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All companies which are Cyprus tax resident are subject to tax in Cyprus based on their worldwide income. Non-tax resident companies are subject to tax only on income derived in Cyprus. A company is not considered as Cyprus tax resident just through incorporation. It is subject to Cyprus corporation tax if it is effectively managed and controlled in Cyprus.
The Corporation Tax in Cyprus is at the rate of 12.5%.
The Cyprus Corporation Tax system provides various exceptions for many types of income which makes Cyprus a very attractive jurisdiction for foreign investors.
Special Defense Contribution (SDC) is imposed on dividends, passive interest and rental income earned by Cyprus Tax Residents.
A company residing in Cyprus is deemed to have distributed 70% of its taxable profits in the form of dividends, after the completion of 2 years from the end of the tax year for which the taxable profits relate to. The amount of deemed distribution is subject to 17% SDC.
This rule is only applicable where the shareholders of the company are Cyprus tax residents (individuals or companies).
Payment of dividends or interest to non-Cyprus tax residents are not subject to Cyprus withholding tax, irrespective of the existence of Double Tax treaty. Royalties payments for use of rights outside the Republic of Cyprus are also exempt of withholding tax. Royalties payment for the use of rights in Cyprus are subject to 10% withholding tax and 5% on TV rights.
Capital Gains Tax
Capital Gain tax is imposed on gains from the sale of immovable properties situated in Cyprus or from gain from the sale of shares of companies who own immovable property situated in Cyprus. Gains from the disposal of securities (including shares, bonds, options with underlying securities, futures, forwards etc) are exempt from Capital Gains.
The Capital Gain Tax is at the rate of 20%.
Deadlines and Compliance
|End of each month||SDC withheld on dividends, interest, rent paid in the previous month|
|31-Jan||Submission of the Deemed Dividend Distribution declaration (IR623)|
|31-Mar||Electronic submission of Income Tax Return (IR4) for companies|
|31-Jul||Submission of provisional tax return (IR6) and payment of the first instalment|
|01-Aug||Payment of tax balance (of previous year) through self-assessment, for companies preparing audited accounts|
|31-Dec||Payment of second instalment of provisional tax|
|Payment of SDC for dividends, interest and rent received from outside Cyprus during the last 6 months|
Royal Pine & Associates can provide expert advice on income tax and tax planning.
1. Special Defence Contribution is applicable (see further down)
The author of the article is Maria Vira
Maria is the of Head of Accounting at Royal Pine & Associates. She is a qualified accountant with eight years solid experience in the corporate industry. Maria is an extremely dedicated, innovative and talented accounting professional.
Posted on May 19, 2016
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