Cyprus - Tax and Accounting Regulations
A coherent offshore tax planning strategy is essential to maximize the effectiveness of offshore companies. Eltoma can assist by structuring the most tax efficient strategy to satisfy your requirements. Eltoma will guide you as to which jurisdictions offer the best tax structure by identifying the types of tax payable as well as applicable exemptions and incentives. Eltoma will provide tax planning advice that will identify which is the most favourable tax efficient jurisdiction in which to incorporate.
The information below shows the main features of the tax system in Cyprus.
Corporation Tax – A uniform tax rate of 10% is applied to all companies. This is the lowest rate in the EU.
Income tax - Cyprus Tax Resident Companies are subject to income tax on worldwide basis. In particular, the following income is subject to income tax: interest & trade profit, dividends, royalties
Value Added Tax (VAT) – The Standard VAT Rate is 15% and the reduced rate is 5%. A Cyprus IBC can register for VAT in Cyprus so that they benefit with zero rated tax on intra European trading and recover input VAT on local expenses
Capital Gain Tax (CGT) - Capital Gain Tax (CGT) only applies to immovable property in Cyprus. Any property outside of Cyprus and gains from sales of securities are not a subject to CGT.
Withholding Tax – No withholding tax is payable on interest payments made from abroad, dividends paid to non-resident shareholders and payment of royalties derived from outside of Cyprus
Royalties – Royalty income is subject to Corporation tax at 10% after deducting all relevant expenses including royalties paid.
Dividends – Dividends are exempt from withholding tax. Dividends received by Cypriot companies from foreign subsidiaries are exempt from tax
Defence Tax – Defence tax is levied at 15% on interest and dividends income. There is however a number of exemptions applied. There is a concept of a deemed dividend distribution where undistributed profit is subject to a defence tax. Distribution of profit in form of dividends has to be made within three years from the end of financial year. Otherwise, deemed dividend distribution will be triggered and 70% of retained profit and will be subject to 15% defence tax.
International Aspects of Cyprus Taxation – Anti-avoidance regulations are enforced. Cyprus Tax Code follows OECD Recommendations.
- Transfer Pricing - There is no specific legislation in Cyprus tax code. However, arm’s length test will apply to related party transactions.
- Double Tax Treaties - Cyprus signed more than 40 Double Tax Agreements (DTA) which can be successfully used for international tax planning.
Annual Reporting Requirements:
Cyprus International Companies are to comply with the following:
- Submission of annual return to Registrar of Companies
- Submission of audited financial statements
- Submission of annual income declaration to income tax authority
- Submission of provisional tax returns midway through the year and final tax returns by end of year
Eltoma can provide all of the above services. Please do not hesitate to contact us regarding any queries you may have.