2023 Doing Business in Cyprus (UK Edition)

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DOING BUSINESS C YPRUS 82 UNITED KINGDOM EDITION SPECIAL TYPES OF COMPANIES SHIPPING COMPANIES The Merchant Shipping Legislation, fully approved by the EU, provides for an exemption from all direct taxes and taxation under the tonnage tax regime. The merchant shipping legislation applies to qualifying shipowners, charterers and ship managers, which are involved with the operation of qualifying community ships (ships under a CY flag or a flag of an EU member state or of a country in the European Economic Area) and foreign (non-community) ships (under conditions) and provided that they engage in qualifying activities. The legislation allows non-community vessels to enter the tonnage tax regime provided the fleet is composed by at least 60% community vessels. If this requirement is not met, then non-community vessels can still qualify if certain criteria are met. Exemption is also given in relation to the salaries of officers and crew aboard a Cyprus ship. INSURANCE COMPANIES Profits of insurance companies are liable to corporation tax similar to all other companies except in the case where the corporation tax payable on taxable profit of life insurance business is less than 1.5% of the gross premium. In this case the difference is paid as additional corporation tax. ADMINISTRATION AND COMPLIANCE Tax Year: The tax year is the calendar year. The accounts of a company may be closed on a date different from 31st of December, in which case taxable profits are apportioned on a time basis relevant to the tax years. CONSOLIDATED RETURNS Taxation on a consolidated basis is not permitted and each company is required to submit a separate standalone tax return. A set-off of group losses is possible provided there is a 75% parent subsidiary relationship, including subsidiaries under 75% control of a common parent company. Group loss relief is available only between resident companies (and EU-based companies/companies with which Cyprus has concluded a double tax treaty, provided that they have exhausted all options to utilize the losses in their country of residence). FILING REQUIREMENTS: Corporate tax returns must be filed electronically by the 31 st of March of the year following the year under consideration (i.e. 15 months from the year-end). Companies are required to pay provisional tax in two equal instalments by 31 st of July and 31 st of December of the year under consideration. Any underpayment is due to be settled via self-assessment by 1 st of August of the following year. If the income declared for the payment of the provisional tax is lower than 75% of the actual income as finally determined, an additional tax equal to 10% of the difference between the final and provisional tax is payable.
DOING BUSINESS C YPRUS 83 UNITED KINGDOM EDITION PERSONAL INCOME TAX BASIS OF TAXATION All Cyprus tax residents are taxed in Cyprus on all income accrued or derived from all sources in Cyprus and abroad such as employment income, rental income etc. (i.e. worldwide income). Individuals who are not tax residents of Cyprus are taxed on income accrued or derived from sources in Cyprus. An individual is tax resident in Cyprus if one of the following conditions are met: • he/she spends physically in Cyprus over 183 days during the relevant tax year, or; • he/she does not remain in any other state for one or more periods which altogether exceed 183 days in the same tax year and he/she is not tax resident in any other state for the same tax year and all the following conditions are cumulatively met: • he/she should remain in Cyprus for at least 60 days during the tax year • he/she should pursue any business in Cyprus and/or to work in Cyprus and/or to be a director in a company tax resident in Cyprus at any time during the tax year • he/she should maintain a permanent residence in Cyprus, which can be either owned or rented by him/her The personal income tax rates that apply to individuals are as follows: Taxable Income Tax Rate (%) Tax (€) Accumulated Tax (€) 0-19,500 0 0 0 19,501- 28,000 20 1,700 1,700 28,001-36,300 25 2,075 3,775 36,301-60,000 30 7,110 10,885 60,001 and over 35
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2023 Doing Business in Cyprus (UK Edition)

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