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Corporate taxation in Cyprus

Setting up your business in Cyprus

Cyprus is one of the most appealing tax frameworks in Europe. As an EU member state since 2004, Cyprus aligns its regulatory standards with the EU and OECD guidelines, fully adhering to their requirements. The island nation offers an enticingly low corporate tax rate of 12.5%, making it one of the most favorable jurisdictions for international tax planners. This attractive tax rate, complemented by an extensive network of double tax treaties, places Cyprus at the forefront for those seeking favorable tax solutions.
All companies that are tax residents in Cyprus are subject to taxation on income generated from both domestic and foreign sources. Non-tax resident companies in Cyprus, are completely tax exempt on all incomes generated overseas.

A company is classified as a tax resident in Cyprus if its management and control are based within the country. Tax credits can be applied against the corporation tax liability for foreign taxes paid.
The corporate tax rate stands at 12.5% for all companies.
Here’s an overview of the type of income and exemption limits:

Profit from the sale of securities: Entire amount is exempt.

Dividends: The entire amount 1 is exempt.

Interest not arising from the ordinary activities or closely related to the ordinary activities of the company: The entire amount 2 is exempt.

Profits of a permanent establishment abroad, under certain conditions: The entire amount is exempt.

Please note that dividend income may be subject to Special Contribution for Defense, and interest income is subject to Special Defense Contribution.

A fixed Annual Levy of €350 per annum was introduced on August 26, 2011, which must be paid by December 31st each year. Failure to pay this levy may result in deregistration by the Cyprus Register of Companies.
Cyprus has entered into nearly 50 double-tax treaties, a notable feature for a low-tax jurisdiction. These treaties typically ensure that Cyprus-registered entities with tax exemptions in Cyprus enjoy similar exemptions in the treaty countries. Most of these treaties follow the OECD Model Convention, with the US Treaty adhering to the most recent United States model. Generally, the country of residence provides a credit for taxes paid in the other treaty country. Cyprus offshore entities qualify for treaty protection in almost all treaties, except for those with Canada, France, the UK, and the USA. However, these limitations primarily apply to income flows to Cyprus, not from Cyprus to the concerned countries.

In light of Cyprus’s EU accession and the abolition of the ‘offshore’ sector, the country has improved its standing as a tax treaty partner. It has had to revise numerous treaties and engage in new agreements with additional countries.

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