With its wisely shaped, EU- and OECD-compliant tax system, Cyprus is the most advantageous business jurisdiction in the EU
In the course of harmonisation, focusing on the then future EU-membership, Cyprus dismissed its “offshore” legislation in 2002 and 2003 step by step. Simultaneously, a new system of EU-conform tax advantages has been set up, and the refinement is still continued day by day. Today, Cyprus is even more attractive as a place of doing business, providing not only tax advantages but many other advantages as well.
In order to fully benefit from the tax advantages of Cyprus, Companies in Cyprus are required to maintain operative substance in Cyprus. For more information:
Companies Need Sufficient Substance to Avoid Cross-Border Tax Issues;
Cyprus Tax Residency: Where will my Cyprus Company get taxed?.
Non tax-resident Cyprus Companies are not liable for corporate tax in Cyprus, provided that
In the case where a non-tax resident Cyprus Company conducts business in Cyprus, the profit from this business will be taxed in Cyprus. Non-tax-resident companies cannot benefit from Double Taxation Avoidance Treaties.
Tax-resident Cyprus Companies pay 12,5 % corporate tax on their taxable income. However:
Double Taxation Avoidance Agreements fully apply.
The profit that accrues from the exploitation of Intellectual Property is taxable at a favoured rate of only 2,5 %. As per the new EU regulations from 2016, a number of condition applies. Please read the related information.
The so-called Cyprus Defence Tax as per the Cyprus Special Contribution for Defence Tax Law is payable, under certain circumstances, on income from dividends and interest. The EU Parent-Subsidiary Directive fully applies.
The Cyprus Defence Tax on dividend income is 17 % (for tax-resident individuals). If a tax-resident person benefits from the non-dom tax status, Cyprus Defence Tax is not applied for a number of years.
The Cyprus Defence Tax on income from interest that is not related to the business of the company is 30 %.
Note: Interest income from loan agreements between group companies (companies that belong to or are under the control of the same beneficial owner) is generally considered as related to the business of the company. The rate of interest must be at arm-length, please read our specific news.
Annual earnings of an individual up to EUR 19.500 are not taxable in Cyprus. Earnings over EUR 19.500 are taxed as per the Cyprus Income Tax Law, at a rate of 20 – 35 %, where the highest tax rate of 35 % is applied for the portion of annual earnings over EUR 65.000.
Cyprus tax-resident but non-domiciled individuals enjoy substantial tax benefits through the Cyprus Non-Domiciled Tax Regime. Please read our specific page for “non-doms”.