CYPRUS TAX:
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By Cyprus Tax, we mean a tax system which comprises all the Cyprus Taxes.
So the Cyprus Tax system comprises the following taxes:
1. Cyprus Corporate Tax
2. Cyprus Income Tax
3. Cyprus Capital Gains Tax
4. Immovable Property Tax
5. Immovable Property Transfer Tax
6. VAT Tax
7. Special Defense Contribution Tax
8. Double Tax Treaties
Every Cyprus Tax is regulated by a relevant legislation, which provides for the Cyprus Tax rate its collection and the relevant penalties.
Cyprus Taxes are approved by the Cyprus Government and in particular the Cyprus Parliament.
AN ADVANTAGEOUS CYPRUS TAX SYSTEM:
The Cyprus Tax legislation, its regulation, its construction and its interaction with the business community is easy, straightforward and predictable. The Cyprus Tax Authorities are fair and have excellent relations with the Tax payers. By providing an efficient and transparent environment, the Cyprus Tax enhances Cyprus’s competitiveness and contributes to making Cyprus a jurisdiction, which is attractive for international tax planning of every serious businessman.
Below we give you a short description of every Cyprus Tax, with particulars of rates and legislations. They are for your general guidance and not for a source of Cyprus Tax advice to regulate your business in detail. If you need any professional advice for any Cyprus Tax, please get in touch with us for a responsible and professional approach and advice to your Cyprus Tax problem query or need.
1. CYPRUS CORPORATE TAX:
There are two kinds of Cyprus Company. One that is not tax resident in Cyprus and therefore does not pay Cyprus Tax, but pays tax in the country in which it is considered to be tax resident. It is of course taxable on profits made from trading activities within the Republic.
A company is considered as Tax Resident in Cyprus, if the majority of the Directors are tax resident and the board meetings, take place in Cyprus.
If it is Tax Resident in Cyprus, it pays Cyprus Tax and of course it benefits of the 10% Corporate Tax and of the Double Taxation Avoidance Treaty.
If a Cyprus Company is tax resident in Cyprus, it pays tax on all sources of income, whether the source is located within the Republic or outside the Republic.
EXEMPTIONS:
1. No tax on dividends paid to shareholders who are not tax resident in Cyprus or on dividends received by the company as shareholder of the companies abroad.
2. No tax on profits from trading in securities.
3. No tax on interest earned.
4. No withholding tax on royalties paid from Cyprus in respect of intellectual property exploited outside Cyprus.
5. No tax or capital gain tax on profits of sale of immovable property held by the Cyprus company, which is situated outside Cyprus.
6. No tax on profits made through a permanent establishment, like a chain of supermarkets, which is situated wholly abroad.
7. Tax losses can be carried forward indefinitely.
DOUBLE TAX AVOIDANCE TREATIES:
A Cyprus Company can take advantage of an extensive network of Double Tax Avoidance Treaties, with at least 42 countries, such as the USA, CHINA, INDIA, CANADA, RUSSIA, UK, EUROPEAN COUNTRIES etc.
Cyprus Corporate Tax at 10% flat is the lowest in the European Union.
CYPRUS INCOME TAX:
Any physical person, who is tax resident in Cyprus, pays Cyprus Income Tax on all his profits made by trading within the country or Cyprus Income Tax on profits from sources outside the country.
Such Cyprus Income Tax is imposed on income from employment or trading or services rendered, rents and pensions.
A tax resident individual is considered one who spends 183 days or more in the country at any given year.
The highest tax rate for a physical person is 30% for a net income of €36.301 and over.
All expenses gone to generate the income are deductible.
EXEMPTED INCOMES:
The following incomes are by the Cyprus Income Tax law, excluded from taxation:
1. Divided Income
2. Interests Accrued
3. Profits from trading with securities
4. Profits from a permanent establishment which is maintained abroad
5. Employment income derived from non tax resident employer, which represents 90 days or more outside Cyprus
6. Windows pension
7. Retiring lump sum payment
8. Life insurance lump sum payment
PAYMENT OF CYPRUS INCOME TAX:
The Cyprus Income Tax Authority notifies by letter the Tax Payer whether on his Tax Returns, income tax has been levied.
The letter is usually sent to the Registered Office address of the company or the business address of the Tax Payer.
If the tax is paid within the time limit set, then no penalty or interest is charged if the Tax Return was filed belated or the tax is paid belated then there is a penalty and interest paid on the sum of the Income Tax.
Cyprus Income Tax is actually paid at the local offices of the Income Tax of every District.
CYPRUS CAPITAL GAINS TAX:
One of the taxes, comprised in the Cyprus Tax system is the Capital Gains Tax.
Cyprus Capital Gains Tax is a flat rate tax of 20%.
Cyprus Capital Gains Tax is imposed on the profits realized by the sale of immovable property by physical persons or corporate persons such as a Cyprus Company.
The profit realized is ascertained after deduction of the purchase price, the transfer fee tax, interests paid if purchased by a loan improvement cost.
A sum of €10.000 is exempted for every person or company if it is the first time they sell any immovable property.
EXEMPTIONS TO CAPITAL GAIN TAX:
1. Transfer of property on Death.
2. Gifts between relations up to 3rd degree, such as parents to children, between cousins, grandparents to grandchildren etc.
3. Gift to a company if the shareholders are members of the Donor’s family and stay as such for the
following 5 years.
4. Gift by a family company to its members, provided the land was acquired by donation as a gift.
5. Gifts to charitable organizations.
6. Also land exchanged with other immovable property of equal value is exempt.
7. If the main residence is sold, then the sum of €85,430 is exempted.
8. Finally, land sold by a farmer, the sum of €25,629 is exempted.
CYPRUS IMMOVABLE PROPERTY TAX:
Cyprus Immovable Property Tax is one of the first taxes to be levied in Cyprus, even before
independence.
It is imposed on all immovable property held by physical persons or companies at scaled up rates.
For up to €170,860 value, no tax. It is 0, 25% ON PROPERTY VALUED AT TOP €427,150 or 0, 35% up to €854,300 and at 0, 40% at top value of €854,301 and over.
The value used is that of 1 January 1980 when the properties were valued by the Cyprus Land Office Director, for the whole of Cyprus.
EXEMPTIONS:
The following properties are not taxed:
1. Building of charitable organization
2. Charges
3. Hospitals
4. Agricultural Land
5. Farms
6. Schools
7. Cemeteries
8. Property of the Republic and foreign embassies or consulates
9. Property of missing persons from the Turkish invasion
10. Property situated is designated inaccessible or depressed areas.
CYPRUS VAT TAX:
Cyprus VAT Tax is a special tax levied on goods, commodities and services.
The basic rate is 15%. There is of course the reduced rate of 8% and 5% and in some cases 0%.
All physical persons and compani8es who trade in goods, commodities, services etc in Cyprus with a turnover of €187.200 a year or €15,600 per month, which are subject to VAT Authorities and submit their VAT return forms every 3 months. VAT is paid at any Cyprus Banks.
See more
EU REGULATORY OBLIGATIONS:
INTRASTAT:
Businesses who carry out intra-community trading in goods and commodities must file the intrastate Form.
INTRASTAT forms are submitted to the VAT Authorities, no later than the 10th day which follows the end of the month stated on the INTRASTAT form.
VIES FORM:
Businesses who carry out trading in goods and services within the EU Community, have to complete and file the VIES form, every month. This is done by the accountant’s office, to the VAT Authorities, once a month.
PENALTIES:
If the VAT INTRASTAT or VIES forms are not submitted in time, there are penalties for that as follows:
1. Late payment of VAT entails the payment of 10% fine on the amount of the VAT payable and 5, 35% p.a. interest.
2. Late registration for those services, the penalty is €85 for every month.
3. Late de-registration, €85 one-off.
4. Late submission of return, €51 one-off.
5. Late submission of recapitulative schedule for supplies €50 one-off.
6. Late submission of INTRASTAT, €15 for each return.
SPECIAL DEFENCE CONTRUBUTION TAX:
The tax is paid only by companies which are Tax Residence in Cyprus and carry out trading in Cyprus.
There are three rates of SDCT, at 15% for Dividends, at 10% for interest income and at 3% for rents, interest from Government Bonds and Social Insurance Fund.
DOUBLE TAX TREATIES:
Cyprus has signed more than 42 Double Taxation Avoidance Treaties, so far, with Countries like the U.S, Canada, Russia, India, China and many European countries. See more
TAX SERVICES OFFERED BY OUR FIRM:
Our firm offers a full range of Cyprus Tax Services, such as Accounting, Auditing, VAT and VIES services of all kinds. Ask at the back office for details of all the tax services and prices.
