Cyprus Corporate Tax: 12.5%
The rate of corporation tax is 12.5%. Companies pay corporation tax. Sole traders and partnerships do not pay corporation tax. All companies that are tax-resident in Cyprus are taxed on income whether it comes from Cyprus or anywhere else in the World. Companies which are not tax-resident in Cyprus, but have a permanent establishment (office) in Cyprus are taxed on income from business activity conducted in Cyprus.
Some exemptions from corporation tax are:
· Profits from an office (permanent establishment) in another country
· Dividends (Company profits paid to shareholders)
· Profits from the sale of shares and other securities
Expenses incurred by the company solely for business purposes can be deducted from corporation and include:
· Employer’s contributions to social insurance and approved funds on employees’ salaries
· Entertainment expenses for business purposes (with limitations)
· Donations to charities
· Building maintenance for buildings subject to a Preservation Order (with limitations)
The following types of expenses are not allowed:
· Expenses related to acquiring or maintaining of a private (saloon) car
· Interest applicable to acquiring any asset (including a private car) not used in the business
If a company makes a tax loss which cannot be set off against other income then it is carried forward so it can be set off against future profits. There is no time restriction for this.
The losses of one company can be set off against the profit of another provided the companies are members of a group and both Cyprus tax resident. Group is defined as; one company holding 75% or more of the shares of the other company.
Losses from an overseas office (permanent establishment) can be set off with profits of the company in Cyprus.
Annual wear and tear
If a company owns items of value (fixed assets) like; property; tools; vehicles etc then allowances are made for their depreciation (wear and tear). Depreciation is calculated as a percentage of the cost of acquiring the asset. The annual allowance is deducted from chargeable income. The annual percentage by which the value of an asset is depreciated (rate of depreciation), depends on the type of asset.
Here are some examples:
- Plant and machinery 10%
- Tools in general 33.3%
- Furniture and fittings 10%
- Commercial motor vehicles 20%
- Commercial buildings 3%
- Motor boats 12.5%