Comparative Guides
Welcome to Mondaq Comparative Guides - your comparative global Q&A guide.
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Results: 4 Answers
Corporate Tax
1.
Basic framework
1.1
Is there a single tax regime or is the regime multi-level (eg, federal, state, city)?
 
Cyprus
The tax regime of Cyprus is determined by the central government. Tax is imposed based mainly on the following legislation:

  • the Income Tax Law of 2002 (118(I)/2002), as amended;
  • the Special Defence Contribution Law of 2002 (117(I)/2002); and
  • the Capital Gains Tax Law of 1980 (52/1980).
For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd
1.2
What taxes (and rates) apply to corporate entities which are tax resident in your jurisdiction?
 
Cyprus
An entity is tax resident in Cyprus if it is managed and controlled within Cyprus.

All Cyprus tax resident entities are subject to income tax at a rate of 12.5% on income earned or accrued from all chargeable sources.

Cyprus tax resident entities are also subject to the special defence contribution (SDC), which applies to certain types of ‘passive’ income. Specifically, SDC is levied at a rate of 30% on passive interest income, 3% on 75% of rental income and 17% on dividend income, where more than 50% of the paying company’s profits were generated from investment income and where the foreign tax burden on those profits was lower than 6.25%.

Furthermore, a Cyprus tax resident company is deemed to distribute dividends of at least 70% of its post-tax profits (subject to some adjustments) within two years of the end of the tax year to which the profits relate. The deemed dividend distribution is reduced by any actual dividends distributed within this two-year period. With regard to the remaining deemed dividend distribution, SDC is charged at a rate of 17% to the extent that the shareholders (directly or indirectly) are Cyprus tax resident and domiciled individuals.

Non-tax resident entities are subject to income tax in Cyprus on income from any business exercised through a permanent establishment in Cyprus and on certain income from sources within Cyprus (eg, rental income from property located in Cyprus or profits from the disposal of real estate in Cyprus).

Lastly, any profits arising from the direct or indirect disposal of immovable property located in Cyprus are subject to capital gains tax at a rate of 20%, irrespective of the tax residency status of the seller.

For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd
1.3
Is taxation based on revenue, profits, specific trade income, deemed profits or some other tax base?
 
Cyprus
Income tax is levied on an annual basis at a rate of 12.5% on the entity’s net taxable profits.

For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd
1.4
Is there a different treatment based on the nature of the taxable income (eg, gains on assets as opposed to trading income or dividend income)?
 
Cyprus
While a single income tax rate (12.5%) is applied to the net taxable profits, various types of income are exempt from income tax, such as the following:

  • dividend income;
  • interest income;
  • profits from the sale of securities;
  • profits arising from foreign exchange differences (assuming that these are not generated from trading in foreign currencies); and
  • profits attributable to a foreign permanent establishment.
For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd
1.5
Is the regime a worldwide or territorial regime, or a mixture?
 
Cyprus
Tax resident entities are subject to income tax on their worldwide income. Non-tax resident entities are subject to income tax on Cyprus-source income.

For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd
1.6
Can losses be utilised and/or carried forward for tax purposes, and must these all be intra-jurisdiction (ie, foreign losses cannot be utilised domestically and vice versa)?
 
Cyprus
Tax losses can be carried forward for up to five years.

Utilisation of intra-group current year losses (subject to a 75% holding threshold) is possible; since 2015, this has also been extended to cover losses from group companies located in other EU member states.

For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd
1.7
Is there a concept of beneficial ownership of taxable income or is it only the named or legal owner of the income that is taxed?
 
Cyprus
The concept of beneficial ownership of taxable income does not apply.

For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd
1.8
Do the rates change depending on the income or balance-sheet size of the taxpayer?
 
Cyprus
No, a single 12.5% tax rate applies irrespective of the size of the income or assets of the taxpayer.

For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd
1.9
Are entities other than companies subject to corporate taxes (eg, partnerships or trusts)?
 
Cyprus
Other types of entities which are deemed transparent for tax purposes, such as partnerships and trusts, are not subject to tax in Cyprus. Their taxable profits are subject to tax at the level of the partners/beneficiaries, which will therefore depend on the location of tax residency of the partners/beneficiaries.

For more information about this answer please contact: Charles Savva from C.Savva & Associates Ltd