus.
  8. Exchange or sale of immovable property in accordance with the Agricultural Land (Consolidation) Laws Expropriations.
  9. Exchange of properties, given that the whole profit generated from the exchange has been used to purchase the other property.
  10. Gains generated from a transfer of ownership or shares in the case of a company reorganisation.

 

Immovable Property Tax:

The immovable property tax is abolished as from the year 2017 and for each subsequent year. That is to say, the immovable property tax in Cyprus is 0%.

Contact our tax experts:

Our multilingual team of tax experts is able to provide you with detailed guidance on all the matters related to taxation in Cyprus. The experienced corporate and real estate lawyers of Rah Legal offer tailor-made solutions by analyzing the particular needs of each client. For more information on this topic, please contact one of our legal experts.

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