Cyprus tax system is now well known for its multiple tax advantages. A tax consultant can guide and assist you with any corporate tax issue such as, tax planning, tax returns, recognise tax planning opportunities, minimize your tax liabilities and much more.
1. A tax consultant’s role
- Preparation and submission of Corporate and Individual Income Tax return forms
- Evaluations of Provisional Tax
- Tax calculations
- Communicating and negotiating with Tax Authorities
- Obtaining tax clearance certificates, tax residence certificates, and double taxation certificates.
- Assist with any personal taxation issue such as tax planning and compliance, trust planning, investment planning, pension, and life insurance,
- Preparation and filing of VAT/VIES/Intrastat returns
- Efficient VAT recovery
- VAT diagnostic reviews
- Advice on justifying VAT costs and managing risks on importing/exporting
- EORI Registration.
- VAT registration and Investigations
- Completion and submission of VAT returns.
2. Cyprus Tax Rates
- Below we are presenting some basic information regarding the relevant and applicable taxes for various cases. For more detailed information about each tax rate communicate with a tax consultant to get the appropriate advice.
2.1 Corporate income tax (CIT)
All companies that are tax residents of Cyprus are taxed on their income accumulated or resulting from all sources in Cyprus and abroad. A non-Cyprus tax resident company is taxed on income accumulated or resulting from business activity that is carried out through a permanent Cyprus established company and on certain other income arising from sources in Cyprus.
The standard CIT rate in Cyprus is 12.5%.
As of 1 January 2019, CFC rules apply, specifically non-distributed profits of CFCs directly or indirectly controlled by a Cyprus tax resident company may be tax eligible in Cyprus (certain exceptions can apply). The Cyprus CIT law provides clearly for a number of exemptions for various types of incomes, profits, and gains which can be clearly defined and explained by Cyprus tax consultants that can help you with your international tax planning using Cyprus and other jurisdictions.
2.2 Income tax
As to the income tax the below rates apply to individuals.
Chargeable income for the tax year €
Tax rate %
Accumulated tax €
From 19 501-28 000
From 28 001-36 300
From 36 301-60 000
Over 60 000
Foreign pension income is taxed at the flat rate of 5% on amounts over €3.420. The taxpayer can however on an annual basis elect to be taxed at the normal tax rates and bands set out above. Cyprus source widow(er)’s pension is taxed at the flat rate of 20% on amounts over €19.500. The taxpayer can however on an annual basis elect to be taxed at the normal tax rates and bands set out above.
2.3 Special Defense Contribution (SDC)
SDC is compulsory only for non-exempt dividend income, ‘passive’ interest income, and rental income earned by Cyprus tax resident companies and Permanent established in Cyprus of non-Cyprus tax resident companies. Companies that are Non-tax residents nor permanent established in Cyprus are exempt from SDC.
Dividends generally are exempt from SDC but could be subject to some rarely applicable limitations.
Interest received by close-ended or open-ended collective investment schemes (CISs) is never subject to SDC as it is considered as ‘active’ interest income. Such interest is only taxed under CIT (after deducting allowable expenses) at the standard CIT rate of 12.5%.
Interest received by companies in the ordinary course of their business is also considered as ‘active’ interest income and is only taxed under CIT (after deducting allowable expenses) at the standard CIT rate of 12.5%.
2.4 Tonnage tax
For ship-owning companies, the profits derived by the owner of a ship registered in the European Union or European Economic Area (EEA) from its operation/charter out are fully exempt from all direct taxes. The term ‘owner’ includes a bareboat charterer of a non-Cyprus flag vessel registered in Cyprus. A similar exemption applies to charterers and ship managers.
Bareboat charter out agreements remain eligible for tonnage tax, with restrictions introduced for bareboat charter agreements to third parties.
This treatment applies until 31 December 2029 and is compulsory for Cyprus flag ship owners, but optional for other ship owners, charterers, and ship managers.
2.5 Local income taxes
There are no local government taxes on income in Cyprus.
2.6 Inheritance tax
There is no inheritance or succession tax in Cyprus. Your assets can pass to your inheritors without paying any local taxes.
2.7 Value Added Tax (VAT)
The VAT is imposed on the purchase of services and goods. The standard rate is at 19% however the legislation provides for the rates of 0%, 5% and 9% depending on the type of services or goods provided.
2.8 Contribution for the General Health System
As from March 2019 contribution to Cyprus General Health System has started to apply.
Below you can see the current rates
Employees and emoluments
Persons holding office
Republic of Cyprus or Natural/Legal person responsible for the remuneration of persons holding an office
Persons earning rental, interest, dividend and other income
Rental, Interest, Dividend Income etc
Republic’s Consolidated Fund (Πάγιο Ταμείο της Δημοκρατίας)
Emoluments/Pensions of persons (i), (iii), (iv) and (v)
As Cyprus has endorsed a large number of double tax treaties with a big list of countries, for the avoidance of double taxation, tax advisors can also assist any business or individual in the avoidance of paying tax in 2 jurisdictions. With comparatively low income tax, limited capital gains tax and no inheritance tax, Cyprus can offer a beneficial tax environment either it’s a matter of investments, income or pension.