Corporate Tax 2012

yprus 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 broad. 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.

A company is resident in Cyprus if it is managed and controlled in Cyprus.

Tax Allowances of Legal Entities

Corporate Tax Losses

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.
Tax losses from the year 1997 and onwards are carried forward and are being offset against profits of future years without any restrictions.

Wear & Tear Allowances

Deductible Expenditure of Legal Entities

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 of shareholders nonresident in Cyprus.

Deemed dividend distribution is subject to special defense contribution 20% (see below special Deference Contributions)

However, the proportion of the deemed dividend distribution that corresponds to non -Cyprus tax residents is exempt from the payment of the special defense contribution.