Cyprus Tax Regime

1. Companies

Income

Any Company that is considered to be a Cyprus Resident company is taxed in respect of its worldwide income arising or accruing during the year of assessment.

The term “Cyprus Resident Company” means a company whose management and control is exercised in the Republic of Cyprus.

A non-Cyprus resident Company is taxed only on its income arising or accruing from sources in the Republic of Cyprus.

As of 1^st January 2013, the Corporation tax rate is at 12.5%.

The following types of income are exempt from Corporation tax:

Profit from disposal of securities
Dividend Income
Interest Income that does arise from the ordinary activities or is closely connected to the ordinary activities of the company
Profits from permanent establishment abroad, under certain conditions

Expenses

All expenses incurred wholly and exclusively for the production of income of the business are considered as tax deductible expenses.

Losses carried forward

As from 1 January 2013 losses are carried forward for only five years from the end of the tax year in which the tax loss incurred.

Group Loss Relief

Current year losses of a company can be set off against the profits of another company provided the companies are tax resident in Cyprus and are part of a group.

Tax credit for tax paid abroad

Tax credit is granted in Cyprus for any tax paid abroad, irrespective of the existence of a Double Tax treaty between the Countries. Such tax credit can be granted against both Income Tax and Defence Fund Contribution.

Special Levy

As from 2011 an annual levy of €350 payable to the Registrar of companies is introduced for all companies incorporated in Cyprus. For groups of companies the maximum levy is fixed at €20.000.

2. Individuals:

Taxable Income

Where an individual is a resident in Cyprus, tax is imposed on income accruing or arising from sources both within and outside the Republic of Cyprus.

If an individual is not a resident of Cyprus, tax is imposed only on the income accruing or arising from sources within Cyprus.

An individual is considered to be resident if he is present in the Republic for a period exceeding 183 days in a tax year (from 01/01 to 31/12).

Tax Rates for individuals

Taxable Income	Tax Rate	Tax	Cumulative 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
60.000 and over	35

There are certain types of income which are exempt for tax purposes and allowances/deductions that decrease your personal income tax.

For further information please do not hesitate to contact us.

3. Special contribution:

From 1^st January 2014 to 31^st December 2016, special contribution for employees, self-employed and pensioners in the private sector is as follows:

Gross Monthly Emoluments	% Contribution	Total Monthly Contribution in EUR
0 - 1.500	0	0
1.501 – 2.500*	2,5	25
2.501 – 3.500	3	55
Over 3.501	3,5

*Minimum amount of special contribution is EUR 10

There is no upper limit on the amount of emoluments. However, certain types of emoluments are not included in the above calculations.

In the case of an employee, the contribution is shared equally between the employee and the employer.

For employees and pensioners the amount of the special contribution will be withheld and paid in the same way as PAYE, whereas self-employed individuals will pay under self-assessment.

All the above contributions are deductible for income tax purposes.

4. Special Defence Contribution:

Special contribution for defence is imposed on certain types of income (dividends, interest and rental income). Non-residents are exempt from special contribution for defence.

The special defence contribution is charged as follows:

	Individuals %	Legal Entities %
Dividend income from Cyprus resident companies	17	Nil
Dividend income from non-Cyprus resident companies	17	Nil¹
Interest income arising from the ordinary activities or closely related to the ordinary activities of the business	Nil	Nil
Other interest income	30²	30²
Rental income (reduced by 25%)	3	3

Notes

Dividend income from abroad is exempt from defence fund contribution.
This exemption does not apply if:
- more than 50% of the paying company's activities result directly or indirectly in investment income and
- the foreign tax is significantly lower than the tax burden in Cyprus. The tax authorities have clarified through a circular that "significantly lower" means an effective tax rate below 6,25%.
When the exemption does not apply, the dividend income is subject to special contribution for defence at the rate of 17%.
Interest income from Cyprus government savings bonds and development bonds and all interest earned by a provident fund is subject to special contribution for defence at the rate 3% (instead of 30%).

In the case where the total income of an individual (including interest) does not exceed €12.000 in a tax year, then the rate is reduced to 3% (instead of 30%).

Deemed dividend distribution

If a Cyprus tax resident company does not distribute by way of a dividend at least 70% of its accounting profits within two years from the end of the tax year then the company is deemed to have distributed such profits and is liable to pay 17% (15% up to 30 August 2011, 17% from 31 August 2011 to 31 December 2011, 20% for 2012 and 2013) special contribution for defence on the deemed dividend distribution applicable to its shareholders who are Cyprus tax residents.

A non-Cyprus tax resident receiving dividends from profits subject to a deemed distribution, is eligible to a tax refund.

5. Capital Gains Tax (CGT):

Capital Gains Tax is charged at the rate of 20% on gains arising from the disposal of immovable property located in Cyprus including the profit from the disposal of shares of companies which own immovable property in Cyprus, which are not listed on a recognised stock exchange.

There are also a number of disposals that are exempt from CGT.

Individuals are allowed, under certain conditions, the following life-time exemptions of capital gains:

Type of disposal	Amount (€)
Disposal of private residence (under conditions)	85.430
Disposal of agricultural land by a farmer	25.629
Any other disposal	17.086

6. Immovable Property Tax (IPT):

Immovable Property Tax has been abolished as of the 1^st January 2017 for the tax year 2017 and all future tax years.

Until 31^st December 2016, the registered owner of the property (either physical or legal person) was liable to an annual IPT calculated on the market value of the property as at 1 January 1980.

As from 1^st January 2013, the IPT rates have been revised as follows:

Property Value (€)	Rate %	Tax Amount (€)	Accumulated Tax (€)
1 – 40,000	6,0	240	240
40,001 – 120,000	8,0	640	880
120,001 – 170,000	9,0	450	1,330
170,001 – 300,000	11,0	1,430	2,760
300,001 – 500,000	13,0	2,600	5,360
500,001 – 800,000	15,0	4,500	9,860
800,001 – 3,000,000	17,0	37,400	47,260
Over 30,000,001	19,0

The above rates and amounts apply per owner, not per property.

There are also a certain types of disposals that are exempt from IPT.

7. Inheritance Tax:

Inheritance Tax has been abolished with effect from 1st January 2000, and is no longer imposed.

8. Social Insurance:

Social Insurance Contributions (SICs) are payable by the employer, employees and self-employed persons based on their insurance earnings. The SICs rates applicable for each category are listed below.

Categories	Employer	Employees	Self-employed (under certain conditions)
	%	%	%
Social Insurance	8,3	8,3	15,6
Holiday fund*	8	-	-
Cohesion fund	2	-	-
Redundancy fund	1,2	-	-
Industrial fund	0,5	-	-
National Health Security (ΓΕΣΥ)**	1,85	1,70	2,55
Total	21,85	10,0	18,15

* If not exempted
** Contributions are paid on all employee annual earnings up to EUR180.000.»

9. Property Transfer Fees:

The fees charged by the Department of Land and Surveys for the transfer of immovable property are:

Property Price	Rate	Fee	Accumulated Fee
First €85.000	3%	€2.550	€2.550
€85.001 to €170.000	5%	€4.250	€6.800
Over €170.000	8%

Properties purchased between the 2nd of December 2011 and 31st December 2016, which are subject to VAT will be exempt from the above transfer fees. Properties not subject to VAT will be eligible for a 50% exemption from the above transfer fees.

10. Value Added Tax (VAT):

Value Added Tax (VAT) is imposed on the provision of goods and services in Cyprus, as well as on the acquisition of goods from the European Union and on the importation of goods into Cyprus.

Persons Liable

A person liable to VAT under the provisions of the VAT legislation is every person (Company or Individual) that:

Exercises business and
It is registered or must be registered with the VAT (Customs & Excise) either in Cyprus or within the European Union.

This person can be an individual or a Company or a partnership and also clubs, institutions, associations and other.

All taxable persons charge VAT on their taxable supplies (output tax) and are charged with VAT on goods or services which they receive (input tax).

VAT Registration

Taxable person must register when:

its taxable supplies exceeds the €15.600 threshold during the 12 preceding months or
it expects that its taxable supplies will exceed the €15.600 threshold within the next 30 days
Receives goods in Cyprus of a value exceeding €10.251,61
provides services to another EU VAT registered person within European Union
receives services from countries outside the European Union

A person not exceeding the threshold of €15.600 can also opt to register voluntarily.

VAT Rates

The current Vat rates applicable in Cyprus depending on the nature of the supply, are as follow:

Zero rate (0%)
Reduced rate (5%)
Reduced rate (9% as of 14^th January 2014)
Standard rate (19% as of 14^th January 2014)

Exemptions

The following types of supply are exempt from VAT:

Rental income derived from immovable property
Financial Services
Medical services
Postal services
Insurance services
Social welfare
Education, under certain conditions
Sale of properties for which the application for building approval has been submitted before 1^st May 2004.

The difference between zero rate and exempt supplies is that businesses that make exempt supplies are not entitled to recover the VAT charged on their purchases, expenses or imports.

Irrecoverable input VAT

As an exception to the general rule, input VAT cannot be recovered in a number of cases which include the following:

Acquisitions used for making exempt supplies;
Purchase, import or hire of saloon cars;
Entertainment and hospitality expenses (except those relating to employee and directors);
Housing expenses of directors.

VAT Information Exchange System (VIES)

In Cyprus registration for VIES is required whenever there is a provision of services or sale of goods in other Member state.

The VIES declaration is filed 15 days after the end of every month.

VAT Submission and Payments

Any registered person must submit to the VAT Commissioner a VAT return within 40 days from the end of any tax period and pay the VAT due.

11.Tax Diary:

End of each month
- Payment of PAYE deducted from employees’ salaries for the previous month.
- Payment of Special Defence Contribution withheld on payments of dividends, interest or rents (when the tenant is a company, partnership, the state or local authority) made to Cyprus tax residents during the previous month.
- Payment of tax withheld on payments made to non-Cyprus tax residents during the previous month.
31 January 2019
- Submission of declaration of deemed dividend distribution (IR623) for the year ended 31 December 2016.
31 March 2019
- Electronic submission of 2017 income tax return for individuals and companies preparing audited financial statements (IR1, IR4).
30 April 2019
- Payment of the first instalment of the premium tax for life insurance companies for 2019.
30 June 2019
- Payment of tax balance for 2018 through self-assessment by individuals who do not prepare audited accounts.
- Payment of special defence contribution for the first six months of 2019 on rents and on dividends or interest from sources outside Cyprus.
31 July 2019
- Electronic submission of employers return (Form IR7) for the year 2018.
- Submission of personal tax return for 2018 by individuals who do not prepare audited accounts if their gross income exceeds €19.500.
- Submission of the 2019 provisional tax return and payment of the first instalment.
1 August 2019
- Payment of the final corporation tax for the year 2018 under the self-assessment method.
- Payment of the personal income tax for the year 2018 under the self-assessment method by individuals preparing audited financial statements (2).
31 August 2019
- Payment of the second instalment of the premium tax for life insurance companies for 2015.
30 September 2019
- Submission of 20148 personal tax returns of individuals not required to prepare audited financial statements if their gross income exceeds €19.500.
31 December 2019
- Submission of revised form of provisional tax for 2019, if any
- Payment of the second instalment of provisional tax for 2019.
- Payment of special contribution for defence for the last six months of 2019 on rents (if the contribution is not withheld at source from tenant) and on dividends or interest from sources outside Cyprus.
- Payment of the third instalment of the premium tax for life insurance companies for 2019.

Note: If the above deadlines are not kept then penalties and interest are imposed. The interest rate has been set at 3.50% as of 1^stJanuary 2017.