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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

Exemption 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

Exemption 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

Exemption 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

4,5

Steamers, tugs and fishing boats

6

Shipmotor launches

12,5

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