Profit tax rate (Corporation Tax) – 12.5%
Income tax is withheld from resident companies with profits from any commercial activity, both from sources within and outside Cyprus. Non-resident companies are taxed on profits in respect of income of which Cyprus is the source.
Income tax is not levied on income from securities transactions, dividends, and interest on non-core activities (but the latter will be subject to a defence tax).
Interest earned by the Cyprus company in the line-up activity, or closely related to it, is not subject to a defence tax, but is taxed on profits at a standard rate.
The dividends received by the Cypriot company from a non-resident company, are exempt from both income tax and defence fee.
Annual fee – Annual Levy. It is obligatory for all companies (even not operating), starting from the first year of registration, and is 350 euros. Payment must be made before 30 June of each year. In case of late payment of the Annual Levy – a penalty is payable. Delay of payment for up to 2 months – penalty of 10 %, for a period from 2 to 5 months – penalty of 30 %. Delay for a period of more than 5 months may entail liquidation of the company.
Capital Gains Tax (VAT) – 20%
Income from capital gains from the sale of shares in a foreign company and income from foreign securities are exempt from this tax.
Value added tax (VAT)
The standard rate is 19%, the reduced rate is 9% and 5%. If the company exports goods, the rate is 0%. Depends on the type of activity of the company.
Repatriation tax (Withholding Tax)
Source tax (i.e. in Cyprus) for the payment of interest, dividends, royalties by a Cypriot resident in favour of a non-resident.
- The payment of income as dividends in favour of a non-resident – 0%.
- Payment of income as interest to a non-resident – 0%.
- Royalty income payable to a non-resident is 0% if the rights are used outside Cyprus and 10% if the intellectual rights were used in Cyprus.
Special IP BOX tax regime
Under certain conditions, taxes in Cyprus can be optimized and reduced by 2.5% if the Cyprus company profits from intellectual property.
This interest rate is achieved by the fact that 80% of the income derived from the ownership of intellectual property can be exempted from income tax, while 20% of intellectual property income is taxable at a standard rate of 12.5%.
The benefits can be taken on the condition that the Cypriot company has participated in the creation of intellectual property and its main activity is related to such intellectual property in the territory of Cyprus.