Taxes for companies in Cyprus

Since 1992, Feod Group has been providing a wide range of immigration, corporate and legal services in Cyprus and other EU countries

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Benefits of Cyprus for business

According to information provided by the Cyprus Statistical Service, more than 6,000 new companies were registered on the island in the first half of 2023 alone. And half of them are enterprises with the participation of foreign investors. Registering a company in Cyprus to optimize taxes provides a wide range of advantages.

The main motives for relocating a business to Cyprus are:

The tax system in Cyprus represents one of the key advantages of this country, providing the opportunity to legally optimize taxes for both beneficiaries and companies.

For example, a low level of corporate tax. The corporate tax rate is only 12.5%, and there are no certain taxes, such as tax on dividends and income from the sale of shares.

In addition, there are beneficial programs that provide IT companies and other enterprises engaged in innovative developments with the opportunity to pay tax on only 20% of the profits from inventions. The terms of the program are described below.

An additional advantage is the application of British law and the presence of one of the most developed and reliable banking systems in the country.

Cyprus has been a member of the EU since 2004, and has long lost its offshore jurisdiction status and is recognized as a low-tax country that meets all standards of the European Union and the Organization for Economic Co-operation and Development (OECD). This ensures the legality and reliability of the Cyprus tax system.

These factors help attract investors and entrepreneurs, highlighting the attractiveness of Cyprus for international business transactions and financial investments.

Taxes in Cyprus for business

There are several types of taxes for legal entities in Cyprus. The main types of taxes include:

 

Corporation tax in Cyprus for business

The corporate tax rate in Cyprus is fixed at 12.5%.

Cyprus corporation tax is one of the lowest and most favorable in Europe, making Cyprus an attractive location for business and investment, supporting the country’s economic competitiveness. If we compare corporate tax rates in the EU, we can note a noticeable competitive advantage of Cyprus. For example, corporate tax on mainland Portugal ranges from 17 to 21%, in Spain from 15%, in Italy from 24%.

The deadline for filing corporate tax returns is March 31 of the second year after the year to which the return relates (for example, a 2023 corporate tax return must be filed by March 31, 2025). Information about the tax calendar can be found on the official website of the Cyprus Tax Department.

Reducing corporate tax in Cyprus through IP-BOX regime

The IP-BOX, or Intellectual Property Box, regime is a tax instrument that aims to stimulate innovation and attract high-tech companies to Cyprus. By using IP-BOX, companies can significantly reduce corporate tax to just 2.5%.

Under the terms of IP-BOX – 80% of profits are deducted for tax purposes. Thus, only 20% of the income from intellectual property assets is taken into account.

Read more: Rules for preferential tax treatment of IP Box in Cyprus

Value added tax (VAT)

VAT is charged on the supply of goods and services in Cyprus, as well as on the purchase of goods from the European Union and the import of goods into Cyprus.

The standard VAT rate in Cyprus is 19%. However, the effective rate could be:

Application of VAT in international transactions

The application of Value Added Tax (VAT) on international transactions in Cyprus depends on the direction of movement of goods and services. When exporting goods and services from Cyprus, businesses can count on preferential VAT exemption. This means that when selling goods or providing services to other countries, companies may be exempt from the obligation to charge VAT to customers.

However, when importing goods and services into Cyprus, you may be required to pay VAT in accordance with local legislation. In this case, companies are required to take into account the standard VAT rates applicable in Cyprus and include them in the price of goods or services.

Tax on dividends

In Cyprus, the tax on dividend income has special privileges – 0%. This applies to income from dividends, interest and other passive income.

For tax residents of Cyprus, Cyprus tax privileges on dividends, interest and other types of passive income apply both within and outside Cyprus, providing businesses and beneficiaries with maximum flexibility in managing their finances.

Capital gains tax

The capital gains tax rate in Cyprus is 20%. Applies only to profits attributable to immovable property located in Cyprus.

A rate of 20% capital gains tax is levied:

  1. from income from the sale of real estate located in Cyprus
  2. or from the sale of shares in companies owning real estate located in Cyprus. This rule applies if at least 50% of the market value of the shares sold is related to property located in Cyprus or to a transaction involving the purchase and sale of real estate located in Cyprus.

Capital gains tax is not payable in Cyprus in the following cases:

Employer contributions in Cyprus

In Cyprus, the employer is required to pay various contributions amounting to approximately 14.9% of the salary of his employees. The breakdown of these contributions is as follows:

Stamp duty in Cyprus

Cyprus stamp duty is levied exclusively on written documents such as agreements and contracts relating to assets located in Cyprus. The applicable rates depend on the value specified in each agreement or contract and are:

There is the possibility of exemption from stamp duty in the event of reorganization or reconstruction of a company, including mergers or acquisitions, provided that these processes comply with the requirements of Cyprus law.

Annual fee from Cypriot companies

All companies in Cyprus pay an annual fee of €350.

Tax payment must be made before June 30 of the current reporting year. In case of delay in payment of the fee, a strict system of fines is provided, up to and including exclusion of the company from the State Register.

Stipulated fines:

If the fee is not paid for 5 months, the company may be excluded from the State Register.

Read also:


Contact us!
Our company's Cypriot lawyers will provide you with legal support and advice on issues related to business, taxation, investment and immigration status in Cyprus, providing you with the necessary information.

 

 

TAX CONSULTATION IN CYPRUS

FAQ – Taxes in Cyprus for companies
Why is Cyprus very profitable for business?

1. Beneficial programs for tax optimization, such as a low corporate tax of 12.5%, as well as no tax on dividends and income from the sale of shares.

2. Innovation incentives: There are programs aimed at supporting innovation by providing IT companies and enterprises engaged in innovative developments with the opportunity to pay tax on as little as 20% of the profits from inventions.

3. Compliance with EU and OECD standards: Cyprus, a member of the European Union since 2004, emphasizes its legality and compliance with Organization for Economic Co-operation and Development (OECD) standards, making it attractive for international business transactions.

What taxes do companies in Cyprus need to pay?

In Cyprus, companies are required to pay several types of taxes. Some of the main taxes for companies include:

  • Corporate Tax: The standard corporate tax rate in Cyprus is 12.5%.
  • Value added tax (VAT): standard rate 19%
  • Social contributions: Companies and their employees may also be subject to social contributions.

Specific tax liabilities may vary depending on the type of business the company operates and other factors. It is important to consult with professional tax advisors to obtain accurate information in the context of your particular business.

What is the Cyprus corporate tax rate in 2024?

The corporate tax rate in Cyprus in 2024 is 12.5%, which is one of the lowest in Europe.

Article author

Anastasia Taran Head of Corporate Services
Ukraine
In 2013, she graduated in law from the National University «Odessa Law Academy» with honors and received a Master of Law degree. Anastasia Taran has experience in international and contract law, as well as corporate and tax law in Europe. Within the framework of Feod Group, she specializes i...
In 2013, she graduated in law from the National University «Odessa Law Academy» with honors and received a Master of Law degree. Anastasia Taran has experience in international and contract law, as well as corporate and tax law in Europe. Within the framework of Feod Group, she specializes in immigration and corporate law of European countries, particularly:
  • family and corporate immigration solutions.
  • establishing a business in Europe.
  • personal and corporate taxation in Europe.
  • opening accounts in European banks.
  • obtaining a tax resident status.
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We provide our clients with related services, such as relocation and adaptation abroad, organizing family relocation abroad, enrollment of children in schools and many other services.

 

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