Taxation overview
Resident companies
Resident Companies are the Companies whose management and control is exercised in Cyprus. The Corporation Tax for Resident Companies is 12.5%.
Non-resident companies
Non-Resident Companies are the Companies whose management and control is exercised outside Cyprus. The Corporation Tax for the Non-Resident Companies is Nil.
Meaning of Management and Control
In practice, following decided tax cases management and control is exercised where:-
- The majority of the Directors reside.
- The Board meetings are held.
- The general policy of the Company is formulated.
CORPORATION TAX
|
Corporation Tax Rates
|
%
|
|
Resident Companies
|
12.5 |
|
Non-resident companies
|
Zero |
Schedule showing how various types of Income are taxed for Resident and Non-resident Companies
| TYPE OF INCOME | TYPE OF TAX | RESIDENT COMPANIES |
NON RESIDENT COMPANIES |
| CHARGEABLE INCOME | Corporation Tax | 12.5% | 0% |
| CHARGEABLE INCOME of a permanent establishment abroad |
Corporation Tax | 0% | 0% |
| INCOME FROM SALE OF SHARES | Corporation Tax | 0% | 0% |
| CAPITAL GAINS TAX There is Capital Gains Tax only if the property is sold in Cyprus |
Capital Gains Tax | 20% | 20% |
| BANK INTEREST / NON- TRADING INTEREST INCOME |
Defence Tax | 30% | 0% |
| TRADING INTEREST Interest arising from the usual exercise of the ordinary activities i.e. interest on debit balance of clients |
Corporation Tax Defence Tax |
12.5% 0% |
0% 0% |
| DIVIDENDS Paid from one resident CyprusCompany to another resident Cyprus Company |
Corporation Tax Defence Tax |
0% 0% |
N/A N/A |
| DIVIDENDS Paid from a non-resident Company to a Cyprus resident Company |
Corporation Tax Defence Tax |
0% 0% (1) |
N/A N/A |
| DIVIDENDS Paid from one resident Company to resident individuals Paid from one resident Company to non- resident individuals |
Defence Tax Defence Tax |
17% 0% |
N/A N/A |
| RENTAL INCOME | Defence Tax Corporation tax |
3% on 75% of rental income 12.5% on profit |
N/A N/A |
|
SHIP MANAGEMENT COMPANIES
SHIP OWNING COMPANIES
CHARTERS
|
Corporation Tax | Tonnage tax or 12.5% corporation tax | Tonnage tax or 12.5% corporation tax |
| INTERNATIONAL TRUSTS | Corporation Tax | 0% | 0% |
| DOUBLE TAX TREATIES | Apply | N/A | |
| LOSSES | Can be set off against future profits within 5 years from the year that losses incurred | N/A | |
| TAX CREDIT | According to double tax treaties or unilateral tax credit for non tax treaty Countries | N/A |
This exemption does not apply:
- If the company paying the dividend engages directly or indirectly more than 50% in activities which lead to investment income and
- The foreign tax burden on the income of the company paying the dividend is substantially lower than the tax burden of the Cyprus Company (5%).
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As from 1.1.2010 the three categories will be taxed under Tonnage Tax.
Tonnage Tax Rates
|
Net Tonnage |
||||
| 0-1.000 | 1.001-10.000 | 10.001-25.000 | 25.001-40.000 | >40.000 |
| € 36,50 Per 100 NT |
€31,03 Per 100 NT |
€20,08 Per 100 NT |
€12,78 Per 100 NT |
€7,30 Per 100 NT |
Note: The rates applicable to ship managers are 25% of the above.
Sample calculation of the annual tonnage tax for a 19.538 net tonnage vessel:
1.000 NT: 1000/100 = 10 x € 36,50 = € 365,00
9.000 NT: 9000/100 = 90 x € 31,03 = € 2.792,70
9.500 NT: 9500/100 = 95 x € 20,08 = € 1.907,60
38 NT : 38/100 = 0,38 x € 20,08 = € 7,63
Annual tonnage tax due = € 5.072,93
Capital Gains Tax is levied on gains from the disposal of immovable property or shares in a company which owns immovable property at the rate of 20%. If the property was acquired before 1.1.1980 the cost is deemed to be its market value as at 1.1.1980. A cost adjustment is allowed based on the increase in the R.P.I. between the date of purchase (or 1.1.1980 if earlier) and the date of sale. Lifetime gains arising on disposal of immovable property by individuals are exempt as follows:
- €17.086 on disposal of any property
- €25.629 on disposal of agricultural land
- €85.430 on disposal of a residence
| Standard rate (goods and services) | 19% |
| Reduce rate (hotels, restaurants etc) | 9% |
| Reduce rate (newspapers, books, animal food, food supplies, medicines etc.) | 5% |
| Financing insurance services etc | Exempted |
Residents of Cyprus are liable to Defence Tax of the following incomes:
|
%
|
|
| Dividend Income to Cyprus Tax residents |
17
|
| Bank interest |
30
|
| Other non trading interst | 30 |
| Gross rental income less 25% |
3
|
|
Interest from Cyprus government saving bonds and developments bonds and interest earned by provident fund
|
3
|
* Residents of Cyprus
Resident in the Republic” means an individual who stays in the republic for a period or periods exceeding in aggregate 183 days in the year of assessment and “non-resident or resident outside the Republic” shall be construed accordingly.
No taxation on emoluments earned abroad
SPECIAL CONTRIBUTION
Employees are subject to income tax on the following tax rates:
| Cumulative | |||||
| Income
€ |
Rate
% |
Tax
€ |
Income
€ |
Tax
€ |
|
| First | 19.500 | 0 | 0 | 19.500 | 0 |
| Next | 8.500 | 20 | 1.710 | 28.000 | 1.700 |
| Next | 8.300 | 25 | 2.075 | 36.300 | 3.775 |
| Next | 24.700 | 30 | 7.410 | 60.000 | 11.185 |
| Over | 60.000 | 35 | |||
| · First time employment of a non-resident 20% deduction of his emoluments or up to €8.543 whichever is the lower for each of the next 5 years ( up to 2020) |
| · A non- tax resident employed in Cyprus with emoluments excluding € 100.000 per annum 50% deduction is allowed for such income for the first 10 years of employment. |
Social Insurance Rates
| Employee contribution
€ |
Employer’s contribution
€ |
|
| Social Insurance | 7.8% | 7.8% |
| Social Cohesion Fund | 2% | – |
| Redundancy Fund | 1.2% | 25 |
| Industrial Training Fund | 0.5% | 30 |
| Holiday Fund (if not exempt) | 8% | 35 |
Maximum insurable amount is EUR4.533 per month
Under the Stamp duty legislation of Cyprus, stamp duty is imposed on documents referring to assets in Cyprus, or matters or things that will be done in Cyprus irrespective of where the documents are signed.
The relevant stamp duty rates applicable are as follows:
| Contracts with a fixed amount | Stamp duty |
| €0- €5.000 | €NIL |
| €5.001- €170.000 | 0.15% |
| Over €170.001 | 0.2% capped at €20.000 |
Contracts without fixed sum bear a stamp duty of €35
Stamp duty is payable within 30 days from execution of the agreement.
Taxation of individuals
Income tax
The following income tax rates apply to individuals:
| Chargeable income for the tax year (EUR) | Tax rate (%) | Accumulated tax (EUR) | |
| From | To | ||
| 0 | 19,500 | 0 | 0 |
| 19,501 | 28,000 | 20 | 1,700 |
| 28,001 | 36,300 | 25 | 3,775 |
| 36,301 | 60,000 | 30 | 10,885 |
| 60,001 | and above | 35 | |
Social insurance
Contributions %
- Employer 7.8
- Employee 7.8
The rate of Social insurance contributions is applied to a maximum level of emoluments. The maximum level of emoluments for 2017 (as with 2016 and 2015) is €54,396 (weekly €1,046/monthly €4,533).
Other employer’s contributions
The employer makes the following other contributions based on employee’s emoluments:
| From | % |
| Social cohesion fund* | 2 |
| Redundancy fund ** | 1.2 |
| Industrial training fund** | 0.5 |
| Holiday fund** | 8 |
* Social cohesion fund is calculated on total emoluments and has no maximum level
** Restricted to the maximum level of emoluments as with the social insurance contributions
The contributions of self-employed persons are 14.6% of their income. The amount of the contributions is subject to a lower and a maximum limit, depending on the profession or trade of the Self-
Employed Person. These limits are set on an annual basis.
