Understanding the Tax System in Cyprus

Cyprus offers a corporate tax rate of 12.5%, which is the lowest in the European Union. The country also has a standard VAT rate of 19%. Cyprus tax authorities and tax legislation are in compliance with European Union Laws and Directives as well as the Organization for Economic Cooperation and Development (OECD). Cyprus has also been rated as the 6th lowest tax misery in the world by the Forbes Tax Misery Index 2009.

Cyprus Non-Tax Resident IBC

If you are wondering what a Cyrus Non-Tax resident IBC is, it refers to an International Business Company – a legal entity whose beneficial ownership and business activities take place outside the country where the company is incorporated. A Cyprus non-tax resident IBC’s shares should belong only to foreigners, its income must be obtained from sources abroad, and the business must be carried out outside the country of registration. These are also known as offshore companies and are legal and are recognized by authorities. Its establishment and operation process is simple and it costs relatively low. This company structure offers substantial tax benefits since it is not subject to any taxation in Cyprus. The company just needs to file tax returns in Cyprus and should be able to prove in which country it is tax resident.

Yacht Leasing Scheme in Cyprus

Cyprus Value Added Tax (VAT) Authorities published certain guidelines elaborating the VAT treatment of Yacht Leasing Schemes on 13 March 2012, which turned out to be the most attractive VAT yacht system in whole Europe. It is believed that by using this yacht scheme, the VAT can potentially be reduced to as low as 3.8% of the initial value of the pleasure yacht which is 5.4% less than the yacht leasing scheme in Malta. This new scheme states that only a certain percentage of the lease amount should be subject to Cyprus’s standard VAT rate, which is 19%. The effective VAT rate will vary depending on the size of the yacht. The variations are explained below:

For Motor Yachts

Size of the Vessel

% of Time Spent in EU Waters

VAT Rate

8 metres

60%

11.40%

8.01-14 metres

50%

9.50%

14.01-24 metres

30%

5.70%

Over 24 metres

20%

3.80%

 

For Sailing Yachts

Size of the Vessel

% of Time Spent in EU Waters

VAT Rate

10 metres

60%

11.40%

10.01-20 metres

50%

9.50%

20.01-24 metres

30%

5.70%

Over 24 metres

20%

3.80%

 

Procedure for Apply for VAT in Cyprus

  1. Get an approval from Cyprus VAT Commissioner
  2. Register your Cyprus Limited Liability Company
  3. Apply for VAT registration
  4. Submit lease agreement and supporting documents to the VAT department
  5. Thereafter, a review of application is carried out by Cyprus VAT authority
  6. If everything is in place, a letter of approval of application is issued confirming the applicable VAT rate

Cyprus Income Tax Rates

Cyprus tax rates are not fixed, and vary according to the amount of income. The variations of tax rates are given below:

Income (in euros)

Tax Rate

0 - 19,501

0%

19,501 - 28,000

20%

28,000 - 36,300

25%

36,300 - 60,000

30%

Above 60,000

35%

 

All these amazing tax benefits make Cyprus an ideal place for establishing a business. So, if you are looking forward to setting up a company in Cyprus, then look no further as our advisors at Business Setup Worldwide are here to help you with the drill. We excel in providing world-class support services which you may be very eager to avail while setting up your business in Cyprus. For further assistance on how to set up a company in Cyprus, do contact us – we’d be happy to help.

About the Author

Shalu.Lal@bsworldwide.com's picture

Shalu Lal is an engineer in the making fascinated by the idea of contemplating and writing, who dived into Digital Marketing and found her cup of tea.