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Corporate Tax in Cyprus

Joining the EU in 2004, Cyprus became one of the most attractive business destinations in Europe.

The tax rate for Cypriot companies is 12.5%, which is one of Europe’s lowest rates. This rate is applied on all profits generated worldwide from a Cypriot company, however, if the company is operated solely as a “Holding Company” (i.e., to hold shares of other companies) it will not be taxed. Furthermore, a uniform 10% corporate tax rate is now levied on all “resident companies”. This new taxation status is residence-based, thus a company is only “resident in the Republic” if its business is centrally managed and controlled in Cyprus. Under these new rules, a resident corporation is taxable on its worldwide income accrued or arising from sources both within and outside Cyprus if it is managed and controlled from Cyprus. Accounting and auditing of a Cyprus Private Company is compulsory every year. To obtain a Cypriot tax identification number, it is required that most directors reside in Cyprus and SFM can provide local directors through its nominee director service.

The following income is not taxable:

  • Dividends.
  • Profits from the sale of listed securities.
  • Interests not from ordinary activities or not directly related to the key activity of the company.

Possible deductions:

  • Donations to charity.
  • Representation expenses.
  • All expenses related to the maintenance of a building.
  • Contributions to employers’ social insurance.

Expenses cannot be deducted from:

  • Maintenance of motor vehicles.
  • Business taxes.

When does the tax return have to be submitted?

  • For a company registered prior to the 1st of July (e.g. 22/04/2010), the accounts must be presented to the tax authority before the 31st of December of the following year (31/12/2011) for the preceding year (2010).
  • If the company was registered after the 1st of July (e.g. 30/09/2010), the accounts must be submitted to the tax authority before the 31st of December two years after (31/12/2012) for the preceding years (2010 and 2011).

If you have questions regarding the Cyprus tax system please contact us.