Corporation Tax – Cyprus Income Tax for Companies
Imposition of tax
Where a company is resident in the Republic of Cyprus, tax is imposed on income accruing or arising both from sources in and outside the Republic. Resident in the Republic of Cyprus is a company that is managed and controlled in the Republic.
Where a company is not a resident in the Republic of Cyprus , tax is imposed on income accruing or arising only from sources in the Republic.
Tax rate
A uniform corporate tax rate of 10% is applied to all companies either operating locally or internationally. This rate applies to profits after the deduction of all expenses incurred wholly and exclusively for the production of income. Public Corporate Bodies (i.e. semi-government authorities operating locally) are subject to tax at 25%.
| Interest income. | whole amount |
| Interest income arising in the ordinary course of business including interest closely connected with the carrying on of the business, and interest earned by open-ended or closed-ended collective investment schemes, is not considered interest but trading profit and is not exempt. | |
| Dividend income. | whole amount |
| Profit from the disposal of securities including the redemption of units or other ownership interests in an open-ended or closed-ended collective investment scheme. | whole amount |
| Profits from a permanent establishment maintained outside Cyprus (certain conditions apply). | whole amount |
Deductions
Deductible from income are all expenses incurred wholly and exclusively for the production of income including:
| Interest incurred for the acquisition of a fixed asset used in the business. | whole amount |
| Expenditure for the maintenance of buildings under preservation order. (Subject to certain conditions). | up to € 700, €1.100 or €1.200 per sq. m. (Depending on the size of the building). |
| Donations to approved charities (with receipts) | whole amount |
Non-deductible expenses
The following are not deductible from income:
| Business entertainment expenses including hospitality expenses of any kind which are incurred for the business. | amounts in excess of 1% of the gross income or ’ € 17.086 (whichever is the lower) |
| Private motor vehicle expenses | whole amount |
| Professional tax | whole amount |
| Immovable property tax | whole amount |
| Interest payable or deemed to be payable in relation to the acquisition of a private motor vehicle, irrespective of whether it is used in the business or not, or other asset not used in the business. This restriction is lifted after 7 years from the date of purchase of the relevant asset | whole amount |
| Contributions to the Social Cohesion Fund | whole amount |
Losses
Carry forward of losses
Losses are carried forward indefinitely. Losses for the years 1997 onwards which have not been offset against profits arising up to the year 2002, will be carried forward to 2003 and subsequent years without time restriction.
Group relief
Losses for the current year only can be surrendered by a group company to another group company. Group relief will be given provided that both companies are members of the same group for the whole of a tax year.
Two companies are considered to be part of a group for group relief purposes if:
- One is a 75% subsidiary of the other, or
- Both are 75% subsidiaries of a third company.
Loss of a permanent establishment outside the Republic
Losses arising from a permanent establishment outside the Republic can be offset against profits arising in Cyprus. However, when a profit arises from such a permanent establishment, an amount equal to the losses that have been utilized in the past against profits arising in Cyprus will be included in the taxable income.
Insurance companies
- Losses of the life business can be offset against profits of the general business
- Losses of the life business can be offset against profits from other sources
- Losses of the life business can be carried forward indefinitely.
Tax credit for foreign tax paid
Any tax suffered abroad on income subject to income tax will be credited against any income tax payable on such income irrespective of the existence of a double tax treaty.
