Corporate Tax 2013

Corporation Tax Rates

Cyprus Tax Resident Companies are those which are managed and controlled in Cyprus.
These are taxed on profits based on their income accrued or derived from all sources in Cyprus and abroad.
Non-resident Companies are taxed on income accrued or derived from a business activity which is carried out
though a permanent establishment in Cyprus and on certain income arising from sources in Cyprus.
Foreign taxes paid can be credited against the corporation tax liability.

Tax Allowances of Legal Entities

Corporate Tax Losses

Tax losses can be carried forward and set off against the profits of the next five (5) years, subject to conditions as from the year 2007 onward.
A partnership or a sole trader transferring business into a company can carry forward tax losses into the company for future utilization.
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 offset in previous periods, will be included in the taxable income of this year, up to the amount of profit from permanent establishment abroad.
The current year loss of one company can be set off against the profit of another subject to conditions provided the companies are Cyprus tax resident companies of a group. Group is defined as:

• One company holding at least 75% of voting shares of the other company.
• Both of the companies are at least 75% (voting shares) held by another third company.

Taxations on Loans / Advances from Companies to Directors, Shareholders and Related Persons

When a Director, shareholder and their spouses or their second degree relatives obtains any loan or money advances above their salaries from a limited company, then a benefit on their salary (9% on this amount) will be added on their monthly salary.
This benefit will be taxed monthly and paid through the PAYE system.
Article 39 'Loans to Directors' is abolished, where 9% deemed interest on the above loans/advances was added to the company's tax computation as additional income.

Salaries -Allowable Expense

Salaries will only be treated as allowable expense when declared in full at the social insurance office and all the necessary deductions are paid (social insurance, redundancy, training development, cohesion, trade union, provident fund etc...,). Any salaries for which no above deductions are paid will not be treated as allowable expense for taxation purposes.
In cases where the deductions are paid within two years from the date they become due, then the expense will be tax allowed at the year of payment.

Wear & Tear Allowances

Deductible Expenditure of Legal Entities

Reorganisations Transfers of assets and liabilities between companies can be affected without tax consequences within the framework of a reorganisation and tax losses can be carried forward by the receiving entity.
Reorganisations include mergers, demergers, partial divisions, transfer of assets, exchange of shares and transfer of the registered office from/ to Cyprus.

Deemed Dividend Distribution

As from the year 2003 and onwards 70% of the accounting profits after deduction of the corporation tax (and other adjustments) are deemed to be distributed as dividends the latest two years following the year that they were incurred. This deemed distribution does not apply in the case shareholders are non-resident in Cyprus.
Deemed dividend distribution is subject to special defence contribution 20% till 31/12/2013 and 17% as from 01/01/2014 (see below special Deference Contribution).
However, the proportion of the deemed dividend distribution that corresponds to non-Cyprus tax residents is exempt from the payment of the special defence contribution.

Annual Government Fee to Registrar of Companies for Cyprus registered companies

Registered companies and those registered between 01/07/2013 till 30/06/2014, the Annual fee of
2014 is payable to the Registrar of Companies by 30 June 2014 . In the case of group companies
the total amount payable is capped at €20.000.
Late payment of the levy will give rise to the following penalties: in case of up to a 2 month
delay - a 10% penalty; in case of a delay between 2 and 5 months - a 40% penalty.
Non-payment of the levy may result in deregistration (strike-off) of a company by the Cyprus
Registrar of Companies (which will not allow the company to submit documents or request
certificates from the Registrar of Companies). If a company is re-instated within a two year
period from its strike-off a fixed penalty of €500 (in addition to the outstanding amount of the levy)
is imposed. The fixed fee will be increased to €750 where a company is re-instated after the
two year period.