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Cyprus

Private company limited by shares

Taxes

Tax residency – A company is tax resident in Cyprus, if it is controlled and managed from Cyprus.

Basis – All companies that are tax residents of Cyprus are taxed on 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 business activity that is carried out through a permanent establishment (PE) in Cyprus and on certain other income arising from sources in Cyprus.

Tax rate – Corporate tax standard rate is 12.5%.

Capital gains – Capital Gains from disposals of shares, bonds, debentures and other titles of companies or other legal persons incorporated in Cyprus or abroad and options thereon are exempt.

There is a capital gains tax of 20% levied on gains arising from the disposal of immovable property situated in Cyprus or the disposal of shares in companies that own Cyprus-situated immovable property. Shares listed on any recognised stock exchange are excluded from capital gains tax.

Dividends -  Dividends received by Cyprus companies are exempt from all taxes, with the exception of foreign-source dividends that are deductible for tax purposes for the paying company.

Interests - Interest received by companies in the ordinary course of their business is taxed at the standard rate of 12.5%.

Interest income considered passive income (not related to the ordinary course of the business) is subject to the Special Defence Contribution at the rate of 30%. Such passive nature interest is, however, exempt from corporate income tax.

Royalties – Royalty income is subject to income tax.

Foreign-source income – Companies ordinarily residents and domiciled in Cyprus are taxed on their worldwide income. However, foreign P.E. income, as well as foreign-source dividends and capital gains may be exempt from taxation.

The PE exemption is applicable, unless the below anti-avoidance rules apply:

  • more than 50% of the foreign PE’s activities directly or indirectly result in investment income, and
  • the foreign tax on the income of the foreign PE is significantly lower than the tax burden in Cyprus (i.e. an effective tax rate of less than 6.25%).

If foreign income is taxed in Cyprus, double taxation is avoided through granting tax credits for the foreign taxes, without the need for a DTT to be in place with the foreign jurisdiction.

Withholding taxes – Cyprus does not levy withholding tax on dividends, interest and royalties paid to non-residents. However, a 10% withholding tax is levied on royalties earned on rights used within Cyprus.

Losses – Losses arising from taxable income may be carried forward 5 years. Carryback of losses is not allowed.

Inventory - Inventory valuations are usually made at the lower of cost or net realizable value. In general, the book and tax methods of inventory valuation will be acceptable. The Last in first out method (LIFO) is not allowed for taxation purposes.

Anti-avoidance rules – Transactions between related parties should be carried out at arm’s length.

 

Cyprus has not enacted thin capitalization rules, nor controlled foreign companies regulations.

Labor taxes – Employers required to make contributions to the Social Insurance Fund (7.8%), Redundancy Fund (1.2%), Training Development Fund (0.5%), Social Cohesion Fund (2%), Holiday Fund (8%). With the exception of the social cohesion fund, the maximum amount of monthly earnings on which the contributions are paid is EUR 4,533 for 2018. The employee must also contribute at the same rate as the employer to the social insurance fund (withhold by the employer), but not to the other funds.

Tax credits and incentives – The new Cyprus IP box allows for a deductible notional expense calculated as 80% x qualifying profits from qualifying IP.

For the purposes of the 80% deduction, qualifying IP may be legally or economically owned and comprise:

  • patents
  • copyrighted software
  • utility models, IP assets that grant protection to plants and genetic material, orphan drug designations, extensions of patent protection, and
  • other IP that are non-obvious, useful, and novel, that are certified as such by a designated authority, and where the taxpayer satisfies size criteria (i.e. annual IP related revenue does not exceed EUR 7.5 million for the taxpayer, and group total annual revenue does not exceed EUR 50 million, using a five-year average for both calculations).

Marketing-related IP, such as trademarks, do not qualify.

Qualifying profits include, inter alia:

  • royalties or other amounts in relation to the use of qualifying IP
  • amounts for the grant of a licence for the exploitation of qualifying IP
  • amounts derived from insurance/compensation in relation to the qualifying IP
  • trading income from the sale of qualifying IP (note that capital gains on IP are excluded; as such, capital gains are not subject to taxation in Cyprus), and
  • IP income embedded in the sale of products, services, or the use of processes directly related with qualifying IP assets.

In calculating the amount of the qualifying IP profits entitled to the 80% deduction, a fraction is applied to the above IP profits based on R&D activity of the taxpayer; the higher the amount of R&D undertaken by the taxpayer itself (or via a taxable foreign PE or via unrelated third party outsourcing), the higher the amount of R&D fraction (modified nexus fraction).

Compliance – On average, a Limited company in Malta may require 28 payments and 127 hours per year to prepare, file and pay taxes.

Personal income tax – An individual is tax resident in Cyprus if he or she resides 183 days during a calendar year in Cyprus, or resides 60 days in Cyprus and does not reside 183 days or is tax resident in any other country and is employed or has a business in Cyprus.

Tax residents are taxed on their worldwide income.  Non-residents are only taxed on their income and capital gains from Cyprus.

Personal income tax rates are progressive from 0% to 35%. Special Defence Contribution tax applies to dividends (17%) and interest income (30%) instead of Personal Income tax. For rental income a Special Defence Contribution tax of 2.25% is charged in addition to personal income tax.

Non-domiciled tax residents may be exempt from Special Contribution Defence Tax. An individual is domiciled in Cyprus based on the provisions of the Will and Successions Laws (e.g. domicile of the parents at the time of birth) or he or she has been tax resident for at least 17 of the 20 years before the current tax year.

Capital Gains tax at the rate of 20% is imposed on gains arising from the disposal of immovable property situated in Cyprus or the disposal of shares in companies that directly own Cyprus-situated immovable property. Other capital gains are exempt from taxation.

Other taxes – In Cyprus, there are no inheritance, real property, net wealth and municipal taxes. There is an immovable property transfer tax up to 8%. Value-added tax is 19%

  • Offshore Income Tax Exemption
  • Offshore capital gains tax exemption
  • Offshore dividends tax exemption
  • CFC Rules
  • Thin Capitalisation Rules
  • Patent Box
  • Tax Incentives & Credits
  • Property Tax
  • Wealth tax
  • Estate inheritance tax
  • Transfer tax
  • Capital duties
  • 12.5% Offshore Income Tax Rate
  • 12.5% Corporate Tax Rate
  • 0% Capital Gains Tax Rate
  • 0% Dividends Received
  • 0% Dividends Withholding Tax Rate
  • 0% Interests Withholding Tax Rate
  • 0% Royalties Withholding Tax Rate
  • 0 Losses carryback (years)
  • 5 Losses carryforward (years)
  • FIFO Inventory methods permitted
  • 127 Tax time (hours)
  • 28 Tax payments per year
  • 7.8% Social Security Employee
  • 19.5% Social Security Employer
  • 35% Personal Income Tax Rate
  • 19% VAT Rate
  • 53 Tax Treaties

Country details

Cyprus
EUR
Nicosia
Europe
e l - C Y , t r - C Y , e n
1102677

Cyprus is a former UK colony and currently a Member State of the European Union. It is located in the island of the same name, in the Mediterranean Sea, 113 km south of Turkey, 120 km west of Syria, and 150 km east of the Greek island of Kastellorizo.

It has about 1.2 million people and its capital and financial hub is Nicosia. Its official languages are Greek and Turkish, although English is widely spoken. Since 2008, its official currency is the Euro (EUR).

It has a highly vulnerable economy strong dependent on the services sector, which is equivalent to 4/5 of GDP. The tourism is its main sector with about 2 million of visitors per year. Followed by financial and asset management.

Due to its favorable tax regime, Cyprus is the gateway to the European common market chosen by many non-EU companies and a portal for investment from the West into Russia, Middle-east, Asia and South America. It is also a shipping hub, the Cypriot-registered vessel fleet is the fourth largest in the world, and provides large revenues. Cyprus is also an exporter of citrus fruits, cement, potatoes, clothing and pharmaceuticals.

At the end of March 2013, in the context of the Cypriot financial crisis and the negotiation of the bailout from the EU, there was block on bank deposits and the banking offices were closed. In order to avoid the banking panic and massive withdrawal of deposits before the imposition by the EU ministers of economy of a levy to the bank deposits. On the brink of bankruptcy, Cyprus had to accept drastic concessions in exchange for an international loan of 10 billion euros, including a significant reduction of its banking sector, where large depositors were forced to contribute with a percentage of their deposits.

Tax treaties

Country Type Date Signed
Spain DTC  2013-02-14
Moldova, Republic of DTC  2008-01-28
Slovenia DTC  2010-10-12
Finland DTC  2012-11-15
Montenegro DTC  1985-06-29
Egypt DTC  1993-12-18
China DTC  1990-10-25
Slovakia DTC  1980-04-15
Estonia DTC  2012-10-15
Lithuania DTC  2013-06-21
Ireland DTC  1968-09-24
Canada DTC  1984-05-02
United States DTC  1984-03-19
Belarus DTC  1998-05-29
Syrian Arab Republic DTC  1992-03-15
Switzerland DTC  2014-07-27
Qatar DTC  2008-11-11
Norway DTC  1951-05-02
Malta DTC  1993-10-22
France DTC  1981-12-18
Hungary DTC  1981-12-01
Turkmenistan DTC  1982-10-29
Belgium DTC  1996-05-14
Armenia DTC  2011-01-17
United Kingdom DTC  1974-06-20
South Africa DTC  1997-11-26
Portugal DTC  2012-11-19
Germany DTC  2011-02-18
Kuwait DTC  1984-12-15
Romania DTC  1981-11-16
Sweden DTC  1988-10-25
Seychelles DTC  2006-06-28
Russian Federation DTC  1998-12-05
Italy DTC  1974-04-24
Austria DTC  1990-03-20
United Arab Emirates DTC  2011-02-27
Guernsey DTC  2014-07-29
Serbia DTC  1985-06-29
Iceland DTC  2014-11-13
Poland DTC  1992-06-04
Denmark DTC  2010-10-11
Czech Republic DTC  2009-04-28
Ukraine DTC  2012-11-08
Thailand DTC  1998-10-27
Lebanon DTC  2003-02-18
Mauritius DTC  2000-01-21
Greece DTC  1968-03-30
Singapore DTC  2000-11-24
Tajikistan DTC  1982-10-29
Bulgaria DTC  2000-10-30
India DTC  1994-06-13
San Marino DTC  2007-04-27
Bahrain DTC  2015-03-09

Procedures

We can help you incorporate a Company limited by shares in Cyprus for $3,900.


Description


Cyprus Limited Company – US$3,900.00


We pride ourselves in providing the best possible professional service which includes our honest hassle free “No Hidden Fee” policy. Your incorporation package includes:



  • Government incorporation and filling fee

  • Bound set of Constitutional Documents

  • Certified Copies of Constitutional Documents for bank account opening

  • Registered Agent & Registered Office Fee

  • Corporate Seal

  • Courier fees


Time to form: 2 weeks.


All our incorporation services include a yearly consulting session, a dedicated account manager and access to our global network of trusted business services, including introductions to accountants, financial, tax and legal advisors at no cost.


Bank Accounts



  • Cyprus Bank Account (In-person/Remotely) – US$700.00

  • Mauritius Bank Account (Remotely) – US$500.00

  • Curaçao Bank Account (Remotely) – US$500.00

  • Bahamas Bank Account (Remotely) – US$500.00

  • Offshore Bank Account* (Remotely) – US$300.00

  • Hong Kong Bank Account (In-person) – US$1,200.00

  • Singapore Bank Account (In-person) – US$900.00

  • Switzerland Bank Account (Remotely) – US$1,200.00

  • Cayman Islands Bank Account (Remotely) – US$900.00

  • Crypto-Friendly Bank Account (Remotely) – US$3,000


We include introductions to payment processors or merchant accounts with all of our incorporation services. Whether you just need standard credit card processing or specialized services for high risk processing, we are happy to help you with introductions that can empower your business.


*Offshore Bank Accounts: Belize, Puerto Rico, Nevis, Antigua, Saint Lucia.  Other bank account options may be available depending on business profile and turnover.


Annual Fees (2nd year) – US$3,100.00


Including:



  • Government Fee

  • Annual Return Filling

  • Secretarial Services Fee


Additional Services



  • Nominee Director / Shareholder – US$600.00 (per year)

  • Accounting and audit services: minimum price of US$1,000.00 (in case that the company will have no transactions).





Click here to incorporate your Cyprus LTD.

Incorporate now

Disclaimer

Although we use our best efforts to keep the information of this site accurate and up-to-date, we make no representations or warranties with respect to the accuracy, applicability, fitness, or completeness of the contents of this website. We disclaim any warranties expressed or implied, merchantability, or fitness for any particular purpose. We shall in no event be held liable for any loss or other damages, including but not limited to special, incidental, consequential, or other damages. The contents of this website are just for illustrative purposes and are NOT to be considered as a legal opinion or tax advice and should not be relied upon as such. Far Horizon Capital Inc., and any associated company, is not engaged in the practice of law or tax. If you wish to receive a legal opinion or tax advice on the matter(s) in this website please contact our offices and we will refer you to an appropriate legal practitioner. Use of our websites FlagTheory.com, Incorporations.io, Residencies.io, Passports.io, is subject to our terms and conditions.