Cyprus Tax Regime
Cyprus Company › Cyprus Tax RegimeCorporation Tax, Losses Carried Forward, Reorganisations
Corporation Tax
All companies tax resident in Cyprus are taxed at 12.5% from 1st of January 2013 on their income accrued or derived from all sources both in Cyprus and abroad. A company is tax resident in Cyprus if it is managed and controlled from Cyprus.The following types of income are exempt for taxation purposes:
Profits from trading in securities
Dividend income
Interest not arising from the ordinary activities or closely related to the ordinary activities of the company
Losses Carried Forward
Tax losses of one year which cannot be set off against other income may be carried forward and set off against future profits up to 5 years. Alternatively, the current year losses of a company can be set off against the profits of another company provided that the companies are tax resident in Cyprus and are part of a group.A group is defined as:
Profits
One company holding at least 75% of the shares of another company
At least 75% of the voting shares of both companies are held by another company
Reorganisations
Assets and liabilities may be transferred without tax consequences within a reorganisation structure and tax losses can then be carried forward by the receiving company. Reorganisations include mergers; demergers; transfer of assets and partial divisions.Special Defence Contribution
Special contribution for defence is in some cases imposed on income earned by Cyprus tax residents. Non-tax residents are exempt from special defence contribution.More specifically:
Dividend income received from Cyprus resident companies is not subject to special defence contribution
Dividend income received from abroad is exempt from special defence contribution
The exemption will not apply if 50% of the activities of the company paying the dividend result directly or indirectly from investment income and the foreign tax are significantly lower clarified by the tax authorities to mean below 6.25% than the tax burden in Cyprus. Where the exemption does not apply, the dividend income will be subject to special defence contribution at 17% for the year 2014 onwards
Interest income arising from the ordinary activities of the Cyprus resident company or closely related to the ordinary activities will be exempt from special defence contribution
Other interest is subject to 30% special defence contribution from 29 April 2013
Deemed Dividend Distribution
If a Cyprus resident company does not distribute dividends within two years from the end of the tax year in which the profits were generated, then:70% of the adjusted accounting profits are deemed to have been distributed
17% for the year 2014 onwards special defence contribution is imposed on the deemed dividend distribution applicable to Cyprus resident shareholders
Deemed dividend distribution is reduced with payments of actual dividends which have already been paid during the relevant year or paid during the two following years from the profit of the relevant year
*In case the Cyprus Company is ultimately wholly owned by non-resident individuals, defence contribution provisions will not apply.
Capital Gains Tax
Gains from the disposal of immovable property situated in Cyprus including gains from the disposal of shares in companies which hold such immovable property in Cyprus will incur a capital gains tax at the rate of 20%.