Corporate Tax 2017

CORPORATION TAX

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 rate:

                        Corporation tax          12,5%

Tax Allowances/ Exemptions of Legal Entities

Deductible Expenditure of Legal Entities

Non-Deductible Expenditure 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.

Group Relief

Current year tax losses within group of Cyprus tax resident companies can be surrendered provided that the group companies are members of the same group for the entire year.

Current year tax loss from another EU group Company can be surrendered provided such losses have not firstly been utilised in its country of residence or any intermediary EU holding company.

Group Relief

Group is considered when:

One is a 75% subsidiary of the other, or

Both are 75% subsidiaries of a third company

Group relief may be claimed even if there is a non-Cyprus tax resident company in the group provided that such company is in an EU Country or a country which has either a tax treaty with Cyprus or exchange of information treaty (bilateral or multilateral).

Foreign Tax Credit

Foreign tax paid on income taxed in Cyprus can be credited against Cyprus income tax irrespective of the existence of a tax treaty.

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.

Reorganisations

Transfers of assets and liabilities between companies can, subject to conditions, 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.

Annual Wear & Tear Allowances

Annual Government Fee to Registrar of Companies for Cyprus Registered Companies

The Annual Government fee is €350, payable to the Registrar of Companies by 30 June.

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.