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Tax System in Cyprus

Resident of Cyprus:

  • An individual who stays in Cyprus for a period of time of at least 183 days in a tax year;
  • A company, whose management and control is exercised in Cyprus.

    Tax Residents ( individuals or companies) are being taxed both on their income acquired in and outside Cyprus.

    Non Residents (individuals or companies), are being taxed only on their income acquired in Cyprus.

    Corporate Tax

    Cyprus offers a wide range of tax advantages to companies conducting business on the island. Such advantages derive from the country's favourable legislation compliant with OECD and EU requirements, as well as from the wide network of double taxation treaties with more than 60 countries involved.

    Briefly, the main provisions of corporate taxation are:

    • Uniform corporate tax rate of 12.5%, the lowest tax rate in the EU;
    • No tax on dividends or interest payments to non-residents, as well as residents not Domiciled in Cyprus;
    • No withholding taxes on royalty payments relating to the use of rights outside Cyprus;
    • Favourable treatment of tax losses;
    • No tax on profits from permanent establishment outside Cyprus, subject to certain terms and conditions;
    • No tax on capital gains from disposal of securities listed on a recognised Stock Exchange Market;
    • No tax on profits from reorganisations;
    • Tax free repatriation of profits and capital.

    Personal Income Tax

    One of the lowest top statutory personal income tax rate, based on the Eurostat΄s data.

    Individuals are subject to a scaled assessment rate on their annual income, starting with 20%, 25%,30%, and ending at 35%, with the first €19500 of income being non-taxable.

    Below are briefly described some of the main provisions of Income Tax applied to individuals:

    Income from the sources described below are NOT taxable under CERTAIN rules and conditions:

    • Income from Dividend and Interest;
    • Profit from permanent establishment outside Cyprus;
    • Income from Employment (salary earned abroad) outside Cyprus;
    • Profit from the sale of securities;
    • loss from trade within the current year and or previous years is deducted from the taxable income, subject to certain terms and conditions;
    • Income received in the form of retiring gratuity, compensation for death or injuries, provident fund, pension fund, or other approved funds, is exempted from tax.

    International Trusts

    Cyprus international trusts enjoy important tax advantages, providing significant tax planning possibilities:

    • Income and gains of a Cypriot international trust, derived from sources outside Cyprus are exempt from any tax imposed in Cyprus;
    • Dividends and interest received by a trust from a Cyprus international business company are not subject to tax nor are they subject to withholding tax;
    • Exemption from taxation in the case of an alien who creates an international trust in Cyprus and retires in the country, on the condition that all the property settled and the income earned is abroad, even if the individual is a beneficiary.

    Value Added Tax

    Liable to V.A.T. tax are those entities selling goods or providing services within the Republic of Cyprus, and those importing goods from other member states and Third countries.

    V.A.T. rates are:

    • Standard rate: 19%;
    • Reduced rates: 9% / 5%;
    • Zero rate: 0%.

    Visitors from non-EU countries can claim a refund of VAT paid on their purchases of goods in Cyprus upon their departure from the country, provided that the purchased goods are transported outside Cyprus (and the EU) in their personal luggage.

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    Related Links

    Tax Department
    Adjusted Top Statutory Tax Rate on Corporate Income in EU 2009
    Department of Merchant Shipping
    Department of Customs and Excise
    Electronic Submission of Income Tax Returns
    VAT Service

    Last Update on: 16/07/2018 12:52:36 PM

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