Cyprus Taxation

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Cyprus has one of the lowest corporate tax rates in Europe.

 

 The country offers one of the most attractive tax systems in the European Union. It provides a simplified, effective and transparent tax regime that is fully compliant with EU laws and regulations.

 

 Dividend income, profits from overseas permanent establishments and profits from the sale of securities are exempt from tax. Also, there is no withholding tax on dividend, interest and royalties paid from Cyprus to non residents.

 

 Most international transactions are exempt from VAT.

 

 Cyprus has a network of double tax treaties with more than 48 countries ensuring any scope for double tax is eliminated

 

 Additionally, Cyprus has access to EU Directives that focus on reducing or eliminating foreign withholding taxes.

 

i) Corporate tax

 

All companies are subject to a uniform tax rate of 12.5%, the lowest corporate tax rate in the European Union.

 

Moreover, various tax exemptions apply for corporate tax such as:

 

 exemptions in respect of dividends received from other companies

 

 exemption in respect of interest income under special conditions

 

 favourable tax treatment of losses

 

 no tax on profits earned from permanent establishments abroad under certain conditions

 

 no tax on capital gains derived from the disposal of securities

 

 no tax on profits from company reorganisations. Tax relief of foreign tax paid

 

ii) Personal Income Tax

 

Based on Eurostat's statistics, Cyprus does not only exhibit the lowest corporate tax rate, but also one of the lowest top statutory personal income tax rate at 35%.

 

Moreover, various tax exemptions apply for personal income tax as well, such as:

 

 exemptions in respect of dividends subject to certain conditions

 

 no tax on interest income subject to certain conditions

 

 favourable tax treatment of losses by soletraders

 

 no tax on capital gains derived from the disposal of securities

 

 Tax credits available for taxes paid on remuneration for services rendered abroad

 

 no tax on specific type of income such as compensation for injuries, provident fund, pension fund or other approved funds

 

iii) International Trusts

 

Cyprus International Trusts are widely utilised as a vehicle for international tax planning, offering the following tax advantages:

 

 Income and gains of a Cyprus International Trust, derived from sources outside Cyprus are exempt from any tax imposed in Cyprus under certain conditions.

 

 Dividends, interest or other income received by a Trust from a Cyprus international business company are not subject to tax nor are they subject to withholding tax.

 

 No capital gains tax is charged on the disposal of assets of an International Trust.

 

 Exemption from taxation in the case of an alien who creates an International Trust in Cyprus and retires in Cyprus under certain conditions.