A company is tax resident in Cyprus when its management and control is exercised in the Republic. Their taxable income includes both income earned in Cyprus and abroad. A non-Cyprus tax resident is taxed only on income earned in Cyprus.
All companies are subject to a uniform tax rate of 10% which is the lowest corporate tax rate in the European Union. A special tax regime applies for shipmanagement services.
Cyprus tax resident companies are exempted in respect of dividends received from other Cyprus resident companies. Dividends received by Cypriot Companies from foreign subsidiaries. Interest income is taxed at the corporate tax rate of 10% arising from or closely connected to the ordinary activities of the company. Moreover, 50% of all other interest income is exempted from income tax and is subject to special defence contribution at 10%. Profits gained from the sale of securities listed on a recognised Stock Exchange are exempted from tax for all companies.
Personal Income Tax
Individual tax resident of Cyprus is an individual who stays in the Republic for 183 days in the year of assessment. Cyprus tax residents are taxed on income earned both in Cyprus and abroad. On the contrary non tax residents are taxed on income earned only from Cyprus sources. Individuals who were not Cypriot residents before the commencement of their employment are allowed after the first year an exemption of 20% of their emoluments with maximum amount €8.543 (CY£5.000) annually. This exemption can be used for 3 years commencing from the 1st January following the first year of employment. The rates for income tax for year 2008 are listed in the table below.
|Taxable Income (€)||Tax Rate (%)|
|0 — 19.500||0|
|19.501 — 28.000||20|
|28.001 — 36.300||25|
Dividends are exempted from income tax. Subject to certain conditions, dividends are subject to special contribution for the defence at the rate of 15%, applicable only to residents. For the avoidance of double taxation, Cyprus concluded over 30 double tax treaties, covering 42 countries.