The Tax System in Cyprus
For the purposes of income tax "resident of Cyprus" is defined as:
Person (natural person) staying in Cyprus for one or more periods exceeding a total of 183 days in the tax year,
Person (natural person) who fulfills all of the following conditions in each tax year:
(i) stays in Cyprus for one or more periods of at least 60 days
(ii) does not stay in another State for one or more periods exceeding 183 days in total
(iii) is not a tax resident in another State
(iv) carries on business in Cyprus and / or is employed in Cyprus and / or holds a position as a tax resident of Cyprus on December 31 of each tax year, ie the business or employment or occupation of office shall not be terminated before the end of the tax year year
(v) maintain a permanent home in Cyprus owned or rented by him.
Company (legal entity) whose control and management are exercised in Cyprus
Any person (natural or legal) resident in Cyprus, for any tax year, is taxed on income derived or derived from sources both inside and outside Cyprus.
Any person (natural or legal) who is NOT a resident of Cyprus for any tax year shall be liable to tax on income derived or derived from sources within Cyprus only.
Legal Entity - A non-resident company, having a permanent establishment in the Republic of Cyprus, may elect to be treated as a resident of Cyprus.
Voluntary registration in the tax department's register (for VAT purposes) may be made under terms and conditions, eg. a person who is not permanently established in the Republic of Cyprus but carries out taxable activities in the Republic of Cyprus.
Cyprus offers a wide range of tax advantages to companies operating in Cyprus. These advantages stem from favorable Cyprus taxation in line with the requirements of the Organization for Economic Co-operation and Development (OECD) and the European Union, as well as from the extensive network of Double Taxation Conventions with over 60 countries.
In short, the main provisions of corporate taxation are:
Uniform corporate tax rate of 12.5%. The lowest rate in the EU
Non-taxation of income from dividends and / or interest, of a person who is not a resident of the Republic, and of a person who is a resident of the Republic but is not considered "Domiciled" in the Republic
Non-withholding tax on royalties related to the use of those rights outside Cyprus;
Non-taxation of profits from a permanent establishment held abroad under conditions and conditions
Non-taxation of capital gains from the placement of securities on a recognized Stock Exchange
They are exempt from taxation, in the case of company reorganization, the profits resulting from the transfer of ownership or shares, and the payment of stamp duties.
Tax-free repatriation of profits and capital.
Personal Income Tax
Individuals' annual income is taxed at a rate of 20%, 25%, 30% and 35%, with the first € 19500 of income tax-free. One of the lowest regulated tax rates in the EU
The following are some of the provisions of the Cyprus Legislation regarding Natural Persons:
The income from the following sources of income shall not be taxed under the following terms and conditions:
Dividend and interest income;
Profit from a permanent establishment abroad;
Income from paid employment abroad;
Profit from the sale of securities;
Loss resulting from an enterprise in the current year and / or previous years is deducted from taxable income under terms and conditions;
Exempt from taxation, income received: as a retirement allowance, death or injury compensation, welfare fund, pension fund, or other approved funds.
Value added tax
Value Added Tax is levied at a rate of 19% (normal), 9% / 5% (reduced), as well as 0% (zero rate) on specific goods and services, on all deliveries of goods and services effected in the Republic, on acquisitions of goods from other Member States and imports of goods from third countries.
Visitors from countries that are not members of the European Union can claim a refund of VAT paid on the purchase of goods in Cyprus upon departure from Cyprus.