C yprus tax resident companies are taxed on their worldwide income. A company is tax resident in Cyprus if it is managed and controlled in Cyprus. The corporation tax for companies in Cyprus is 12.5% however foreign taxes paid can be credited against this corporation tax.

Dividends:
o There is no withholding tax on dividends paid to non-residents whether companies or individuals.
o Dividends received by a resident or non-resident company, are generally exempt from corporation tax and Special Contribution for Defence (SCD).
o Dividends received by a Cyprus resident company from a Cyprus resident company are exempt from Special Contribution for Defence. (This is unless dividends are paid out of profits which are more than 4 years old.)
o Dividends received by a Cyprus resident company from a Cyprus non-resident company are generally exempt from Special Contribution for Defence.

Interest:
o Interest paid to non-resident companies is not subject to any tax.
o Interest paid to a resident company is subject to a Special Contribution for Defence tax at a rate of 30% (withheld at source) unless the interest is earned in connection with ordinary business activities.

Royalties:
o Royalties paid to non residents are exempt from withholding tax unless the rights giving rise to the royalty are used in Cyprus in which case they are subject to withholding tax of 5% on film royalties and 10% on other royalties.

Capital Gains:
o Gains arising from the sale of shares are tax-exempt, unless the gain results from the sale of shares in an unlisted company which owns immovable property situated in Cyprus.

Capital gains tax is levied at a rate of 20% on the gains from the disposal of immovable property or shares in unlisted companies owning property in Cyprus.

Losses:
o Tax losses may be carried forward for five years for set off against future taxable profits.

Tax Credit:
o Unilateral credit relief applies for tax paid abroad; but where a tax treaty exists,
the treaty provisions apply if more beneficial.

Rent:
o Rent paid to a Cyprus tax resident, is subject to Special Contribution for defence at a rate of 3% on 75% of the rental income. Note that Rental income is subject to personal income tax and corporation tax.  Transfer fees on immovable property:
o Transfer fee ranging from 3% to 8% calculated on the market value of the property as estimated by the Land Registry.

Annual Company levy of €350

Other taxes:
o Capital duty at 0.6% on the authorised share capital.
o Payroll tax.
o Annual real property tax on 1980 values increasing from 0.6% to 1.9%.
o Social Security.
o Stamp duty on contract relating to property or actions performed in Cyprus. (Maximum payable is €20,000)

This article is written for information purposes only and does not constitute legal advice.