Cyprus Tax Information 2010

 

The information below provides some key basic facts on the Cyprus Tax system and is intended for general guidance only. For any specific matter you are strongly advised to obtain the expert advise of a professional.  Euromanagement will be pleased to discuss any relevant issues of interest to you and provide the necessary information and guidance.

 

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Resident in Cyprus

With reference to a physical person , it means an individual who stays in Cyprus for a period or periods exceeding 183 days in the year of assessment.

With reference to a company, it means a company whose management and control are exercised in Cyprus.

 

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INCOME TAX

In the case of a person who is tax resident in Cyprus, tax is levied on income accruing or arising from sources both within and outside Cyprus.

In the case of a person who is not a tax resident in Cyprus, tax is levied on income accruing or arising from sources in Cyprus only.

		Individuals	Companies
	Exemptions to income tax	%	%
	Income from Interest (provided it does not arise from the ordinary activities of the company)	100	100
	Dividends	100	100
	Profit from sale of securities	100	100
	Profit from a permanent establishment (under certain conditions)	100	100
	Renumeration for the rendering of salaried services outside Cyprus for a total aggregate period of more than 90 days to an employer not resident in Cyprus	100

 

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INCOME TAX - DEDUCTIONS FOR INDIVIDUALS

	Expenses of rented property	20% of the Rental
	Interest paid in respect of rented buildings	100%
	Subscriptions to unions or professional associations	100%
	Donations to approved chartiable institutions	100%
	Social insurance contributions, life insurance premiums and contributions to approved pension funds or medical funds	up to 1/6th of taxable income

 

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INCOME TAX - DEDUCTIONS ALLOWED FOR COMPANIES

All expenses are allowed as deductions for ascertaining the chargeable income provided that all such expenses are wholly and exclusively incurred by the company.

Business entertainment expenses including hospitality of any kind, made in connection with the business are restricted to 1% of the gross income of the business or Euro 17,086 whichever is the lower.

TAX RATES - INDIVIDUALS
	Income Tax (Euro)	Tax Rate %	Tax Amount (Euro)	Cumulative Tax (Euro)
	0 - 19,500	0	0	0
	19,501 - 28,000	20	1,700	1,700
	28,001 - 36,300	25	2,075	3,775
	Over 36,300	30
	Corporation Tax	10%
	Public Corporated Bodies	25%

 

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SPECIAL TAX RATES

	Foreign pensions of individuals	Up to Euro 3,417	0%
		Over Euro 3,417	5%
	Income of a person from the rendering of ship management services		4.25%
	The gross amount of any royalty, premium, compensation or other income, derived form sources within Cyprus by any person not being resident is subject to withholding tax		10%
	The gross amount of any rental in respect to showing off cinematography films in Cyprus, derived by any person who is not resident is subject to withholding tax		5%
	The gross income derived by an individual not resident in Cyprus from the exercise in Cyprus of any profession or vocation of public entertainers is subject to withholding tax		10%

 

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SPECIAL CONTRIBUTION TO THE DEFENSE FUND

This tax is imposed on income received or deemed to have been received by any person resident in Cyprus.

 

		Individuals	Corporations
	Interest (except interest accuring to any person from the ordinary activities of the business) *	10%	10%
	Dividends received or deemed to be received from a company resident in Cyprus	15%	0%
	Dividends received from abroad	15%	0%**
	Rents (reduced by 25% instead of actual expenses)	3%	3%
	*Interest arising from the ordinary activities or closely related to the ordinary activities of the business is exempt from special contribution for defence.  All interest income of Collective Investment Schemes is considered to be arising from the activities of the Scheme. ** Dividend income from abroad is exempt from defence fund contribution.  However this exception does not apply if the company paying the dividend has more than 50% of its incoming arising from investment activities AND the tax burden on the income of the company paying the dividend is substantially lower than the tax burden of the company receiving the dividend.
	ALLOWANCE FOR FOREIGN TAX
	Where foreign tax was paid on income subject to special contribution, such tax can be given as an allowance against the special contribution payable on the income, irrespective of the existence of a double taxation relief with the respective foreign country.
	DEEMED DISTRIBUTION
	A company resident in Cyprus is obligated to pay 15% special contribution to the defence fund (3% only for International Collective Investment Schemes) based on a deemed distribution of 70% of its account profit after taxation and before set-off of losses brought forward from previous years AND after taking into consideration and dividends paid within the two years.
	The deemed distribution rule does not apply to profits to non resident shareholders
	SOCIAL INSURANCE - Contribution Rates		%
	Self employed individuals		12.6
	Employee		6.8
	Employer		6.8
	Employer's contribution to the Redundancy Fund		1.2
	Employer's contribution to the Human Resources Development Authority		0.5
	Social Cohesion Fund		2

 

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SOCIAL COHESION FUND

This tax is imposed on the Employer only and is payable at the rate of 2% of the total emoluments of each employee.

 

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CAPTIAL GAINS TAX

	This is 20% on the net profit from:		Rates
	The disposal of immovable property located in Cyprus or
	The disposal of shares in companies which have immovable property in Cyprus provided such shares are not listed in the stock market.
	The net profit is calculated as the difference between the disposal proceeds less the greater of the cost or market value on 1 January 1980 adjusted for inflation on the basis of the Retail Price Index.
	Exemptions:
	Transfer by reason of death
	Gifts to relatives within the third degree of kindred
	Gift to a company of which the shareholders are and continue to be members of the disposer’s family for five years after such gift.
	Gift by a company of which the shareholders are members of the same family, to any of its shareholders when the property gifted was also acquired by the company as a gift. Such property must remain in the hands of the donee for a period of at least three years.
	Gift to the Republic or to a local authority for educational or other charitable purposes or to approved charitable institutions.
	Exchange or sale in accordance with the Agricultural Land (Consolidation) Laws
	Exchange of properties where the values of the immovable properties being exchanged are equal.
	Gain on disposal of shares which are listed on any stock exchange.
	Gains from transfer of property or shares in case of reorganization.
	Limetime exemptions for individuals Euro		Euro
	For sale of own residence		85,430
	For sale of agricultural land by a farmer		25,629
	For other sales		17,086

 

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VALUE ADDED TAX

			Rates
	Exports, supplies of food (unless the supply is in the course of catering), supplies of medicines and vaccines, commission from abroad for imports/exports to/from Cyprus, international air and sea transportation of persons, and goods and related services (except intra-community transport of goods), ship management services, goods that are to be placed in customs warehouses/bonded warehouses or free-zones and be subject to the relevant customs regime or temporary importation/transit or transhipment regime goods that are intended to be incorporated into drilling, goods after importation but before customs clearance.		0%
	Supplies of animal feeding stuff, including food for birds and fish, supplies of fertilizers, supply of coffins, services supplied by undertakers, services of road cleaning, refuse collection and waste treatment (other than services provided by local administration), services of writers, composers and artists, services of hairdressers, renovation and repair services to private residences (subject to certain conditions),supplies of water, manufactured juices and drinks, but excluding refreshment drinks, alcoholic beverages, beer and wine, supplies of liquified petroleum gas newspapers, books, magazines and similar items, supplies of various goods for incapacitated persons, supplies of ice-cream, chips and salted nuts, supplies of medicines and vaccines excluding those which are subject to the zero rate of VAT, fares for urban and rural areas by bus, catering services from school canteens.		5%
	Transportation of passengers and their luggage by taxi, restaurant services and other similar catering services for food, but excluding the supply of  alcoholic beverages and excluding the catering services provided by school canteens, accommodation provided by hotels and other similar  establishments, including the provision of holiday accommodation		8%
	All supplies of goods or rendering of services, except those taxed at 0%, 5%, 8% or exempt.		15%
	EXEMPTIONS
	Rents
	Supplies of immovable property (except "new buildings")
	Insurance and financial services
	Medical services
	Educational services
	REGISTRATION
	Obligations of the Supplier
	When supplying services to taxable persons in other MS: Liable to register, regardless of the registration limit Submit a monthly Recapitulative Statement (VIES II), electronically
	Obligations of the Recipient
	When receiving supplies from outside the Republic Register for VAT, in case not already registered, regardless of the registration limit Account for VAT in The Republic, under the RC rule
	Registration for VAT is obligatory:
	at the end of any month, if the value of the taxable supplies (supplies taxed at the rates of 0% and / or 5% and / or 8% and / or 15%) in the period of one year then ending has exceeded Euro 15.600 or
	at any time, if there are reasonable grounds for believing that the value of the taxable supplies in the period of 30 days then beginning will exceed Euro 15.600.
	Businesses with a turnover of less than Euro15.600 can be registered voluntarily
	VOLUNTARY REGISTRATION
	A person who has a business establishment in Cyprus or his usual place of residence is in Cyprus and he makes supplies outside Cyprus but would be taxable supplies if made within Cyprus, is entitled to voluntary registration.
	NON RECOVERABLE VAT
	expenditure for entertainment of persons other than staff
	purchase of a private saloon car up to nine seats

 

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IMMOVABLE PROPERTY TAX

This tax is imposed on the owner of the immovable property in Cyprus annually on 1 January. It is calculated on the market value of the immovable property on 1 January 1980 and is payable by 30 September each year.

	Property Value (Euro)		Rate %	Tax Euro	Accumulated Tax (Euro)
	1 - 170,860		0	0	0
	170,861 – 427,150		2.5	641	641
	427,151 – 854,300		3.5	1,495	2,136
	over 854,300		4.0
	TRANSFER FEES FOR IMMOVABLE PROPERTY
	These fees are paid on transfers of immovable property and are calculated on the market value of the property as calculated by the Land Registry Department.
	MARKET VALUE EURO		Rate %	Tax Euro	Accumulated Tax (Euro)
	0 – 85,430		3	2,563	2,563
	85,431 – 170,860		5	4,272	6,835
	170,861 and over		8
	Tranfers of immovable property that take place in relation to a company reorganization are exempt from transfer fees.
	MORTGAGE FEES		Rate %
	On Loans		1%
	Transactions that take place in relation to a company reorganization are exempt from mortgage fees.
	STAMP DUTIES		Euro
	For amounts of  Euro 3 – 34		3 cents
	Over 34		7 cents
	CONTRACTS
	1.5% for amounts up to Euro 170,860
	2‰ plus Euro 256 for amounts in excess of Euro 170,860 up to a maximum levy of Euro 17,086
	without fixed amount  Euro 34
	REGISTRATION OF A LIMITED COMPANY		EURO
	By shares or quarantee with share capital		102 plus 0.6% on nominal capital
	Registration of a company without share capital		171
	Registration of Issue of shares by a limited company		17
	EXEMPTION
	Transactions that take place in relation to a company reorganization are exempt from stamp duty

 

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SPECIAL LEVY ON STOCK EXCHANGE TRANSACTIONS

	The levy is paid on on stock exchange transactions by the seller to the CSE who pays the levy to the State.
		Rate
	Individuals and Legal Persons	.15%
	Exempt Transactions
	issue and buy back of securities by the issuer
	transactions relating to non-convertible corporate bonds or debentures
	transactions relating to debentures, development stock and government securities
	gifts of securities from parents to their children, between spouses or relatives up to the third degree of kindred
	transfer of securities by reason of death.

 

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SHIP MANAGEMENT SERVICES

	Tax Rates
	Income derived from the rendering of ship management services is subject to tax at the rate of 4.25%
	The rendering of ship management services to ships allows a company the option to :
	be taxed on its profits at the rate of 4.25% or
	pay 25% of the gross tonnage tax of the ship. The tonnage tax is not levied in respect of ships under Cypriot flag, for which a tonnage tax has already been paid.
	The term ‘ship management services’ includes recruitment of crew as well as services relating to technical and financial management of the ship, under certain conditions.
	Dividends derived directly or indirectly from profits from the exploitation of a ship under the Cyprus flag or from the rendering of ship management services are not subject to special contribution to the defence fund.