Due to its EU membership since 2004, Cyprus developed a regulatory regime that is fully compliant with the EU and OECD requirements. Over time, it managed to develop one of the most attractive taxation systems in Europe. The fact that Cyprus signed double tax treaties with 46 countries in order to avoid double taxation of foreign investors combined with one of the lowest European corporate taxes make this country an investment destination in its own right.
If a company is established in Cyprus and its management and control are exercised from here this means the respective company will be taxed both for domestic income and for the one earned abroad. Companies that are not Cypriot residents will only be requested to pay taxes levied on domestic income.
The law that regulates taxation in Cyprus is the Income Tax Act of 2002, N118(I)/2002, and taxes are collected according to the Assessment and Collection of Tax Act N4/78.
The corporate tax rate is 12,5% for all types of Cypriot companies. This tax is levied from sales and securities, dividends, interest closely related to the ordinary activities of the company and Profits of a permanent establishment abroad.
Cyprus doesn’t levy wealth taxes but only minimal stamp and local taxes. Profits on transactions in shares and foreign source income are tax exempt altogether. There are no withholding taxes on outbound dividends, interest & royalties, irrespective of the country of destination. Capital gains only apply to real-estate properties situated in Cyprus.
There are no exchange controls and most international transactions are free of VAT. Overall, the whole tax administration in Cyprus was built to help and attract foreign investors. This is why the number of entrepreneurs looking to open their businesses or create virtual offices in Cyprus, or even establish subsidiaries here is continuously increasing.
Value Added Tax (VAT) is levied on taxable goods or services delivered or provided in Cyprus. Companies offering these products on the Cypriot market must register their business with the VAT District Office. At the moment, the standard VAT in Cyprus is of 19%, but there are also reduced VAT rates of 9% for certain goods and services like.
For more information please contact our company formation specialists in Cyprus. Who will provide you with the consultancy you require and a personalized offer.