Corporation tax for legal entities

• The definition of resident of Cyprus is introduced. A company is resident in Cyprus if its management and control is in Cyprus.
• There is no longer a distinction between local companies and International business companies (IBCs). There is a change from the current principle under which IBCs were considered residents of Cyprus and taxed in Cyprus irrespective of the place of management and control. The taxable profits of all Cyprus resident companies will be taxed at the rate of  15%. Non-resident Companies will be taxed on profits from a business activity which is carried out through a permanent establishment in Cyprus, rentals from immovable property located in Cyprus and profits from the sale of goodwill.
• Dividend income from abroad and from Cyprus is, in most cases wholly exempt from corporation tax.
• No taxation on the profits from the disposal of securities for all the companies that are residents of Cyprus. “Securities” is defined as shares, bonds, debentures, founders’ shares and other securities of companies or other legal persons, incorporated under the law in Cyprus or abroad and options thereon.
• Profits earned from permanent establishment abroad are fully exempt from corporation tax.
• Tax losses are carried forward for 7 years.
• Losses of a company can be set off against profits of another company of the same group. 100% of the interest income of a company resident of Cyprus is exempt from corporation tax. However interest income earned from the trading activities of a company (e.g. credit institution) is fully taxable
• In order to conform with the European Union, the new tax legislation adopts the appropriate European Union directive which enables without tax implications reorganizations, mergers, acquisitions and amalgamations of companies.
• In most cases no withholding tax on the payment of dividends, interest and royalties to non-residents of Cyprus.

Income tax for individuals

•  An individual is resident of Cyprus if he lives in Cyprus for one or more periods which exceed the total of 183 days per fiscal year.

• All individuals who are residents in Cyprus are taxed with the following rates:

• Dividend income from abroad and from Cyprus is fully exempt from income tax.
• The whole amount of interest income is fully exempt from income tax
• For non-Cyprus residents taking up residency in Cyprus to work for an employer in Cyprus and whose annual emoluments are more than EUR100.000 there is an exemption of 50% of their employment income. This applies for a period of 17 years starting from the first year of commencement of employment.
• No taxation on the profits from the disposal of securities for individuals that are residents of Cyprus. “Securities” is defined as shares, bonds, debentures, founders’ shares and other securities of companies or other legal persons, incorporated under the law in Cyprus or abroad and options thereon.
• Profits of an individual earned from permanent establishment abroad are wholly exempt from income tax (subject to provisions).
• Gains from trading of Cyprus assets is taxed at flat rate of 8%

Value Added Tax (VAT)

• VAT is applicable at the rate of 19% on most services and goods.