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Profits from Shipping Activities
The following are exempt from taxation in accordance with the provisions of the Merchant Shipping (Fees and Taxing Provisions) Law and are subject to tonnage tax:
- The income of a qualifying ship-owner from the operation of a qualifying Cyprus, community and/or foreign ship (under conditions), in a qualifying shipping activity.
- The income of a qualifying charterer from the operation of a qualifying Cyprus, community and/or foreign ship (under conditions), in a qualifying shipping activity.
- The income of a qualifying ship operator from the provision of ship management services of the crew and/or technical administration services.
- Dividends paid directly or indirectly from the profits mentioned above.
- Salaries or other benefits paid to the masters, officers and the crew of a qualifying Cyprus or Community flag ship in a qualifying shipping activity.
For the purposes of the above-mentioned Law, in the case of a Cyprus ship, the term “ship-owner” also includes the bareboat charterer.
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.) | 3% |
| Basic goods | 0% |
| 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 | 17 |
| Other non trading interst | 17 |
| Gross rental income less 25% | 3 |
| Interest from Cyprus government saving bonds and developments bonds and interest earned by provident fund | 3 |
| Interest earned by Social Insurance fund | 3 |
* Tax Residents of Cyprus
Up to 2016 tax year, an individual is considered to be tax resident in Cyprus if he was in Cyprus for more than 183 days in any calendar year.
Effective from 1.1.2017, an individual can be considered as tax resident in Cyprus if he spends at least 60 days in Cyprus provided that the individual:
- a) do not reside on any other country for more than 183 days, and
b) are not tax resident in any other country, and
c) have other defined Cyprus ties. To satisfy this condition the individual must
carry business in Cyprus and/or
ii. be employed in Cyprus and/or
iii. hold an office of a Cyprus tax resident company (i.e. director), provided that is not terminated during the tax year
iv. Further the individual must maintain permanent residence in Cyprus, either owned or rented
The previous “183 day rule” is also maintained so that an individual staying in Cyprus for more than 183 days in a year is automatically tax resident in Cyprus
Cyprus tax resident individuals either under the “60 day rule” or “183 day rule” are subject to taxation in Cyprus on their worldwide income.
In addition, Cyprus tax resident individuals who are Non- Domiciled in Cyprus are exempt from taxation on dividend income earned worldwide and on passive interest income.
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 15 years of employment. |
Social Insurance Rates
| Employer’s contribution
€ |
Employee contribution
€ |
|
| Social Insurance | 8.8% | 8.8% |
| Self employed | 16.6% | – |
| Social Cohesion Fund | 2% | – |
| Redundancy Fund | 1.2% | – |
| Industrial Training Fund | 0.5% | – |
| Holiday Fund (if not exempt) | 8% | – |
Maximum insurable amount is EUR5.239 per month
National Health System Law
introduction of contribution effective from 1.3.2019
| Contributions | 2022 | |
| Employees/retirees/income earners | 2.65% | |
| Employers | 2.90% | |
| Self-employed | 4.00% | |
| The state | 4.70% | |
| Contributions are to be applied to a max level of taxable income (including dividends, interest & rental income) of €180,000 per annum. | ||
Personal Allowances
- Premiums on life policies are allowed provided they do not exceed 7% of the capital sum insured.
- Contributions to life insurance, social insurance, pensions, provident fund (maximum 10% of remuneration) and medical fund (maximum 1.5% of remuneration) are allowable provided such contributions do not exceed 1/5th of the total chargeable income effective from 2019.
Deductions
|
20% of income |
|
|
| Area up to 120 m2 | €1.200 per m2 |
| Area up to 121 m2 – 1000 m2 | €1.100 per m2 |
| Area up to 1000 m2 | €700 per m2 |
|
|
Exemptions
|
100% |
|
100% |
|
100% |
|
100% |
|
100% |
|
100% |
|
100% |
|
20% of the remuneration up to €8,550 annually |
|
50% of the remuneration |
|
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 | TAX RATES |
| CHARGEABLE INCOME | Corporation Tax | 12.5% |
| CHARGEABLE INCOME of a permanent establishment abroad |
Corporation Tax | 0% |
| INCOME FROM SALE OF SHARES | Corporation Tax | 0% |
| CAPITAL GAINS TAX There is Capital Gains Tax only if the property is sold in Cyprus |
Capital Gains Tax | 20% |
| INTEREST INCOME |
||
| BANK INTEREST / NON-TRADING INTEREST INCOME | Defence Tax | 17% * |
| Interest earned by an approved provident fund | Defence Tax | 3% |
| Interest earned by the Social Insurance Fund | Defence Tax | 3% |
| Interest earned by (i) Cyprus government bonds, (ii) Cyprus and foreign corporate bonds listed on a recognised stock exchange and (iii) bonds issued by Cyprus state organisations, or by Cyprus or foreign local authorities, listed on a recognised stock exchange | Defence Tax | 3% ** |
| 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% |
| DIVIDENDS Paid from one resident CyprusCompany to another resident Cyprus Company |
Corporation Tax Defence Tax |
0% 0% |
| DIVIDENDS Paid from a non-resident Company to a Cyprus resident Company |
Corporation Tax Defence Tax |
0% 0% (1) |
| DIVIDENDS Paid from one resident Company to resident individuals Paid from one resident Company to non- resident individuals |
Defence Tax Defence Tax |
17% 0% |
| RENTAL INCOME | Defence Tax Corporation tax |
3% on 75% of rental income 12.5% on profit |
| SHIP MANAGEMENT COMPANIES
SHIP OWNING COMPANIES CHARTERS |
Corporation Tax | Tonnage tax or 12.5% corporation tax |
| INTERNATIONAL TRUSTS | Corporation Tax | 0% |
| DOUBLE TAX TREATIES | Apply | |
| LOSSES | Can be set off against future profits within 5 years from the year that losses incurred | |
| TAX CREDIT | According to double tax treaties or unilateral tax credit for non tax treaty Countries |
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%).
* Interest income by individual
An individual whose total annual income including interest does not exceed €12.000, has the right to a refund of the amount of SDC suffered on interest income in excess of 3%.
** Interest income at reduced 3% rate
The Special Contribution for Defence rate on interest income of 17% is effective for interest received or credited from 29 April 2013 onwards. Interest income earned by individuals from corporate bonds (as from 26 June 2019 ), Cyprus government savings and development bonds as well as all interest earned by a provident fund and the Cyprus Social Insurance Fund is subject to Special Contribution for Defence at the rate 3% (instead of 17%). As from 8 June 2022, the reduced rate of 3% applies to both legal persons and individuals tax resident in Cyprus earning interest income from: (i) Cyprus government bonds, (ii) Cyprus and foreign corporate bonds listed on a recognised stock exchange and (iii) bonds issued by Cyprus state organisations, or by Cyprus or foreign local authorities, listed on a recognised stock exchange. Furthermore, the reduced rate of 3% also applies to pension funds.