Corporate taxation in Cyprus
Advantages to register in Cyprus
All Cyprus tax resident companies are taxed on their income accrued or derived from all chargeable sources in Cyprus and abroad. A non-Cyprus tax resident company is taxed on its income accrued or derived from business activity carried out through permanent establishment in Cyprus and on certain income arising from sources within Cyprus.
Type of income: Exemption limit.
1 Dividend income may be subject to Special Contribution for Defence.
2 Interest income is subject to Special Defence Contribution.
Fixed annual levy
Cyprus double taxation prevention treaties
Cyprus has entered into almost 50 double-tax treaties (unusually for a low-tax jurisdiction). The general effect of these treaties is that Cyprus-registered entities that have tax exemptions in Cyprus will have the same exemptions in the treaty countries.
Most of Cyprus’s treaties follow the OECD Model Convention, although the US Treaty follows the most recent model of United States Agreements. Normally speaking, therefore, the country of residence will give a credit for taxes paid in the other treaty country. The Cyprus offshore entity qualifies for treaty protection under all the extant treaties except those with Canada, France, the UK and the USA, and even in those cases the limitations apply only to flows of income to Cyprus, and not to income flows from Cyprus to the countries concerned.
Revisions to Cyprus’s corporate tax regime consequent upon its accession to the EU, and the abolition of the ‘offshore’ sector as such, have made Cyprus more rather than less attractive as a tax treaty partner, and the island has found itself needing to revise many of its treaties as a result, as well as entering new treaties with additional countries.
To check those countries which have double-tax treaties with Cyprus, although not all have been ratified at the time of writing, please click HERE.
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