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Why Cyprus - Country Tax Profile
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H&P Accountants has been set up in a customer service oriented mindset - with a scope of achieving clients'
targets, exploring all options prior to implementation, addressing any given issue, welcoming a good challenge and always
finding the safest route.
With a dedicated team headed by experts and the best professionals on the market in Auditing, Accounting, Tax Services
and Advisory Services, H&P Accountants works closely with their clients, committed to listen and understand
where the clients came from, where they are today, and where they wish to be tomorrow.
H&P Accountants' team builds long term relationships with their clients, giving their time, patience and
undivided attention. For H&P Accountants' team, all clients are special and a N° 1 priority. Teams' integrity and
professionalism are second to none and they take pride in their well earned trust and reputation. With a genuine passion
for what they do, each one of the team member invests in their own future by providing excellent service, expertise,
integrity, professionalism, and an extra mile to go, whatever they do.
We Will Not Let You Down. - H&P Accountants Team
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Introduction
Corporate Tax
in Cyprus
VAT
Holding
Companies
Legal Entities
in Cyprus
Royalty
Companies
Immigration
Tax
Diary
Cyprus is ranked 31st in the world, out of 187 countries, according to the 2013 Human Development Report published by the UN, with
a Human Development Index (HDI) value of 0.848.
On 1st May 2004 Cyprus became a member of the European Union. The membership itself, as well as the presidency of the EU Council
in 2012, enabled the island to become an important key outpost in the Eastern Mediterranean and so develop as an essential
investment channel between Europe, Africa and Asia.
Location
With a strategic location on the crossroads of Europe, Africa and Asia, Cyprus is the third largest island in the Mediterranean.
The island is perfectly tuned and ideally placed for all business transactions in the region, as it is situated in the eastern corner of the
Mediterranean Sea and has close links to the busy air and shipping routes that link Europe with the Arab countries and the Far East.
Advantages
Cyprus economic structure has been adapted to encourage foreign investments, offering benefits and favorable taxation suited to
ensure financial growth and confidence in investment. Some of the many advantages are:
•
Widespread knowledge of English.
•
Strategic geographical location, perfect for world trade.
•
Excellent infrastructure and technologically enhanced transport and communications network.
•
Fiscal regime with a favorable business climate and consistent macroeconomic environment.
•
Modern legal, banking and financing systems, continuously adjusted and improved to follow world's trends.
•
Highly qualified and multilingual workforce.
Thanks to 49 double tax treaties and the favorable tax regime, Cyprus is a key gateway to the EU, Eastern Europe, Asia, Africa and the
Middle East - inbound and outbound.
With one of the lowest corporate taxation rates in the EU at just 12.5% on company profits, Cyprus is ranked as a top destination for
investment.
With careful tax planning, investment holding and financial planning, one can safely invest whilst little or even no tax could be payable
in Cyprus.
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DTA’s
Introduction
Corporate Tax
in Cyprus
VAT
Holding
Companies
Legal Entities
in Cyprus
Royalty
Companies
Immigration
Tax
Diary
A company that is managed and controlled in Cyprus is considered a resident of Cyprus.
All companies that are tax residents of Cyprus are taxed on their income accrued or derived from all sources in Cyprus and abroad. A
non-Cyprus tax resident company is taxed on income accrued or derived from business activity which is carried out through a
permanent establishment (PE) in Cyprus and on certain other incomes arising from sources in Cyprus.
Corporate Tax Rates
•
The Corporate Tax Rate on company profits is highly competitive at 12.5%.
Tax Exemptions
•
All dividends received*, all profits from disposal of securities and all profits from permanent establishments abroad** are tax
exempt. Interest derived from ordinary activities, or closely related to ordinary activities, are not subject to a Special Defense
Contribution.
* Dividends may be subject to SDC at the rate of 17% where they do not qualify for exemption.
** Under certain conditions.
Tax deductions
The following expenses are deducted from the income of the company:
•
All expenses incurred for generating income for the company.
•
All donations to approved charities, as long as you have receipts.
•
All employers' annual contributions to any approved funds associated with employee funds.
•
All bad debts, providing, of course, that all required procedures have been followed.
•
All scientific research expenditure.
•
All costs for patents or patent rights or royalties.
•
All interest related to the acquisition of business assets that are used in the business as long as it concerns a taxable activity.
•
1% of gross revenue or €17,086.01 (whichever is the lower) of entertaining expenses paid for purposes of the business.
•
Up to €512.58 or €939.73 per square meter (depending on the size of the building) for the costs of maintenance of a listed
building. A Preservation Order or Certificate from the Ministry of the Interior must be provided to prove that the costs are for
maintenance or preservation work.
The following expenses are not deducted from the income of the company:
•
The expenses of a private saloon car (maintenance, petrol, etc.).
•
For the first seven years, any interest related to buying private saloon cars and any assets not used for the business (after
seven years this interest will be deductible).
•
Fines and penalties, mortgage fees and unrealized foreign exchange loss.
•
The payment of immovable property tax.
•
Any expenses not made wholly and exclusively for the purpose of the business.
Tax losses
The tax losses incurred during a tax year that cannot be offset against other income is carried forward and offset against future profits
within five years.
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DTA’s
Introduction
Corporate Tax
in Cyprus
VAT
Holding
Companies
Legal Entities
in Cyprus
Royalty
Companies
Immigration
Tax
Diary
Group loss relief
Provided that at least two companies of a group are Tax Residents of Cyprus, the current year loss of one of the companies can be offset
against the profit of the other. The companies are in a group when one company is holding 75% of the voting rights of the other company
or both the companies are 75% owned by another company. The tax losses can only be offset with tax profits of the same year and the
companies must be members of the group for the whole tax year.
Losses from a permanent establishment abroad can be offset against profits from a company in Cyprus provided that any subsequent
profits of the foreign company is taxed in Cyprus to the extent of the allowable losses which were offset.
Reorganizations
Transfers of assets and liabilities between companies can be affected without tax consequences within the framework of reorganization.
Reorganizations include mergers and demergers, transfer of registered office, exchange of shares, partial divisions and transfer of assets.
Wear and tear allowance rates
Wear and Tear Allowances are estimated as a percentage on the cost of acquisition of fixed assets and are deducted from the taxable
income of a company. H&P Accountants' team will be happy to provide you with all relevant information on these percentages.
EU Parent Subsidiary Directive
The EU Parent Subsidiary Directive is designed for the benefit of Cypriot holding companies. This directive provides that dividends paid
between associated businesses that are both situated within the EU are made free of any withholding taxes. For a company to be an
associate of another, it must hold at least 10% of its share capital.
A credit will be provided for any tax paid in that EU country if, irrespective of the shareholding percentage, dividends received do not
qualify for participation exemption as described above. Tax paid includes not only withholding taxes but also any tax attributable to the
profits of the paying company (underlying tax) on lower level subsidiaries.
Withholding taxes
No Cypriot withholding taxes will apply with respect to any distribution of dividends and interest by a company to Non Cyprus Tax
Resident shareholders (be they companies or individuals) and Cyprus Tax Resident Companies.
Insurance companies
Insurance companies are liable to corporation tax. For life insurance companies, in cases where the corporation tax payable is less than
1.5% of the gross insurance premiums, then the difference must be paid as additional corporation tax.
Shipping companies
Ship-Management profits are exempt from income tax or corporation tax until 2020 if it elects to be taxed under tonnage tax.
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DTA’s
Introduction
Corporate Tax
in Cyprus
VAT
Holding
Companies
Legal Entities
in Cyprus
Royalty
Companies
Immigration
Tax
Diary
DTA’s
Value Added Tax (VAT)
VAT is imposed on the provision of goods and services in Cyprus and on the importation of goods into Cyprus. It comprises of three
rates: zero rate (0%), reduced rate (5% or 9%) and the standard rate (19%).
Registration is compulsory for businesses with a turnover of over €15,600, or with acquisitions from another member state more than
€15,600 or distance sales from another member state supplier of over €35,000 per annum. Businesses that do not exceed the above
threshold may still register voluntarily if they wish to do so. Voluntary registration is usually sought when businesses wish to recover VAT
paid on local services received.
If a holding company's activity is limited to the holding of shares, it will be VAT exempt. If a holding company is involved in more than just
the holding of shares, such as the management services, it will be obliged to register for VAT.
Reduced rated
goods and services
Zero rated
goods and services
(0%)
•Supplies to other members of the
European Union.
•Exports.
•Foods.
•Machines.
•International air and sea transport.
•Commission received from abroad
for exported goods.
(5%)
•Funeral services and the supply of coffins.
•Road sweeping, rubbish collection and recycling.
•Services of composers, artists and critics of
works of art.
•The supply of fertilizer, animal feed and seeds.
•The supply of animals used for the preparation
of food.
•Non-bottled water.
•Newspapers, magazines and books.
•Equipment for disabled people.
•Ice cream, yogurt and similar products.
•Salted or spicy foods made from cereal, potato
or potato substitute and dry roasted nuts.
•Bottled butane gas.
•Travelling on a public bus.
•Repair and maintenance of private residence
after three years of first residence (subject to
conditions).
•Hairdressing services.
•Entry fees to a theatre, circus, festival, concert,
zoo, museum, cinema, exhibition, sports event
and athletic centre.
Reduced rated
goods and services
(9%)
•Local transport of passengers by
sea and air within Cyprus.
•Hotel accommodation fees.
•Taxi services, tourism, excursions
and intercity buses.
•Supply of goods during the course
of catering (except alcoholic drinks,
which are standard rated).
* All other goods and services are subject to the standard rate of VAT.
Dealing with VAT, especially within the European Union, can be confusing and time consuming and is beset with many hidden pitfalls
which could turn out costly to any company.
H&P Accountants' teams of experienced professionals can guide you through the rules and regulations and help you plan properly and
navigate through the unexpected difficulties, to make your venture smoother and fully productive.
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Introduction
Corporate Tax
in Cyprus
VAT
Holding
Companies
Legal Entities
in Cyprus
Royalty
Companies
Immigration
Tax
Diary
Cyprus - the ideal location for a holding company
Apart from the ideal geographical position and established trade routes throughout the island, Cyprus also has to offer one of the most
beneficial and versatile holding company tax regimes in the world. The favorable withholding tax provisions of the double tax treaties
(DTT) network and the EU Parent-Subsidiary Directive, among other directives, have been designed and implemented to ensure
successful business growth.
Various global companies have chosen Cyprus for the maximization and optimum use of capital and financial resources. H&P
Accountants team is at your disposal to guide you in taking your firm to the next level and utilizing the benefits Cyprus has to offer.
Income from dividends is tax-free
In most cases, income from dividends is exempt from tax. This makes Cypriot holding companies a very attractive proposition for
international groups or individuals investing abroad, aiming at dividend income streams. This is also very favorable as a repatriation
vehicle where the investor's jurisdiction does not have a favorable treaty with the country in which they wish to invest. Because capital
gains on investments are not taxable, Cyprus is the perfect location for holding companies with subsidiaries that have potential for high
capital appreciation that may be spun off or sold in the future.
The only exceptions that are eligible for Special Contribution for Defense Tax to be applied on dividends received from non-Cypriot
companies at the rate of 17% will be in the following cases:
•
The income of the subsidiary is subject to an effective tax burden of 5% or lower; or
•
The subsidiary engages, directly or indirectly, more than 50% in activities leading to investment income.
Profits from the sales of shares are tax-free
In Cyprus, profits from the sales of securities (defined as "shares, bonds, debentures, founders' shares and other securities of companies
or other legal person, Incorporated under a law In Cyprus or abroad, Including options thereon") are generally exempt from tax, even if
this is the only trading activity of the company. There is one exception of 20% capital gain tax if the profit is earned from the sales of
shares in certain non-listed companies owning real estate in Cyprus and it reflects the gain from the sale of the underlying Cypriot real
estate.
Profits from the activities of a permanent establishment abroad are tax-free
All profits earned from a Permanent Establishment (PE) outside of Cyprus are exempt from tax. If there are losses, they can be offset
against its Cypriot income although this exemption does not apply if the PE carries on more than 50% of investment activities (known as
"passive income") and the foreign tax burden is significantly lower than the Cypriot tax burden. If some Cypriot DTTs are used in
conjunction with this exemption, this can lead to PE profits avoiding tax altogether.
Income of interest
All gross interest income received by a Cypriot company is subject to a Defense Tax of 30%. However, any interest earned during, or
closely connected to, the course of normal business is exempt from Defense Tax but it is subject to Corporate Income Tax of 12.5%.
Interest paid out to non-resident creditors is exempt from any Withholding Tax in Cyprus. There are no "thin capitalization rules" that
might limit deduction of interest so that a Cypriot company's debit/equity ratio would exceed a certain level.
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DTA’s
Introduction
Corporate Tax
in Cyprus
VAT
Holding
Companies
Legal Entities
in Cyprus
Royalty
Companies
Immigration
Tax
Diary
Capital gains on disposal of capital assets are tax-free
The winding-up of a Cypriot company by foreign shareholders is exempt from tax. This makes Cyprus a very attractive destination in
cases where there is interest in a tax-free unwinding of the holding company sometime in the future.
Other tax advantages of Cyprus
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•
There are no thin capitalization rules.
•
There is no strict CFC legislation.
•
During the life of a Cypriot holding company, there are no net worth (capital gains) taxes.
•
Tax losses are carried forward for five years and can be surrendered as group relief.
•
Mergers, takeovers and other reorganizations can take place within groups with no tax consequences.
•
Unilateral tax relief is granted to all Cypriot companies for foreign tax paid, even with the absence of a double tax treaty.
•
There are limited anti-avoidance provisions.
•
For borrowings used for finance of taxable activities, interest deduction is allowed for.
•
There are very attractive PE rules and generous PE provisions available in the DTT network.
•
There is no obligation for holdings companies for VAT registration and compliance.
•
There are extremely low duties for the establishment of companies.
•
There are no strict transfer pricing rules.
•
There is always a possibility for obtaining Advance Tax Rulings.
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DTA’s
Introduction Corporate Tax
in Cyprus
VAT
Holding
Companies
Legal Entities
in Cyprus
Royalty
Companies
Immigration
Tax
Diary
The following entities may be registered under Cypriot company law (similar to the Companies Act 1948 in the United Kingdom). There
is no difference in the laws and regulations for foreign investors carrying on international business activities or for local entities.
Limited by Shares:
The liability of its members is
limited to the nominal value of
the shares fully paid up and the
shareholders are not liable to
contribute further.
Limited liability
company
Limited by Guarantee:
These are usually non-profit
making organizations and the
liability of its members is limited
to the amount to which they
have agreed to subscribe in the
case of liquidation.
The Private Limited Company is a distinct legal entity with a separate personality from its owners and can sue and be sued in its own
right. It restricts the right to transfer its shares and prohibits the issue of bearer shares and also prohibits any invitation to the public to
subscribe for its shares or debentures. There can be a minimum of one director, one shareholder and a company secretary (it is possible
under CAP 113 to be the same person, legal or natural) and a maximum of 50 members. As a rule, international business entities are
registered as private companies because this legal form enjoys comparatively inexpensive formation procedures, control over the
membership, consensus of a few shareholders and uncomplicated reporting requirements.
The Public Limited Company is governed by more stringent regulations from the Registrar of Companies and more requirements by law.
A Partnership can become a partner with another company or with individuals, provided that it is authorized to do so by its articles. It
comprises of two or more persons aiming to profit by carrying on a common business and the relationship of partners and management
of the partnership is regulated by the partnership agreement or, if there is no agreement, regulated by law.
General Partnership:
Liability remains with the owners/partners
and is unlimited. Each of the partners is liable
severally and jointly with the remaining
partners for all debts and obligations of the
firm. After a partner’s death, his estate is also
liable for all debts and obligations and is
subject to prior payment of his separate
debts.
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Limited Partnership:
General/Limited
partnership
Comprised of general and limited partners.
The one or more general partners is/are liable
for all debts and obligations of the firm whilst,
at the time of entering into such a partnership,
the one or more limited partners must
contribute a stated amount to the capital or
property valued. Limited partners are not
liable for debts and obligations of the firm
above the amount contributed as capital and
may neither take part in the management of
the partnership nor has the power to
contractually bind it.
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DTA’s
Introduction
Corporate Tax
in Cyprus
VAT
Holding
Companies
Legal Entities
in Cyprus
Royalty
Companies
Immigration
Tax
Diary
Business branches
A local Branch of a foreign company or a Branch of a local company may be registered in Cyprus with the Registrar of Companies under
the relevant section of the Companies Law. They must file a Greek translation of the company's Memorandum of Association and a list of
directors and must appoint a local representative that is authorized to accept service in Cyprus. The Cyprus branch does not have a distinct
legal personality and any liability remains with the foreign entity. For accounting purposes, it will be treated as a separate entity and must
account for its profits on a similar basis as a limited liability company.
European Company (SE)
A European Company is registered according to EC Council Regulations 2157/2001. This allows companies in different EU member
states to merge or form a holding company or joint subsidiary whilst avoiding the practical and legal constraints that would arise from
27 or more different legal systems.
Registration process
With H&P Accountants team's help you can register your new company with three easy steps:
Step one: Approval of the name
The Registrar of Companies must first approve of any company name that may be established in Cyprus (it is always best to provide more
than one name in order of preference to ensure registration). For a successful registration, the name:
• must not be deemed undesirable; and
• must be in the Latin or Greek alphabet; and
• must not be identical or similar to an existing company name; and
• must not imply illegal activities; and
• must not imply royal or government patronage; and
• must include the suffix 'Limited' or 'Ltd.' which denotes limited liability.
The following names, or their derivatives and foreign language equivalents, require consent or a license: Asset Management, Asset
Manager, Assurance, Bank, Banking, Broker, Brokerage, Building Society, Capital, Credit, Currency, Custodian, Custody, Dealer, Dealing,
Deposit, Derivative, Exchange, Fiduciary, Finance, Financial, Fund, Future, Insurance, Reinsurance, Lending, Lender, Loan, Option, Pension,
Portfolio, Reserves, Savings, Security, Stock, Trust and Trustees. The above is subject to approval from the official receiver and Registrar of
Cyprus.
Step two: Corporate features of your future company
For the registration of a Limited Company in Cyprus, the following information is required:
• A list of the Principal Activities in which the company is planning to be engaged; and
• Authorized Share Capital
• Shareholders - A minimum of one shareholder is required, which can be a company or a physical person but Bearer Shares cannot be
issued under Cypriot law. (Please note: If you require confidentiality, the shares can be held by nominee shareholders in trust for the
beneficial owners, whereas a trust document is provided, accompanying the share certificate.); and
• Directors - A minimum of one director is required who can be a natural or a legal person. By law, this director may be a non-resident
but for the company to qualify as a tax resident of Cyprus, the management and control of the company must be in Cyprus; and
• Secretary - Because this person will be ensuring that the company adheres to Company Law requirements, it is practical to appoint a
permanent Cypriot resident who is aware of the provisions of CAP 113.
Step three: Company registration
Registration of a new incorporated company will take approximately seven to ten days and to notarize and apostille all documents will
take approximately one or two days.
To enable you to keep your focus on day-to-day running of your company, H&P Accountants can: register an office address in Cyprus for
official correspondence; nominate shareholders where required; provide director services; provide a secretary for your company; arrange
corporate management; arrange legalization by Apostille and Consulates; provide accounting services and tax and legal advice; open
accounts with local banks; provide many other corporate services including Certificates of Good Standing, Incumbency, Certificates of Tax
Exemption, etc.
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DTA’s
Introduction Corporate Tax
in Cyprus
VAT
Holding
Legal Entities
Companies
in Cyprus
Royalty
Companies
Immigration
Tax
Diary
Among other things, Intellectual Property (IP) can include computer software, technical knowledge, patents, trademarks, copyrights
and trade secrets and methods. Careful structuring of ownership of IP and subsequent channelling of license payments can lead to
significant tax benefits and the use of a Cypriot company can play a deciding role in the process. The gross amount of any royalty,
premium, compensation or other income derived from sources within Cyprus by any person not being a tax resident is subject to a
withholding tax of 10%. Because of Cyprus' Double Tax Treaties and the EU Directives, this percentage can be reduced, which makes
establishing a royalty company in Cyprus very fiscally attractive.
Tax advantages
•
Vast Double Tax Treaty network.
•
Direct effect of the EU Interest and Royalty Directive.
•
One of the lowest corporate income taxation (12.5%) in the European Union.
•
Any dividends earned by non-residents of Cyprus are exempt from withholding tax.
•
Any interest payments to non-residents of Cyprus are exempt from withholding tax.
•
Any royalties paid to a Cypriot company may be exempt or are subject to a reduction of withholding tax under a Double Tax
Treaty or the EU Interest and Royalty Directive.
•
Tax deduction for any royalty payments.
•
An effective tax depreciation of investments in IP. (over 5 years period)
•
Royalty payments (including to offshore companies) for rights used outside of Cyprus can be exempt from withholding tax.
•
Reasonable level of margin required by tax authorities.
•
Stringent protection of IP rights by legislation and the participation of international agreements with Cyprus.
•
Neutral VAT treatment.
•
80% of gains arising from use of IP (including compensation for improper use of such asset) as well as the profit from their sale
is deemed an expense in determination the taxable income.
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DTA’s
Introduction Corporate Tax
in Cyprus
VAT
Holding
Companies
Legal Entities
in Cyprus
Royalty
Companies
Immigration
Tax
Diary
Cypriot citizenship - Application for Cypriot citizenship
From 24/05/2013 a non – EU individuals can acquire Cyprus (EU) Citizenship and Passport through a procedure called naturalization, based
on their investments and financial affairs.
All applicants must meet any of the following criteria:
1.
Gross investment and donations to State fund:
The applicant should at least have invested and donated:
a. The amount of €2 million for the purchase of shares or bonds of an investment company of the State. This amount should be deposited
at the Treasury of the State until the shares or bonds are issued.
b. The amount of €500,000 in the form of a gift to the Research and Technology fund of the State.
2. Direct Investments:
a. The applicant should have direct investments of at least €5 million, including the acquisition of immovable property (such as purchase of
house, office, shop, and hotel). Acquisition of undeveloped property is not applicable for direct investments; or
b. Acquisition of business or companies, based and active in the Republic of Cyprus; or
c. Acquisition of shares of public companies incorporated in Cyprus; or
d. Acquisition of financial instruments issued in the Republic of Cyprus (such as debentures, securities etc), including the ones that will be
issued by the Solidarity Fund; or
e. Participation in a joint venture or a company which has undertaken the execution of a public project.
For points a to d, the applicant should keep these assets for at least three years.
It must be noted that for the period ending 30 June 2014, the Minister of the Interior has the right to reduce the amount for direct
investments to €2 million for non Cypriot Citizens that can prove that they are participating in a special team project of real estate, that
will include in its entirety the purchase of real estate situated in Cyprus with the value not less than €10 billion, which is controlled by the
Cyprus Government.
3.
Deposits in Cyprus Banks
The applicant should have personal deposits or deposits of his private companies (in which he is the final beneficiary) of at least €5 million
in Cyprus Banks for a fixed period of three years, in the Republic of Cyprus.
4.
Combination of grossed investments and donations to State funds (1), Direct Investments (2) and Deposits in Cyprus Banks (3).
The applicant must have a combination of the above amounting to €5 million.
5.
Business Activities
The applicant must be a shareholder or ultimate beneficial owner of a company or group of companies where the administration of this
company/companies is carried out in Cyprus and during the last three years before the submission of the application, it has paid to the
government corporate tax, VAT and other taxes and also fees for the purchase of business services (legal, accounting, audit etc) amounting
at least to a total of €500,000 per year.
Otherwise, in case the individual is a shareholder or ultimate beneficial owner in a company or companies that operate in Cyprus, has its
headquarter in Cyprus and employs at least five Cyprus citizens, then the minimum amount to have been paid for the above (corporate
tax, VAT and other taxes and purchase of business services) is reduced to €350,000 per year for the last three years before the submission
of the application.
In the case where the individual is a shareholder or ultimate beneficial owner in a company or companies that operate in Cyprus, has its
headquarter in Cyprus and employs at least 10 Cyprus citizens, then the minimum amount to have been paid for the above (corporate tax,
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DTA’s
Introduction Corporate Tax
in Cyprus
VAT
Holding
Companies
Legal Entities
in Cyprus
Royalty
Companies
Immigration
Tax
Diary
VAT and other taxes and purchase of business services) is reduced to €200,000 per year for the last three years before the submission of
the application.
In the case where the applicant has paid less than the above amounts, then it can be a combination of criteria 1 or 2 or 3. The total
amount paid to the government and the business services, the last three years, will be reduced from the required investment for the
satisfaction of the criteria 1 or 2 or 3.
For any such company or companies, applications can be submitted for up to two shareholders, preferably having the majority of the
share capital.
Terms and conditions
The applicant must have:
a. Clean criminal record;
b. Residence in Cyprus: Owes immovable property in Cyprus with the market value of not less than €500,000.
Benefits for obtaining a Cypriot (EU) Citizenship and Passport:





All family can obtain Cyprus citizenship and it continues for the future generations.
No requirement to physically reside in Cyprus.
Freely travel, work and reside to any Member State of the EU.
Free movement of Capital from any EU member State to another.
Free movement of Goods and Services within the EU.
Immigration permit
Immigration Permits fall into five categories:
Category A: Persons who intend to work as self-employed in agriculture, cattle breeding, bird breeding or fish culture provided that
they own adequate land or are able to purchase adequate land, that they have at least €472,500 at their immediate disposal and their
employment will not impact negatively on the general economy of the Republic of Cyprus.
Category B: Persons who intend to work as self-employed in mining provided that they have the relevant permit, they have at least
€342,000 at their immediate disposal and their employment will not impact negatively on the general economy of the Republic of
Cyprus.
Category C: Persons who intend to work as self-employed in a trade or profession provided that they have any relevant permits, they
have at least €256,500 at their immediate disposal and their employment will not impact negatively on the general economy of the
Republic of Cyprus.
Category D: Persons who intend to work as self-employed in a profession or science provided that they have relevant academic or
professional qualifications for which there is a demand in the Republic of Cyprus and are in possession of adequate funds for self
support.
Category E: Persons who have been offered permanent employment in the Republic of Cyprus which will not create undue local
competition.
Category F: Persons who have a proven secured annual income, high enough for self support in the Republic of Cyprus, without having
to engage in any business, trade or profession, which would normally be retired people with adequate pensions (the most popular
application). The annual income received must be at least €9,576 per annum for a single applicant and at least €4,617 for each
dependent thereof although the Immigration Control Board may demand additional amounts depending on circumstances.
H&P Accountants' team is at your disposal for quick, dependable advice, offering a prompt, safe, stress-free and comfortable experience
in obtaining your residency permit in Cyprus.
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DTA’s
Introduction
Corporate Tax
in Cyprus
VAT
Holding
Companies
Legal Entities
in Cyprus
Royalty
Companies
Immigration
Tax
Diary
The schedule here below indicates the deadlines for the payments of tax throughout the year. In case where these deadlines are not
followed, an interest and penalty change, depending on the circumstances, will be payable by law.
H&P Accountants can manage these payments for you in a timely manner, avoiding penal fees and unnecessary additional efforts in
resolving the situation.
End of each Following Month
• Payment of Tax deducted from employees’ salaries (P.A.Y.E).
31st January
• Payment of Special Contribution for Defence for deemed dividend distribution.
30th April
• Submission of Individuals' Personal Returns (IRI) for the previous year (extended by 3 months in case of
electronic submission).
• Submission of the Payroll List (IR7) for the previous year by employers.
30th June
• Payment of Special Contribution for Defence for the first six months of the current year on rents and on
dividends or interest from sources outside Cyprus.
• Submission of Income Tax Returns by Individuals who do not submit audited financial statements, but are
obligated to issue invoice, receipts, etc. (extended by 3 months in case of electronic submission).
• Payment of tax balance from previous year by individuals who do not submit audited financial
statements, but are obligated to issue invoice, receipts, etc.
31st July
• Submission of Provisional Tax Declaration (IR6) and payment of the first installment of Provisional Tax for
the current year.
1st August
• Payment of final Corporation Tax under the self-assessment method for the previous year.
• Payment of final Income Tax under the self-assessment method for the previous year by individuals
preparing audited financial statements.
30th September
• Payment of Immovable Property Tax for the current year.
31st December
• Submission of Company Tax Returns (IR4) and Income Tax Return (IR1) by individuals who submit audited
financial statements for the previous year (extended by 3 months in case of electronic submission).
• Payment of the second and final installment of Provisional Tax for the current year.
• Payment of Special Contribution for Defence for the last six months of the current year on rents and on
dividends or interest from sources outside Cyprus.
14
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DTA’s
Introduction
Corporate Tax
in Cyprus
VAT
Holding
Companies
Legal Entities
in Cyprus
Royalty
Companies
Immigration
Tax
Diary
DTA’s
Double tax treaty network of Cyprus
Cyprus has an extensive network of Double Tax Treaties, with quite a few more currently under negotiations. These treaties ensure that dividend and
interest payments, made to/from Cypriot companies by foreign subsidiaries/debtors, are subject to minimum or no withholding taxation in the
remitting country.
By implementing efficiently Double Tax Treaties, withholding tax credit can be obtained, e.g. on payments to companies in Cyprus and/or vice versa.
Being a European Union Member State, a Cypriot company has access to all the benefits of the EU Parent-Subsidiary Directive that, under certain
circumstances, enable withholding tax exemption for dividends paid between EU subsidiaries and EU parent companies.
Also, a Cypriot company has access to the EU Interest and Royalty Directive that, under certain circumstances, entitles the company to exemption
from withholding tax for interest and royalty payments between EU companies.
Summary of Withholding Taxes
Received in Cyprus
Country
(31)
Dividends (3)
Interest
%
%
0
5
(4)
(4)
Dividends (3)
%
%
5
0
Interest
(4)
%
Austria
10
0
0
10
0
0
3
Belarus
5
(8)
5
5
5
(8)
5
5
4
Bulgaria
5
(23)
7
(29)
5
(23)
7
5
Belgium
10
(5)
10
(20)
0
10
(5)
10
6
Canada
15
15
(11)
10
7
China
10
10
8
Czech Republic
0
9
Denmark
10
Egypt
11
12
0
(5)
0
(13)
(24)
(15)
5
15
15
10
10
10
10
0
0
0
(35)
0
5
(29)
10
(11)
10
0
10
(13)
0
15
15
10
15
15
10
Estonia
0
0
0
0
0
0
Finland
0
0
0
0
0
0
13
France
10
14
Germany
5
15
Greece
25
16
Hungary
5
(5)
10
(12)
0
17
India
10
(6)
10
(12)
15
(19)
10
18
Ireland
0
0
0
(16)
0
0
19
Italy
15
10
0
10
20
Kuwait
10
10
(18)
10
10
21
Kyrgyzstan
0
0
0
0
0
22
Lebanon
5
5
(20)
0
5
5
(20)
0
23
Malta
0
10
(12)
(12)
10
24
Mauritius
0
25
Moldova
5
26
Montenegro
27
Norway
5
28
Poland
0
15
(31)
(32)
(6)
10
(13)
0
(30)
(5)
0
(12)
0
(25)
10
0
(26)
(23)
10
(7)
10
(6)
(30)
5
(5)
(16)
25
10
0
10
(12)
0
10
(12)
15
(19)
0
(16)
0
(12)
5
(6)
10
(13)
0
(30)
0
(12)
0
(30)
0
(16)
0
(12)
5
10
15
10
0
0
0
0
5
5
5
5
5
10
10
10
10
10
0
0
0
0
0
5
0
5
(12)
(23)
(18)
0
0
5
(15)
10
0
(5)
(2&4)
%
2
10
(34)
Royalties
Armenia
(33)
(35)
Royalties
1
0
(34)
Paid from Cyprus (1)
(12)
5
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Introduction
Corporate Tax
in Cyprus
VAT
Holding
Companies
Legal Entities
in Cyprus
Royalty
Companies
Received in Cyprus
Country
Immigration
Tax
Diary
DTA’s
Paid from Cyprus (1)
Dividends (3)
(4)
Royalties
(4)
Dividends (3)
Interest
(4)
Royalties
(2&4)
Interest
%
%
0
%
%
%
%
29
Portugal
0
10
0
0
10
30
Qatar
0
0
5
0
0
5
31
Romania
10
10
10
10
32
Russia
5
33
San Marino
34
Serbia
35
Singapore
36
Seychelles
0
0
37
Slovakia
10
10
38
Slovenia
5
5
39
Spain
0
40
South Africa
0
1
Sweden
5
(5)
10
2
Syria
0
(5)
10
3
Tajikistan
4
(32)
(32)
(31)
(10)
(12)
0
5
0
5
(10)
(12)
0
5
0
0
0
0
0
0
10
10
10
10
10
0
10
10
0
10
(27)
5
10
(12)
5
0
0
10
5
5
5
0
0
0
0
0
0
0
0
(12)
0
5
(5)
10
(12)
0
(12)
15
0
(5)
10
(12)
15
5
0
Thailand
10
15
5
Ukraine
0
0
6
United Arab
Emirates
0
0
7
United Kingdom
0
(28)
10
0
8
USA
15
(9)
10
9
Uzbekistan
0
(27)
10
(12)
0
(18)
(17)
0
(21)
(14)
5
0
0
0
10
15
0
0
0
0
0
0
0
0
0
10
0
0
0
10
0
0
0
(22)
(30)
(18)
5
0
5
(18)
0
10
0
(31)
(18)
(17)
0
(21)
(14)
5
(22)
(30)
0
0
* All the treaties refer to those, which have been ratified. The numbers in brackets refer to the explanatory notes hereinafter.
** Under Cyprus tax law, dividends paid to non- resident companies are not subject to withholding tax.
16
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Introduction
Corporate Tax
in Cyprus
VAT
Holding
Companies
Legal Entities
in Cyprus
Royalty
Companies
Immigration
Tax
Diary
Notes
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
17
In accordance with the Cyprus tax legislation of dividends and interest to non Cyprus tax residents are exempted from
withholding tax in Cyprus. Royalties granted for use outside Cyprus are also free of withholding tax in Cyprus.
10% in the case of royalties granted for use within the Republic. 5% on film and TV rights.
0% if dividends are distributed between associated companies of different EU member states, provided that the parent
company shareholding is at least 10%.
0% if interest and royalties are paid between associated companies of different EU member states. The possibility for a
transitional period for the implementation of the directive was granted to Czech Republic, Latvia, Lithuania, Poland and
Slovakia.
15% if received by a company controlling less than 25% of the voting power.
15% if received by a company controlling less than 10% of the voting power.
0% if paid to a company controlling at least 50% of the voting power.
This rate applies if the amount invested by the beneficial owner is over €200.000 irrespective of the % of voting power
acquired. 10%is imposed if received by a holder of at least 25% of the share capital of the paying company. Otherwise the
rate is 15%.
5% if received by a company controlling at least 10% of the voting power.
10% if received by a company, which has invested less than US $100.000. The new double tax treaty provides for 10%
rate for investments of less than €100.000.
0% if paid to the Government or for export guarantee.
0% if paid to the Government of the other State or to a financial institution.
0% if paid to the Government of the other State or in connection with the sale on credit of any industrial, commercial or
scientific equipment or any merchandise by one enterprise to another or in relation to any form of loan granted by a
bank or is guaranteed from Government or other governmental organization.
0% if paid to the Government of the other State, to a bank or a financial institution or in respect to debt obligations
arising in connection with sale of property or the provision of services.
0% on literary, dramatic, musical or artistic work with the exception of films used for television programs.
5% on film royalties (except films shown on TV).
10% on literary, dramatic, musical, artistic work films and TV royalties.
0% on literary, artistic or scientific work including films.
10% on payment of technical fees, management fees and consultancy fees.
0% if paid to the Government of the other State, a political subdivision or a local authority, the National Bank or any
institution the capital of which is wholly owned by the State or a political subdivision or a local authority or in the form of
interest income from bank deposits.
10% on interest received from financial institutions, on interest paid in connection with industrial, commercial, scientific
equipment or the sale or merchandise between two companies.
10% on right to use industrial, commercial or scientific equipment or for information concerning industrial, commercial or
scientific experience and 15% for patents, trademarks, designs, models, plans, secret formulas or processes.
10% if received by a company, which owns directly less than 25% of the share capital.
This rate does not apply where 25% or more of the share capital of the Cypriot resident is owned directly or indirectly by
the Bulgarian resident paying the royalties and the Cyprus company pays less than the normal rate of tax.
The treaty provides for 25%, but the domestic rate of 0% applies since it is lower than the treaty rate.
The treaty provides that the tax on the gross amount of the dividends shall not exceed that chargeable on the profits out
of which the dividends are paid.
7% if paid to a bank or similar financial institution. 0% if paid to the Government.
The treaty provides for 15% withholding tax but the local taxation provides for 0% withholding tax.
0% if paid to or is guaranteed by the Government, statutory body, the Central Bank.
5% on film royalties, including films used for television programs.
The treaty between the Republic of Cyprus and the United Soviet Socialist Republic still applies.
The treaty between the Republic of Cyprus and the Socialist Federal Republic of Yugoslavia still applies.
5% if the holding is less than 10%.
5% if the beneficial owner has invested in the capital of the company less than the equivalent of €150.000 at the time of
the investment.
0% if paid to the Government, or to the local authority, or to the Central Bank.
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DTA’s
18
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