Corporations	Individuals
Corporate Income Tax Capital Gains Tax Administration Dividends Foreign Tax Relief Determination of Taxable Income Payroll Taxes Value Added Tax	Income from Employment Self Employment/Business Income Income Tax Rates Personal Deductions and Allowances Administration Capital Gains Tax Estate Duty Networth Tax Social Security Taxes Non-Residents and Foreigners

CORPORATIONS

Corporate Income Tax
A company incorporated in Cyprus is subject to income tax on its worldwide income. A company not incorporated in Cyprus is subject to income tax only on Cyprus income, unless the control and management is in Cyprus, in which case it is taxed on its worldwide income.

The standard rate of corporate income tax is 20% on income up to CYP 40.000 and 25% on income in excess of CYP 40.000. Offshore companies are taxed at the rate of 4,25%.

Capital Gains Tax
A capital gains tax of 20% is levied on gains from disposal of immovable property or disposal of shares in companies, the assets of which include immovable property. The gain is the difference between the sale proceeds and the original cost, adjusted to take into account increases in the cost of living index.

Offshore companies are exempt from capital gains tax, except on immovable property situated in Cyprus.

Administration
The income tax year in Cyprus is the calendar year. Tax is payable on August 1st following the year of assessment. However, an estimate of tax due is made by August 1st in the year of assessment and provisional tax is payable in three equal instalments on August 1st, September 30th and December 31st.

Overdue tax carries a surcharge of 5% per annum if paid within six months of the due date or interest of 9% per annum if paid after six months of the due date.

Dividends
Dividends paid to resident and non resident shareholders are subject to 20% withholding tax except in the case of offshore companies and where otherwise provided by tax treaty. A resident recipient includes the net dividend plus the tax withheld in his taxable income and receives a credit for the tax withheld. If a non-resident shareholder is a foreign corporation, then it is entitled to claim a refund of the tax withheld.

Alternatively, the shareholder, may elect to consider the withholding tax as final tax and do not include the dividend in his taxable income.

Foreign Tax Relief
Foreign tax on profits and gains of a Cyprus resident individual or company is credited against Cyprus tax payable. Such foreign tax relief cannot exceed Cyprus tax payable on the profits or gains.

Determination of taxable income

General
An assessment is based on accounts prepared on generally accepted accounting principles, subject to certain adjustments and provisions. Expenses must be incurred wholly and exclusively for the production of income.

Inventory
Inventory is generally valued at the lower of cost and net realisable value. Cost must be determined on a FIFO basis. The FIFO basis is not acceptable.

Capital Receipts / Payments
Capital receipts are excluded from taxable income. Write-offs of capital expenditures are allowed in certain cases.

Depreciation and amortisation allowances
A straight-line allowance of 10% a year is given on most capital expenditures for plant and machinery, except saloon vehicles. An investment deduction of 20% is also given for new machinery acquired by manufacturing, mining and agricultural enterprises. This deduction does not reduce the asset’s depreciable base.

INDIVIDUALS

Income from employment
Any person who derives gains or profits from any office or employment in Cyprus, regardless of whether the person employed works in Cyprus or elsewhere, is liable to income tax. Emoluments include the estimated value of any accommodation and other allowances from employment, whether in money or otherwise.

Directors’ fees are considered emoluments. Directors’ fees of non-residents are subject to withholding tax, usually at the corporate rate, unless the director files a return, in which case he or she will be taxed as other individuals.

The range of deductible expenses is very limited. Professional tax, subscription to trade or professional bodies and donations to charity are allowed.

Self Employment / Business Income

Who is liable?
Any person deriving income from the following is subject to tax:

• gains or profits from any trade, business, profession or vocation

• dividends, interest or discounts,

• rent, royalty, premiums or other profit arising from property;

• profits from farming and husbandry;

• annual profits or gains not falling under any of the foregoing headings.

Deductible expenses
All expenses incurred wholly and exclusively in the production of income are deductible. In addition, depreciation and amortisation allowances are given as in the case of corporations.

Income Tax Rates

Personal Deductions and Allowances
The principal deductions and allowances permitted are the following:

Administration
Taxes on income from employment are deducted by the employer under the Pay As You Earn (PAYE) system and paid to the tax authorities monthly. Taxes on other types of income for the current year become payable on August 1st of the following year. However, an estimate of tax due is made in the same way as for corporations.

Capital Gains Tax
Tax at the rate of 20% is levied on gains from disposal on immovable property or disposal of shares of companies, the assets of which include immovable property. The gain is the difference between sale proceeds and the original cost of the property, adjusted to take into account increases in the cost of living index.

The following lifetime exemptions are available to individuals:

Estate duty
The entire estate, wherever situated, of a deceased person who was domiciled in Cyprus is subject to Cyprus estate duty. However, property acquired in Cyprus after January 1st, 1976, with foreign exchange earned while the deceased was permanently resident outside Cyprus, is not taxable.

Property situated in Cyprus owned by a deceased person who was not domiciled in Cyprus is taxable in Cyprus.

Property includes movables and immovables of every kind , money, investments and all other assets as well as gifts made within three years of death.

Rates
Estate duty is payable on the market value of property at the date of death at the rates shown below:

Deductions
The following deductions are available in arriving at the taxable value of a deceased’s estate:

Net worth tax
No tax is levied on an individual’s net worth.

Social security taxes
Self-employed persons are required to contribute to the social security scheme at the rate of 11,6% of monthly income. Minimum and maximum monthly incomes are classified according to the types of business, profession or vocation.

Non-residents and foreigners
Foreigners in Cyprus are granted these tax incentives and exemptions:

• Up to CYP 2.000 of foreign investment income remitted to Cyprus is not subject to tax. The rate is 5% for amounts exceeding CYP 2.000. This applies to resident foreigners not carrying on a trade or business in Cyprus. This income is taxed separately from any other type of income

• Interest on foreign money deposited with any bank in Cyprus is tax free.

• Up to CYP 2.000 of pension payments from employment outside Cyprus remitted to Cyprus are not subject to tax . The rate is 5% for amounts exceeding CYP 2.000. This income is taxed separately from any other type of income.

• Royalties, premiums, compensation or other income earned in Cyprus by non-residents are taxed at 10%.

• Film rentals earned in Cyprus by non-residents are taxed at 5%.

• Foreign professionals resident in Cyprus for less than six months during the tax year who earn income in Cyprus (other than emoluments) are taxed at 15% on gross income.

Value Added Tax
Value Added Tax applies to all taxable supplies of goods or services made in Cyprus by a VAT-registered business and on the importation of goods in Cyprus.

A business is required to register for VAT purposes when the taxable supplies made in a year exceed CYP 12.000. Foreign businesses which supply goods or services in Cyprus in excess of the registration limits are liable to register for VAT in the same way as local businesses.

There are two rates of VAT applicable: the zero rate for necessities such as food, water, medicines, gas in cylinders, books, children’s clothing, air and sea transport abroad and export of goods and eight per cent for all other supplies of goods and services. The following supplies are exempt from VAT: sale and rental of land and buildings, financial and insurance services, postal services, lotteries, education, health and social welfare, and certain services when supplied to a an overseas person.

The supplies of goods within Customs regimes (free zones, bonded warehouses, etc.) are exempt from VAT, but they carry entitlement to recovery of input tax.

A VAT-registered business is entitled to claim credit for input tax suffered on goods or services purchased or imported which are used or intended to be used for purposes of that business. Deductible input tax is offset against output tax in the quarterly VAT returns.