Table of Contents
Taxation for companies
Companies incorporated in Cyprus must observe the rules and regulations for taxation and must pay the corporate tax. Cyprus has a favorable taxation regime and this is one of the reasons why many foreign investors are interested in company registration in Cyprus.
The corporate tax in Cyprus has one of the lowest rates in the European Union, at 12.5%. The Cypriot taxation regime observes the EU laws and is also in line with the OECD recommendations. Often, companies in Cyprus will request the services of a Cypriot company formation firm to help with tax compliance while doing business in the country.
Corporate taxation in Cyprus
The 12.5% corporate tax in Cyprus applies for all types of companies that are Cypriot resident companies. The taxation applies on the income produced in Cyprus and abroad, from all taxable sources. A company is considered a Cypriot resident legal entity if it is managed and controlled in Cyprus. Any non-Cyprus resident companies are taxed on the income produced by a Cypriot business activity carries out in a permanent establishment in Cyprus. Branches of foreign companies are a good example of such companies.
The types of incomes to which corporate taxation in Cyprus applies are:
– profit from the sale of securities;
– dividends;
– profits of a permanent establishment abroad (under special conditions);
– interest not arising from the ordinary activities of the company.
Our company formation agents in Cyprus can detail the principles of taxation on dividends and securities. The dividend income in Cyprus may be subject to the Special Contribution for Defense.
Other taxes in Cyprus
Some company expenses in Cyprus are deductible for corporate tax purposes. Examples of these types of expenses include:
– interest expense for direct or indirect acquisition of 100% of the share capital of a subsidiary company – 100% deductible under certain conditions;
– net royalty income from owned intangible assets – 80% deductible;
– donations to certain charities – 100 % deductible;
– employer’s contributions to social insurance – 100% deductible.
These corporate tax deductions apply under certain conditions and investors in Cyprus might be interested in more max minimization strategies. For this purpose, you can contact our Cypriot company formation representatives. We can also help you with other relevant information if you are interested in VAT registration in Cyprus or incompany registration.