As from 24th March 2010, the Tonnage Tax System (TTS) was introduced with the Merchant Shipping (Fees & Taxing Provisions) Law 44(I) of 2010 with effect as from 1 January 2010.
The new TTS covers Maritime Transport activities offered in international shipping, namely Ship owning, Ship management (including Crew Management and/or Technical Manage­ment) and Chartering.

The tonnage tax for a qualifying ship owner and charterer is calculated on the net tonnage of a ship in accordance with the rates outlined in the table:

here are the following tax rates:

Zero rated 0% - export sales (to countries with in EU as from 01/05/2004) ship management services

Reduced rate 5% - books, newspapers, non-bottled water, supply of food, hotel accommodation, rural and tourist buses, supply of medicines, hairdressing, renovation and repairs

Reduced rate 8% - tourist, excursions, interurban bus services, transport
of passengers by taxi, supply of food, sea transport.

Standard rate (Until 29/02/2012) 15% - (From 01/03/2012) 17% - Provision of goods and services in Cyprus; importation of goods, into Cyprus from third countries (i.e. outside EU)

Registration to VAT is compulsory for all entities (partnerships, self-employed people, limited liability companies, Cyprus international companies, societies, club, institution, etc.) with an annual turnover of at least €15.600 or it provides services to registered persons in other EU member states (effective from 01/01/2010).

Submission of VAT returns is done quarterly and the payment of the VAT must be made by the 10th day of the second month that follows the month in which the tax period ends.

Immovable Property Tax is imposed on the market value as at 1 January 1980 and applies to the immovable property owned by the taxpayer on 1 January of each year.
This tax is payable on 30 September each year. Physical and legal persons are both liable to Immovable Property Tax.

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

No immovable property transfer fees are payable in the case of reorganization of companies.

In the situation of transferring of immovable property to a family company and provided the shareholders remain members of the same family, then after the passing of 5 years the immovable property transfer fees are being refunded.

In the case of property transferred from a company whose shareholders are spouses and/or their children, to one of the two spouses, or their children or to third degree of relation the transfer fees are calculated on the value of the property as follows:

• if the transfer is to spouse - 8%
  • if the transfer is to child - 4%
  • if the transfer is to a relative - 8%

Also the following rates are applicable in the case of free transfers:

• from parents to children - 4%
  • between spouses - 8%
  • between third degree relatives - 8%
  • to trustees - €8,54

Value in these cases is the one written on the title deed which refers to values of the year 1920.

The net profit from the disposal of immovable property is estimated by deducting from the disposal price the market value as at 1.1.1980 or the purchase cost if the immovable property was built after this date, as adjusted for inflation based on the retail price indexes and is taxed at 20%.

The above exemptions are given only once and not at every disposal.
An individual claiming a combination of the above is only allowed a maximum exemption of €85.430.

Exemptions /Allowances

The following disposals of immovable property are not subject to Capital Gains Tax:

1. Transfers arising on death.

2. Gifts made from parent to child or between husband and wife or between up to third degree relatives.

3. Gifts to a company where the company's shareholders are members of the donor's family and the shareholders continue to be members of the family for five years after the day if the transfer.

4. Gifts by a family company to its shareholders provided such property was originally acquired by the company by way of donation. The property must be kept by the done for at least three years.

5. Gifts to charities and the Government.

6. Transfers as a result of reorganisations.

7. Exchange or disposal of immovable property under the Agricultural Land (Consolidation) Laws.

8. Expropriations.

9. Exchange of properties, provided that the whole of the gain made on the exchange has been used to acquire the other property. The gain that is not taxable is deducted from the cost of the new property, i.e. the payment of tax is deferred until the disposal of the new property

Expenses that are related to the acquisition and disposal of immovable property are
also deducted, subject to certain conditions e.g. transfer fees, legal expenses etc.

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.

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