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.

Tax Allowances/ Exemptions of Legal Entities

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:

Tax Allowances/ Exemptions of Legal Entities

Deductible Expenditure of Legal Entities

Expenses incurred wholly and exclusively in earning taxable income and supported by documentary evidence are deductible for corporate tax purposes, including:

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 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.

A person who is a tax resident in Cyprus is taxed on worldwide income (Chargeable income accrued or derived from all sources in Cyprus and abroad). A person is regarded to be tax resident in Cyprus if he/she spends in Cyprus more than 183 days in any calendar year. Individuals who are not tax residents of Cyprus are taxed on certain income accrued or derived from sources in Cyprus.

With effect as from 1 January 2017, an individual may also be considered tax resident in Cyprus if (s)he satisfies the “60 day rule”. The “60 day rule” applies to individuals who in the relevant tax year:

1. do not reside in any other single state for a period exceeding 183 days in aggregate, and
2. are not tax resident in any other state, and
3. reside in Cyprus for at least 60 days, and
4. have other defined Cyprus ties. To satisfy this condition the individual must carry out any business in Cyprus and/or be employed in Cyprus and/or hold an office (director) of a company tax resident in Cyprus at any time in the tax year, provided that such is not terminated during the tax year. Further the individual must maintain in the tax year a permanent residential property in Cyprus which is either owned or rented by him/her.

For the purpose of calculating the days of stay in Cyprus, the day within and outside the Republic of Cyprus is determined as follows:

• Day of departure from the Republic is considered as a day outside the Republic
• The day of arrival in the Republic is considered as a day within the Republic
• Arrival and departure from the Republic on the same day is considered as a day within the Republic
• Departure and return to the Republic on the same day is counted as a day outside the Republic

Individuals who are not tax residents of Cyprus are taxed on certain income accrued or derived from sources in Cyprus.

Exemptions

 Tax deductions for Individuals

Loans or Other Financial Assistance Provided to Company Directors or Individual Shareholders

Any amount received as a loan or financial assistance by a company’s director, or by a company’s individual shareholder, or by his/her spouse, or by any relative up to a second degree is considered as a monthly benefit equal to 9% p.a. calculated on the received amount. Such benefit is included in the individual’s taxable income subject to income tax.

The amount of tax on the monthly benefit should be withheld from the individual’ monthly salary and paid to the Tax Department on a monthly basis under the PAYE system.

Personal Income Tax Declarations - IR1

Employees

Individuals with gross income of more than €19.500 annually must submit electronically their personal income tax return to the office of the Inland Revenue until 31st of July of the following year.

Self-Employed

Individuals with no obligation to maintain proper books and records and prepare audited financial statements must submit their personal income tax return to the office of the Inland Revenue until 30th September of the following year. Individuals with an obligation to maintain proper books and records and prepare audited financial statements must submit their personal income tax return to the office of the Inland Revenue until 31st of December of the following year (Electronically 31st March, after the following year, ie 15 months).

All Tax Declarations must be submitted electronically with TAXINET system.

Notes

1. The WHT rate of 5% applies where a dividend is paid by a company in which the beneficial owner has invested less than EUR 150.000.
2. A WHT rate of 5% applies where the investment is not less than EUR 200.000 in the share capital of the company paying the dividend. If such investment is less than EUR 200000, dividends are subject to 15% WHT which is reduced to 10% if the recipient company controls 25% or more of the paying company.
3. A WHT rate of 15% applies if received by a company holding less than 25% of the share capital of the paying company and in all cases if received by an individual.
4. No WHT if paid to the government/Central Bank/ Public Authority of the other state.
5. No WHT for interest on deposits with banking institutions.
6. Serbia, Montenegro and Bosnia apply the Yugoslavia/Cyprus treaty.
7. The WHT 5% rate applies to companies holding directly at least 25% of the share capital of the company paying the dividend. In all other cases the WHT is 10%.
8. The treaty rates do not apply if the payment is made to a Cyprus entity by a resident of Bulgaria owning directly or indirectly at least 25% of the share capital of the Cyprus entity and the Cyprus entity pays tax in Cyprus at a tax rate lower than the usual tax rate.
9. Nil if paid to a government/Central Bank/ Public Authority or for export guarantee.
10. Nil on literary, dramatic, musical, or artistic work (but not including royalties in respect of motion picture films and works on film or videotape for use in connection with television).
11. Nil applies if received by a company (excluding partnership) which holds directly at least 10% of the share capital of the paying company for an uninterrupted period of no less than one year. A WHT rate of 5% applies in all other cases.
12. 10% WHT applies for patent, trademark, design or model, plan, secret formula or process, computer software or industrial, commercial or scientific equipment, or for information concerning industrial, commercial, or scientific experience.
13. A WHT rate of 15% if received by a company controlling less than 10% of the share capital of the paying company or the duration of any holding is less than one uninterrupted year. A WHT rate of 15% also applies if received by an individual.
14.  A WHT rate of 15% applies if received by a company controlling less than 10% of the voting power in the paying company and in all cases if received by an individual.
15. A WHT rate of 15% if received by a company (partnership is excluded) holding less than 10% of the capital of the paying company and in all cases if received by an individual.
16. Nil if paid to a government, bank, or financial institution.
17. A WHT rate of 5% on royalties for cinematographic films including films and video tapes for television.
18. A WHT rate of 15% if received by a company holding less than 10% of the capital of the paying company and in all cases if received by an individual.
19. A WHT rate of 5% on cinematographic film royalties (other than films shown on television).
20. Prior to 1 April 2017, the applicable WHT rate is 15% if received by a company holding less than 10% of the shares of the paying company and in all cases if received by an individual.
21. A WHT rate of 10% is also applicable for payments of a technical, managerial, or consulting nature. Prior to 1 April 2017, a rate of 15% applies on royalties.
22. A WHT rate of 5% if received by a company (other than partnership) holding less than 10% of the capital of the company paying the dividend and in all cases if received by an individual.
23. Nil rate applies if the recipient company (partnership is excluded) holds directly 10% of the share capital of the paying company for an uninterrupted period of at least 2 years. 5% in all other cases.
24. A WHT rate of 5% applies if the beneficial owner is a company (other than a partnership) which holds directly at least 25% of the capital of the company paying the dividends. 10% in all other cases.
25. 5% WHT rate applies for patents, trademarks, designs or models, plans, secret formulas, or processes, or any industrial, commercial, or scientific equipment, or for information concerning industrial, commercial, or scientific experience.
26. A WHT rate of 10% on dividend if paid by a company in which the beneficial owner has invested less than EUR 100.000 in the share capital of the company paying the dividend.
27. A WHT rate of 7% if paid to a bank or financial institution.
28. A WHT rate of 5% if received by a company holding less than 10% of the capital of the paying company and in all cases if received by an individual or a company not limited at least partly by shares.
29. A WHT rate of 15% if received by a company holding less than 25% of the share capital of the paying company and in all cases if received by an individual or a company not limited at least partly by shares.
30. A WHT rate of 10% on interest received by a financial institution or when it relates to sale on credit of any industrial, commercial, or scientific equipment or of merchandise.
31. A WHT rate of 5% applies for any copyright of literary, dramatic, musical, artistic, or scientific work. A WHT 10% rate applies for industrial, commercial, or scientific equipment. A 15% rate applies for patents, trade marks, designs or models, plans, secret formulas, or processes.
32. A WHT rate of 15% if a dividend is paid by a company in which the beneficial owner holds less than 20% of the share capital of the paying company and the beneficial owner has invested less than 100.000 Euro.
33. A WHT 5% WHT will be levied on payment of royalties in respect of any copyright of scientific work, any patent, trade mark, secret formula, process or information concerning industrial, commercial or scientific experience. 10% WHT will be levied in all other cases.
34. A WHT rate of 15% applies to individual shareholders regardless of their percentage of shareholding. Companies controlling less than 10% of the voting shares are also entitled to a rate of 15%. Companies controlling at least 10% of the voting shares are entitled to nil WHT.
35. A WHT rate of 15% if received by a company controlling less than 10% of the voting power of the paying company and in all cases if received by an individual. If a company controls at least 10% of the voting power of the paying company in order to benefit from the WHT rate of 5% other conditions relating to the income of the paying company need to be satisfied, otherwise a WHT rate of 15%.
36. Nil rate applies if the beneficial owner is a company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividends or if the beneficial owner of the shares is the Government of Cyprus or Norway. A WHT rate of 15% in all other cases.
37. The Cyprus - Czechoslovakia treaty applies with the Slovak Republic.
38. 10% WHT rate applies on payment of royalties of any copyright of literary, artistic or scientific work including cinematograph films, and films or tapes for television or radio broadcasting. A rate of 15% applies on payments of royalties of any patent, trade mark, design or model, plan, secret formula or process, or any industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience.
39. A WHT rate of 5% if received by company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividend. 10% in all other cases.
40. Nil rate applies if the beneficial owner is a company (other than a partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends during an uninterrupted period of at least one year (the holding period condition may be satisfied post the date of the dividend payment). Nil rate also applies if the beneficial owner is a pension fund or other similar institution or relates to the Government of Cyprus or Switzerland. 15% in all other cases.
41. A protocol to the treaty entered into force on 18 September 2015 but may apply retrospectively. 5% WHT rate applies if the beneficial owner is a company which holds at least 10% of the capital of the company paying the dividend. 10% in all other cases.
42. Nil applies if the payer is a company that is a resident in Latvia and the beneficial owner of the income is a company (other than partnership) that is a resident in Cyprus. 10% rate applies for all other cases (except for certain governmental interest).
43. Nil applies if the payer is a company that is a resident in Latvia and the beneficial owner of the income is a company (other than partnership) that is a resident in Cyprus. 5% rate applies for all other cases.
44. Nil if paid to a government or any other institution agreed upon between the two States. Prior to 1 April 2017, nil rate also applies if paid to a bank or financial institution.
45. The treaty is effective as from 1 January 2018.
46. The treaty is effective as from 8 July 2018 for Ethiopia.
47. The WHT rate of 5% applies if the beneficial owner of the dividends holds directly at least 25% of the capital of the company paying the dividends.

Notes:

1. Under Cyprus legislation, there is no WHT on dividends and interest paid to non residents of Cyprus. Further, there is also no WHT on royalties paid to non-residents of Cyprus for rights not used within Cyprus.
2. Royalties earned on rights used within Cyprus are subject to WHT of 10% (except royalties relating to cinematographic films, where the WHT rate is 5%).
3. A WHT rate of 5% is applicable on royalties for cinematographic films including films and video tape for television.
4. 0% on literary, dramatic, musical, or artistic work (excluding motion picture films and works on film or videotape for use in connection with television).
5. The WHT rate of 5% is applicable on cinematographic film royalties.
6. 5% WHT applies for any copyright of literary, dramatic, musical, artistic, or scientific work.
7. Serbia, Montenegro and Bosnia apply the Yugoslavia/ Cyprus treaty.
8. A 5% WHT will be levied on payment of royalties in respect of any copyright of scientific work, any patent, trademark, secret formula, process, or information concerning industrial, commercial, or scientific experience and cinematographic films.
9. The Cyprus-Czechoslovakia treaty applies with the Slovak Republic.
10. 5% WHT rate applies for patents, trademarks, designs or models, plans, secret formulas, or processes, or any industrial, commercial, or scientific equipment, or for information concerning industrial, commercial, or scientific experience.
11. 10% WHT rate applies for patent, trademark, design or model, plan, secret formula or process, computer software or industrial, commercial, or scientific equipment, or for information concerning industrial, commercial, or scientific experience.
12. Nil applies if the payer is a company that is a resident in Cyprus and the beneficial owner of the income is a company (other than partnership) that is a resident in Latvia. 5% WHT rate applies for all other cases.
13. The treaty is effective as from 1 January 2018.
14. The treaty is effective as from 1 January 2018 for Cyprus.

WHT on dividends, interest and royalties

Cyprus does not levy a WHT on dividends, interest and royalties paid to non-residents of Cyprus except in the case of royalties earned on rights used within Cyprus, which are subject to a WHT of 10% (5% in the case of cinematographic films). Such Cyprus WHT on royalties for rights used within Cyprus may be reduced or eliminated by double tax treaties entered into by Cyprus or by the EU Interest and Royalty Directive as enacted in the Cyprus tax legislation.

WHT on other types of income

Cyprus levies a 10% WHT on technical services performed by nonresidents in Cyprus. However no such WHT is levied if such services are performed via a permanent establishment in Cyprus of the non-resident or if performed between ‘associated’ companies as these are defined by the EU Interest and Royalty Directive as enacted in the Cyprus tax legislation.

Cyprus also levies a 10% WHT on the gross income/ receipts derived by a non- resident individual from the exercise in Cyprus of any profession or vocation and the remuneration of non-resident public entertainers (such as theatrical, musical including football clubs, other athletic missions etc).

Further, a 5% WHT is levied on gross income derived from within Cyprus by non-residents with no local permanent establishment for services in regards to the exploration, extraction or exploitation of the continental shelf as well as the establishment and use of pipelines and other installations on the ground, on the seabed and on the surface of the sea.

WHT on dividend, interest and royalties tables

Table A below illustrates the applicable Cyprus WHT rates on outbound dividend, interest and royalty payments.

Table B, further below, illustrates the WHT rates provided for in the double tax treaties entered into by Cyprus. This table illustrates the maximum tax rates on Cyprus inbound payments which the treaty partner country may charge on such type incomes qualifying under the respective treaty. The actual WHT rate charged may be lower/eliminated based on each paying country’s domestic law provisions

The following table gives the amount or rate of duty payable on certain documents. Transactions which fall within the scope of reorganizations are exempt from stamp duty. Also, documents relating to assets situated outside Cyprus or business affairs that take place outside Cyprus are exempt from stamp duty

Nature of documents

Social insurance and other contributions are calculated at the following rates on employee’s gross weekly/monthly emoluments.

Limits

The following are the upper limits on employee’s gross emoluments:

Deadline for Contribution Payments

Immovable Property Tax

Immovable Property Tax is abolished as from 1 January 2017.

Estate Duty

Estate duty has been abolished as from 1 January 2000.

The executor/administrator of the estate of the deceased is required by the Deceased Person’s

Estate Law, to submit to the tax authorities a statement of assets and liabilities of the deceased within six months from his/her death.

Immovable Property Transfer Fees

The transfer fees are paid by the acquirer to the Department of Land and Surveys on transfers of immovable property on values estimated by the Department of Land and Surveys.

Immovable Property Transfer Fees

Transfers relating to properties that are subject to VAT will be exempt from the above transfer fees and transfers relating to properties that are not subject to VAT will be eligible for 50% exemption from the above transfer fees.

In the case of free transfers of property between the following parties, the transfer fees are calculated on the value of the property as at 1 January 2013 at the following rates:

No immovable property transfer fees are payable in the case of a qualified reorganization, a qualified loan restructuring or in the context of bankruptcy, liquidation and disposal of mortgaged immovable property by the lender.

Special Defence contribution is imposed on dividend income, ‘passive’ interest income and ‘passive’ rental income earned by companies tax resident in Cyprus and by individuals who are both Cyprus tax resident and Cyprus domiciled.

Prior to 16 July 2015, individuals were subject to special defence contribution if they were tax resident in Cyprus. As from 16 July 2015, individuals are subject to special defence contribution if they are both Cyprus tax resident and Cyprus domiciled.

An individual is domiciled in Cyprus for the purposes of special contribution for defence if he/she has a domicile of origin in Cyprus per the Wills and Succession Law(subject to exemptions)or if he/she has been a tax resident in Cyprus for at least 17 out of the 20 tax years immediately prior to the tax year of assessment. Anti-avoidance provisions apply.

The special defence contribution is charged at the rates shown in the table below:

Notes:

1. Dividends received by a Cyprus tax resident company from other Cyprus tax resident companies are excluded from all taxes, unless they are indirectly declared after the lapse of four years from the end of the year in which the profits were generated, in which case they may be subject to special contribution for defence at 17%.
   Dividends which emanate directly or indirectly out of such dividends on which special contribution for defence was previously suffered are exempt.
   This exemption does not apply if:
   a. more than 50% of the paying company’s activities result directly or indirectly in investment income and
   b. the foreign tax is significantly lower than the tax burden in Cyprus. The tax authorities have clarified through a circular that “significantly lower” means an effective tax rate of less than 6,25% on the profit distributed.
   When the exemption does not apply, the dividend income is subject to special contribution for defence at the rate of 17%.
2. Such interest income is subject to income tax / corporation tax.

Deemed Dividend Distribution

A Cyprus tax resident company is deemed to have distributed as a dividend 70% of its after tax (note 1) accounting profits (as adjusted for special contribution for defence purposes-note 2).
Such a deemed dividend distribution is reduced with payments of actual dividends paid during the relevant year the profits were generated or paid during the two following years.
On the remaining net amount (if any) of deemed dividend 17% special contribution for defence is imposed to the extent that the ultimate direct/ indirect shareholders of the company are Cyprus tax resident individuals.
When an actual dividend is paid after the deemed dividend distribution date, then if special contribution for defence is due on such a dividend, the tax is imposed only on the amount of the actual dividend paid which is over and above the dividend that was previously deemed to have been distributed and previously suffered special contribution for defence.

Notes:

1. The term ‘’tax’’ in addition to corporation tax includes also the special defence contribution, the capital gains tax and any foreign taxes suffered.
2. A number of adjustments to the accounting profit are required for deemed distribution purposes, including for tax years 2012, 2013 and 2014 if the company has acquired in those years plant, machinery or buildings (excluding private motor vehicles) for business purposes, the cost of these assets will be deductible against the accounting profits.

Disposal of Assets to Shareholder at Less Than Market Value

When a company disposes of an asset to an individual shareholder or a relative of his up to second degree or his spouse for a consideration less than its marke value, the difference between the consideration and the market value will be deemed to have been distributed as a dividend to the shareholder. This provision does not apply for assets originally gifted to the company by an individual shareholdei or a relative of his up to second degree or his spouse.

Company Dissolution

The cumulative profits of the last five years prior to the company’s dissolution which have not been distributed or deemed to have been distributed, will be considered as distributed on dissolution and will be subject to special contribution for defence at the rate of 17%.
This provision does not hold in the case of dissolution under a Reorganisation.

Reduction of Capital

In the case of a reduction of capital of a company, any amounts paid or due to the shareholders over and above the previously paid-in equity will be considered a: dividends distributed subject to special defence contribution at the rate of 17% after deducting any amounts which have been deemed as distributable profits.
The above provisions apply only to the extent that the ultimate shareholder: (direct or indirect) are Cyprus tax resident individuals.