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Corporation Tax

 
Basis of taxation    
All companies tax resident of Cyprus are taxed on all their income accrued or derived from all sources in Cyprus and abroad. A non Cyprus tax resident company is taxed on income accrued or derived from a business activity which is carried out through a permanent establishment in Cyprus. 
A company is resident of Cyprus if it is managed and controlled in Cyprus. 
     
Corporation tax rates
    Tax rate % 
Companies    12.50
Public corporate bodies    25
Excemptions
Type of income    Excemption limit 
Interest income not arising from the ordinary activities or closely related to the ordinary activities of the company    100%
Dividends income    100%
Profit from the sale of securities    100%
Profits of a permanent establishment abroad, subject to certain conditions   100%
Deductions 
All expenses incurred wholly and exclusively in earning the income of the company including:  
Type of expense    Excemption limit 
Interest incurred for the acquisition of a fixed asset used in the business 100%
Donations to approved charities (with receipts)    the whole amount 
Employer's contributions to social insurance and approved funds on employees' salaries the whole amount
     
But not including: 
Type of expense    Excemption limit 

Business entertainment expenses including hospitality expenses of any kind which are incurred for the business

amounts in excess of 1% of the gross income or €17,086 (whichever is the lower)

Expenses of a private motor vehicle    the whole amount 
Contributions to the Social Cohesion Fund    the whole amount 
     
Losses carried forward 
The tax loss incurred during a tax year and which cannot be set off against other income, is carried forward and set off against future profits with no time restriction. 
The current year loss of one company can be set off against the profit of another provided the companies are Cyprus tax resident companies of a group. 
Group is defined as: 
a)  one company holding at least 75% of the shares of the other  company 
b)  at least 75% of the voting shares of the companies are held by another company 
A partnership or a sole trader transferring business into a company can carry forward tax losses into the company for future utilisation. 

Losses from a permanent establishment abroad can be set off with profits of the company in Cyprus. Subsequent profits of the permanent establishment abroad are taxable up to the amount of losses allowed.

Reorganisations 
Transfers of assets and liabilities between companies can be effected without tax consequences within the framework of a reorganisation. 
Reorganisations include: 
a)  mergers 
b)  demergers 
c)  transfer of activities 
d)  exchange of shares 
Capital Allowances 
The following allowances for the annual wear and tear which are given as a percentage on the cost of acquisition are deducted from the chargeable income: 
Fixed assets   
Plant and machinery     
Fork lifts, excavators, loading vehicles, bulldozers and oil barrels    25
Motor vehicles of all types except from private saloon cars    20
Personal computers (hardware) and operating software    20
Application software      
up to €1,708.60    100
above €1,708.60    33 1/3
Plant and machinery used in agriculture    15
Water drillings, industrial carpets, video recorders, televisions    10
Any other plant and machinery    10
Buildings      
Metallic frame of greenhouses    10
Wooden frame of greenhouses    33 1/3
Industrial, agricultural and hotel buildings    4
Commercial    3
Ships      
Sailing vessels    4.50
Steamers, tugs and fishing boats    6
Shipmotor launches    12.50
New cargo vessels    8
New passenger vessels    6
Used cargo/passenger vessels Over their useful lifes
Tools      
All tools in general    33 1/3
Videotapes used by video clubs    50