Key tax factors for efficient cross-border business and investment involving Cyprus.
With the following countries, territories and jurisdictions:
(a) Effective as of January 11, 2019.
(b) New double tax treaty signed with entry into force on July 18, 2018 and effective in Cyprus as of January 1, 2019, and in the UK (i) for withholding taxes (WHTs) for amounts paid or credited on or after January 1, 2019, (ii) for personal income tax and capital gains tax from April 6, 2019, and (iii) for corporation income tax for any financial year beginning on or after April 1, 2019.
Limited Liability company with share capital and Partnerships.
A company is resident if its management and control are exercised in Cyprus. Registration in Cyprus is not decisive.
Resident companies are taxed on their worldwide income. Non–resident companies are taxed only on their Cypriot source income, unless they have a permanent establishment in Cyprus and have opted to be treated as a resident company (to benefit from a worldwide loss set-off).
Companies are required to file annual tax returns prepared based on audited financial statements. The filing deadline is 12 months after the financial year ending December 31. For electronic filings the deadline for submission is extended by three calendar months. Companies are also required to prepare accounts and pay tax on a temporary and self-assessment basis. Corporate entities must also submit a provisional tax return prior to August 1st of each year, based on the estimated income for the current year. Provisional tax payments must be made on estimated current's year income in two equal installments, on July 31 and December 31. If the income declared for provisional tax purposes is less than three-fourths of the income as finally determined, the taxpayer must pay, in addition to the normal tax, an amount equal to one-tenth (10 percent) of the difference between the final and the provisional tax. Estimated income can be revised (upwards/downwards) anytime before December 31, the date the last provisional payment is due.
A final payment must be made on August 1st of the following year of assessment, in order to bring the total installment payments to the level of the actual liability due according to the actual tax liability determined.
The standard corporate income tax rate is 12.5 percent.
No withholding tax is levied on royalties paid to non-residents who are not engaged in any business in Cyprus and the intellectual property right is granted for use outside Cyprus. Otherwise, a withholding tax of 10 percent (or 5 percent for film royalties) applies, subject to reduction by double tax treaties
Yes, at a rate of 10 percent on gross payments to non-residents providing technical assistance to Cyprus tax-resident corporations.
Exemption method (100 percent) subject to conditions:
Only on immovable property situated in Cyprus.
Yes. Tax losses may be set-off against income from other sources in the same year, and unused losses may be carried forward to 5 subsequent years. No carry-back is available.
Yes, for companies in a 75 percent group, provided that both companies are tax resident in Cyprus for the entire year including the year of incorporation.
No transfer duty on transfer of shares.
Small administrative fee (EUR 17) on filing of the form for the issue and allotment of shares.
Stamp duty on a share purchase agreement based on the amount stipulated in the agreement: No stamp duty is imposed on sums not exceeding EUR 5,000; 0.15 percent on sums not exceeding EUR 170,000; 0.2 percent plus EUR 247.50 on sums exceeding EUR 170,000; with a maximum stamp duty of EUR 20,000.
Yes, if situated in Cyprus land transfer fees may apply depending on the value of the property.
Yes, if situated in Cyprus land transfer fees may apply depending on the value of the property. Also, stamp duty based on the amount stipulated in the agreement: No stamp duty is imposed on sums not exceeding EUR 5,000; 0.15 percent on sums not exceeding EUR 170,000; 0.2 percent plus EUR 247.50 on sums exceeding EUR 170,000; with a maximum stamp duty of EUR 20,000.
Yes, on a municipal basis depending on the total value of the taxpayer's property. Rates depend on the location of the real estate.
Controlled Foreign Company rules apply as of January 1, 2019. The regime assesses a Cyprus tax-resident company with a CF charge based on the arm’s length measure of the undistributed profits of the CFC that are attributable to the activities of Significant People Functions (SPFs) carried on in Cyprus.
No, but arm’s length principle applies. Transfer Pricing in place only for intra-group financing.
Only for intra-group financing. For the rest, recommended as a matter of practice.
Yes. GAAR introduced in line with ATAD as of January 1, 2019.
The Director of Inland Revenue maintains the right to ignore/examine artificial transactions.
IP Incentive of 80 percent notional deduction from qualifying IP income in line with the modified nexus approach as provided in BEPS Action 5.
Incentive for individuals to invest in innovative SMEs in the form of a deduction from taxable income of the amount invested (up to 50 percent of the individual's taxable income or EUR 150,000, whichever is lower). Any surplus shall be carried forward for a period of 5 years subject to the threshold limitations.
Incentives provided for the film industry in the form of:
The standard rate is 19 percent and the reduced rates are 5 and 9 percent.
Source: Cypriot tax law and local tax administration guidelines, updated 2019.
KPMG in Cyprus
T: +357 22 209 000
KPMG in Cyprus
T: +357 22 209 000