Cyprus Tax Guide 2019

Cyprus has one of the attractive tax regimes in Europe. 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 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%. Such generous taxes and advantages coupled with an extensive list of double taxation treaties with different countries place it high on the list of one of the most preferred jurisdictions for international taxation.

Features of Taxation in Cyprus

As said earlier, due to Cyprus being an attractive tax regime, there are many investors who want to establish a company in the Republic. The key tax features are as follows:

  • OECD approved
  • European Union (EU) compliant taxation system
  • Reasonable tax administration
  • Wide network of double tax agreement with over 60 countries
  • One of the lowest tax rates in the European Union
  • No wealth taxes and minimum stamp duty and local taxes
  • Tax incentives for expatriate employees

Types of Taxes in Cyprus

There are various types of taxes in Cyprus. They are

  1. Corporate Income Tax
  2. Capital Gains Tax
  3. Stamp Duty
  4. Value Added Tax

1.Corporate Income Tax

A company in Cyprus is taxed on income accruing or arising from sources both within and outside the country if the company is tax resident of the Republic. If the company is not the tax resident of the Republic, it is taxed on the income accruing or arising only from sources within the Republic. The corporate income tax rate in Cyprus is 12.5%.

2.Capital Gains Tax

The capital gains taxes in Cyprus are rates at 20%. The tax is treated on:

  • Gains from the disposal of immovable property situated in the Republic
  • Gains from the disposal of shares of companies not listed on a recognized stock exchange which own immovable property situated in the Republic, and
  • Gains from the disposal of shares of companies which indirectly own immovable property situated in the Republic and derive at least 50% of their market value from such immovable property.

3.Stamp Duty

Any documents relating to the property situated in the Republic or to any matters or issues executed or performed in the Republic are subject to the stamp duty. The following table gives the amount or rate of duty payable on certain documents.

Document

Amount in Euros

Letter of Guarantee

4

Letter of Credit

2

Customs Document

18-35

Bill of Lading

4

Bill of Exchange

1

General power of attorney

6

Special power of attorney

2

Certified copies of contracts and documents

2

Will

18

Estate administration document

9

 

4.Value Added Tax (VAT)

When you register a business in Cyprus, registering for a tax is one of the most important processes. Value Added Tax in Cyprus is imposed on the supply of all the goods and services, on the acquisition of goods and services from other Member States and on the importation of goods from the third countries. The different types of vat rates in the Republic are as under:

  • Standard rate- 19%
  • Reduced rate- 9%
  • Reduced rate- 5%
  • Zero rate 0%

Procedure for Apply for VAT in Cyprus

  1. Get 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 an application is carried out by Cyprus VAT authority
  6. If everything is in place, a letter of approval of an application is issued confirming the applicable VAT rate

Penalties in VAT

There are penalties for different categories in VAT. They are:

Particulars

In Euros

Late registration of VAT

85 for every month of delay

Late submission of return

51 for each return

Late payment of VAT

10% of the amount due plus interest

Late de-registration

85 one-off

 

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 meters

60%

11.40%

8.01-14 meters

50%

9.50%

14.01-24 meters

30%

5.70%

Over 24 meters

20%

3.80%

 

 

For Sailing Yachts

Size of the Vessel

% of Time Spent in EU Waters

VAT Rate

10 meters

60%

11.40%

10.01-20 meters

50%

9.50%

20.01-24 meters

30%

5.70%

Over 24 meters

20%

3.80%

 

 

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.