In this article we will consider a brief overview of the taxes regarding businesses in Cyprus and some changes made to national tax legislation. The information provided below will allow you to conduct tax planning effectively and minimize the tax burden of your business.
Cyprus is a popular jurisdiction for foreign investors and businessmen. The country is a member of the European Union and taxes in Cyprus are lower than any other European country. The Cypriot government implements favorable tax conditions for current and future investors. Small, medium-sized and large enterprises can use all the benefits of tax planning and legal methods for reducing the amount that they pay in taxes.
What are the key benefits of the Cypriot tax system?
Below you can find a general overview of information with respect to Cyprus corporation tax.
The company shall be regarded as a tax resident of Cyprus if its management and control is exercised from the territory of Cyprus. All companies which are considered to be Cypriot tax residents will pay tax from income generated from sources in Cyprus and abroad.
The rate of corporate tax for all companies is 12.5%.
The following categories of income are not taxable in Cyprus:
The following are some expenses which may be deducted in calculating taxable income:
Which new rules were implemented with respect to the intellectual property taxation?
Cyprus is a very popular destination for companies and individuals who want to benefit the most of its favorable tax structure. One major sector that is of special interest to intellectual property owners is the IP-Box-Regime. On 14 October 2016 the House of Representatives enacted into Law significant amendments to Cyprus’ “IP regime”. These amendments apply retroactively from 1 July 2016 and provide a transitional period for intellectual property assets qualified under the existing “IP regime” adopted in 2012. The amendments implemented in 2016 by the Cypriot authorities made the existing IP-Box rules stricter.
It should be mentioned that the old IP-Box regime is not fully cancelled as the companies which enjoyed its benefits prior to the amendments may continue to do so until the end of the transitional period, 30 June 2021.
In order to determine whether the particular IP asset is eligible for the IP box regime it is important to ascertain if it falls under the definition of “qualifying intangible asset”: an asset which was acquired, developed or exploited by a person within its business activities, which is the result of research and development (R&D) activities and which includes intangible assets for which only economic ownership exists.
These assets include:
Business names, trademarks, image rights and other intellectual property rights used for the marketing of products and services are not considered as qualified intangible assets.
So, what is the benefit under the above-mentioned regime? 80% of qualifying profits (this amount is calculated based on the special formula) shall be regarded as a deductible expense. This means that the effective tax rate of the “qualifying income” will be the same 2,5% which was applicable under an old IP-Box regime.
The Tax Department is the main tax authority of Cyprus. According to the information provided on its web-site, the Vision of the Tax Department is “to become a modern tax administration, providing quality service to the taxpayer and achieving the maximum possible voluntary compliance”. The Mission of Tax Department is “the consistent application of the laws, ensuring fair taxation in a way that enhances the confidence of the taxpayer, the minimization of tax evasion and the effective collection of tax revenues of the state with the least possible cost”. In the official website of the Tax Department you may easily find the necessary information such as information with respect to double tax treaties, automatic exchange of tax information, returns, forms, applicable legislation, circulars, tax rates, organizational structure of the Tax Department of Cyprus, etc. However, you should remember that the best way to obtain and properly interpret all the array of the information is to consult professionals such as AGP & Co tax experts, accountants and advisors.
What you should know about double tax treaties
Cyprus has double tax treaties with more than 50 countries and is currently negotiating with other countries to increase the number of its treaties. Each treaty aims at avoiding double taxation of income earned in any of these countries. In addition, most of the conventions provide reduced rates of withholding taxes on dividends, interest and royalties paid out of the contracting state.
The full list of the Double Tax Treaties concluded between the Republic of Cyprus and other countries, as well as the text of each published treaty can be found on the official website of the Ministry of Finance of Cyprus.
How can AGP & Co help you with respect to tax optimization and planning?
Our company is proud to engage highly-qualified professionals in order to provide our clients with the best tax and corporate advice with respect to your business. Our tax lawyers, tax advisers and accountants are always at your disposal to assist you with the following issues:
The Cyprus tax system, although very attractive and simple, requires very good knowledge of its regulations and laws, qualified professionals and very experienced accountants to deal with. Cyprus can boast on the high level of education and experience of its accountants, lawyers and other professionals who are eager to assist their international clients to benefit the most.