Business Taxes – What Taxes Do Cyprus Businesses Have To Pay?
This is, quite obviously, the most annoying part of any business venture: handing over a share of your hard-earned cash to the Inland Revenue. If you are operating a business in Cyprus, you are responsible for complying with various tax requirements. To meet these requirements you may need to apply for certain registrations, report income and business expenses, and keep business records. It is also important that you understand which business expenses you can claim, and you might even be eligible for some tax concessions. Having a good understanding of basic tax issues in Cyprus will allow you to legitimately minimize your tax bill and avoid penalties that may be imposed if you fail to meet these requirements.
Depending on whether you are a sole trader or run a limited company, and whether you employ any staff, the taxes you will be liable to pay as a result of your Cyprus business will vary – as will the allowances you can claim.
Due to the complexity of business taxation, we would advise anyone starting out in business to hire an accountant. They will be able to explain how you will be taxed according to the business structure you choose and any other circumstances unique to your business.
Perhaps the single most important tip we can provide is to ensure you keep up with your paperwork – it will save you a lot of stress further on down the road.
Types of Business Tax
If you run a limited company, you will be liable for Corporation Tax. It’s calculated on your profits, and determined at the end of your company’s financial year. You must then pay it to the Inland Revenue. Currently, the companies’ tax rate is 10% of profits .
Value Added Tax (VAT) is the tax added to most goods and services within Cyprus, and is collected at every stage of production and distribution. The standard rate is currently 15% , but there are other rates depending on what you sell. We cover VAT in more detail in the next section.
If you are a limited company director, or have employees, you will also need to be aware of the Pay As You Earn (PAYE) scheme. As the term suggests, the scheme ensures that tax is deducted from employee’s pay each week or month.
One area in which your tax rates will vary according to your trading structure is with National Insurance. Equally, if you employ staff, you will be liable to pay their National Insurance contributions as well.
The political nature of tax means that it’s a fluid set-up, and changes are made all the time. We highly recommend you read up regularly on developments and use an accountant to stay in touch. Remember: ignorance of the law is never an excuse.
For an in-depth guides, visit our section under Cyprus Tax System.
