2020 Cyprus Country Report

Business Operating Environment
Key Features of the Cyprus Tax System
w Simple, transparent and EU harmonised tax system
following recommended OECD practices
w Enjoys the tax benefits of EU Directives (Parent
– Subsidiary Directive, Merger Directive
and Interest and Royalties Directive)
w Extensive Tax Treaty network with 65 countries
w A corporate income tax rate of 12.5%, one of the lowest within
the EU with possibility to enjoy a much lower effective tax rate
w Availability of a Notional Interest Deduction for companies
receiving new equity funding. The tax deduction can reach
up to 80% of the taxable income generated by the new equity
w IP Box regime based on the nexus approach which
allows 80% deemed deduction on qualifying
profits from the business use of qualifying IP
w Attractive Tonnage Tax (TT) regime for ship
owners, managers and charterers
w Attractive tax jurisdiction for funds and
attractive tax regime for fund managers
w Capital gains are exempt from tax (except
for capital gains arising from the disposal of
immovable property located in Cyprus)
w Profits of a foreign Permanent Establishment exempt from tax
w Gains from trading in securities (shares, bonds and certain
other financial instruments) are exempt from tax
w Unilateral credit relief for foreign taxes
w No withholding tax on dividend, interest or royalty payments
(for use of royalties outside of Cyprus) made abroad
w No taxes on entry and on qualifying reorganisations
w Carry forward of tax losses for five years
w Tax incentives for expatriate employees taking up
employment in Cyprus (20%/50% exemption)
w Dividend income and interest income are
exempt from SDC for non-domiciled individuals
taking up tax residency in Cyprus
w Possibility to obtain Cyprus tax residency by spending
only 60-days in Cyprus (subject to conditions)
w No inheritance tax
w No immovable property tax
Special contribution for defence
Special contribution for defence (“SDC”) is imposed on the dividend,
interest and rental income earned by Cypriot tax resident
and domiciled individuals. Non-domiciled Cypriot tax residents
are exempt from SDC.
Submission of tax returns
The tax year is the calendar year. Tax on employment income is
withheld by the employer under the PAYE system and remitted to
the tax authorities. Self-employed individuals pay tax through the
provisional and self-assessment systems. Tax returns must be filed
electronically by 31st of July following the tax year for employees,
30th of September for self-employed persons who are not required
to file audited accounts and 31st of March of the year following
the year under consideration (i.e. 15 months from the year-end)
for self-employed persons whose returns are accompanied by
audited accounts. Sole proprietors with an annual turnover more
than €70,000 are obliged to prepare audited financial statements.
Double Tax Treaties
Cyprus has concluded Double Taxation Treaties (DTTs) with
65 countries, which provide important tax advantages.
Andorra
Armenia
Austria
Azerbaijan
Barbados
Belarus
Belgium
Bosnia
Bulgaria
Canada
China
Czech Republic
Denmark
Egypt
Estonia
Ethiopia
Finland
France
Georgia
Germany
Greece
Hungary
Iceland
India
Iran
Ireland
Italy
Jersey
Kazakhstan
Kingdom of Bahrain
Kuwait
Kyrgyzstan
Latvia
Lebanon
Lithuania
Luxembourg
Malta
Mauritius
Moldova
Montenegro
Norway
Poland
Portugal
Qatar
Romania
Russia
San Marino
Saudi Arabia
Serbia
Seychelles
Singapore
Slovakia
Slovenia
South Africa
Spain
Sweden
Swiss Confederation
Syria
Thailand
The States of Guernsey
Ukraine
United Arab Emirates
United Kingdom
USA
Uzbekistan
156 Country Report CYPRUS 2020