The latest Cyprus Tax Legislation that came into result on 1 January 2003 has been completely ratified by the EU.
The core principles of the new Cyprus tax legislation are:
- The taxation of companies is based on tax residency. Companies will be considered resident in Cyprus and taxed in Cyprus if they are managed and controlled in Cyprus
- The business tax rate is 10%
- Participation exemption for dividends received from other companies
- No withholding tax on dividends, interest and royalties payable to non-residents
- Tax liability is based either on residence or on Cyprus source income only for non-residents
- Incorporation of the Company per se is no longer a criterion establishing residence in Cyprus
- The term “resident” has been added to the vocabulary of relevant terms under the new taxation. For business entities, as mentioned above, the criteria are administration and management
Corporate Tax in Cyprus
Corporate Tax Rate is 10% on the Net Profit
Cyprus branches of overseas companies are also subject to 10% tax on their global income if the administration and management of the branch is performed in Cyprus. If the management and controlled is not performed in Cyprus, then all the income will be exempt from Cyprus tax.
Non-resident companies will be liable to corporate tax on their profits which have accrued or arose in Cyprus from a permanent establishment (PE) in Cyprus.
Income exempt from taxation
Subject to certain circumstances the following are exempt from taxation:
- Dividends from Cyprus or abroad
- Profits arising from an overseas permanent establishment
- Profits arising from the disposal of shares and securities