What special regimes exist (eg, for fund entities, enterprise zones, free trade zones, investment in particular sectors such as oil and gas or other natural resources, shipping, insurance, securitisation, real estate or intellectual property)?
Answer ... Insurers: The taxable profits of insurers are subject to the standard income tax rules and rates. However, if the corporate tax liability is less than 1.5% of the gross premiums, the difference is paid as an additional tax.
Intellectual property: 80% of the net profits (calculated using the modified nexus fraction) earned from the exploitation of intellectual property is exempt from tax, subject to conditions and to the eligibility of the intangible assets.
Shipping: Entities which operate in the shipping industry (eg, shipowners, ship managers, charterers) may elect (this is mandatory in some cases) to be exempt from all direct taxes and instead be subject to the tonnage tax regime.
Funds: Funds which are managed and controlled from Cyprus and which have a legal form which is not tax transparent (eg, companies) are subject to tax based on the normal tax rules and rates.
Gambling: Companies regulated by the National Betting Authority are also subject to gaming tax, which is applied at a rate of 13% of net gaming revenue.
Answer ... The transfer of assets or liabilities through a qualifying corporate reorganisation is exempt from tax, subject to conditions.
Answer ... No, taxation is applied uniformly to net taxable profits, unless the taxpayer falls under one of the special regimes mentioned in question 2.1.
Answer ... For entities with a functional or reporting currency other than the euro, their net taxable profits must be converted into euros.
Answer ... 80% of the net profits (calculated using the modified nexus fraction) earned from the exploitation of intellectual property is exempt from tax, subject to conditions and to the eligibility of the intangible assets.
Answer ... Yes, employers’ contributions to approved pension schemes constitute tax-deductible expenses.
Answer ... As mentioned in question 2.1, different (or additional) taxes may apply to taxpayers in the insurance and shipping sectors, among others.
Answer ... No other surtaxes are applied to tax resident entities.
Answer ... Yes, a notional interest deduction is available for any new equity (ie, equity introduced after 1 January 2015) which is used to generate taxable income. The amount of the notional interest deduction cannot exceed 80% of the taxable income of the entity before applying the deduction.
The notional interest deduction is calculated as the higher of:
- the return on the 10-year government bond of Cyprus as at 31 December of the previous year, plus a margin of 3%; or
- the return on the 10-year government bond of the country in which the equity was invested as at 31 December of the previous year, plus a margin of 3%.