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.

Notes

1. Under Cyprus legislation there is never any WHT on dividends and interest paid to non-residents of Cyprus

2. Royalties earned on rights used within Cyprus are subject to WHT of 10%

3. A rate of 5% on film and TV royalties

4. Nil if paid to a government/Central Bank/ Public Authority or for export guarantee

5. Nil on literary, dramatic, musical, or artistic work

6. Nil if paid to the government/Central Bank/ Public Authority of the other state

7. This 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

8. A rate of 15% if received by a company controlling less than 25% of the voting power.

9. A rate of 15% if received by a person controlling less than 10% of the voting power

10. Nil if paid to a government, bank, or financial institution

11. A rate of 5% on film royalties

12. A rate of 5% if received by a person controlling less than 50% of the voting power

13. This rate applies to individual shareholders regardless of their percentage of shareholding.
    Companies controlling less than 10% of the voting shares are also entitled to this rate

14. A rate of 10% for payments of a technical, managerial, or consulting nature

15. Treaty rate is 15%, therefore restricted to Cyprus legislation rate

16. A rate of 10% if a dividend is paid by a company in which the beneficial

17. If investment is less than EUR 200,000, dividends are subject to 15% WHT
    which is reduced to 10% if the recipient company controls 25% or more of the paying company

18. No WHT for interest on deposits with banking institutions

19. Kyrgyzstan, Tajikistan, and Ukraine apply the USSR/Cyprus treaty

20. A 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

21. This rate applies for any copyright of literary, dramatic, musical, artistic, or scientific work.
    A 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

22. This 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%

23. This rate does not apply if the payment is made to a Cyprus international business entity
    by a resident of Bulgaria owning directly or indirectly at least 25% of the share capital of the Cyprus entity

24. A rate of 7% if paid to a bank or financial institution

25. Serbia, and Montenegro apply the Yugoslavia/Cyprus treaty

26. This rate applies if received by a company (excluding partnerships) that holds directly 25% of the shares.
    A rate of 10% applies in all other cases

27. Applies to any consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work
    (including cinematograph films and films, tapes or discs for radio or television broadcasting), computer software,
    any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial,
    commercial, or scientific experience

28. This rate applies if received by a company (excluding partnership) which holds directly at least 10% of the shares
    for an uninterrupted period of no less than one year. 5% applies in all other cases

29. 10% 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

30. A rate of 5% if a dividend is paid by a company in which the beneficial owner has invested less than EUR 150.000

31. The provisions of the Parent-Subsidiary EU directive are applicable

32. A 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

33. A new treaty has been signed and it will apply as from 1st January of the year following the year of ratification.
    This rate applies if the recipient company (partnership is excluded) holds directly 10% of the shares for an uninter­rupted period
    of at least 2 years. 5% in all other cases.

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.

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

As from 2 December of 2011 until 31 December of 2016, a transfer subject to VAT will be exempt from the above transfer fees and a transfer not subject to VAT will be eligible for 50% exemption from the above 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.

Specifically, for properties charged with VAT there will be no transfer fees payable and for properties that are not charged with VAT the transfer fees will be reduced by 50%.

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 1980

Social Insurance Contributions

The maximum level of emoluments for 2014 is €54.396 (monthly €4.533)

Value Added Tax

Businesses that undertake intra-community trading, i.e. Acquisitions and sales of goods and supply of services from/to EU member states
need to complete the following forms:

1. Intra-Community Acquisitions: (a)Acquisition of Goods, (b) Inclusion in the VAT return (on a total basis)

2. Intra-Community Supplies: (a) Departures of goods, (b) Recapitulative statement for supplies of goods and services (VIES form),
   (c)Inclusion in the VAT return on a total basis

Businesses that undertake intra-community trading, i.e. Acquisitions and sales of goods and supply of services from/to EU member states need to complete the following forms:
Submission: the INTRASTAT forms are submitted to the VAT authorities not later than the tenth (10) days from the end of the related month, the INTRASTAT forms is submitted in electronic form only

Value added Tax

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.

VAT Thresholds and Penalties

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:

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: