The trading profits of a Cyprus resident company are taxed at ten percent (10%), which is the lowest tax rate in Europe.To establish that a company is a Cyprus tax resident its management and control are required to be exercised in Cyprus.
Interest income is also taxed at 10%. If the company’s usual operation is the provision of financing, then such interest shall be considered as trading income and taxed under the Income Tax Law. Otherwise, interest income is also taxed at 10%, but under the Special Contribution of Defence Law provisions. Special Contribution for Defence Law will be addressed in a later article.
Dividends paid by a Cyprus company to another Cyprus company are exempt from any tax in Cyprus. The same applies to dividends distributed by any Cyprus company to non-resident shareholders of non- tax residents whether physical or legal persons. It is worth mentioning that dividends received by Cyprus company from overseas are also tax-free, if some conditions are met.
The gross income of a non-resident company with rights (royalties) arising from sources within Cyprus is subjected to 10% withholding tax. If the rights owned by a Cyprus company are for use outside Cyprus, then there is no withholding tax imposed, but the profits of the company will be taxed at 10%based on the Income Tax Law.
Cyprus company profits from trading and marketing 'titles' are tax free. The term 'title' includes: common and preferred shares, debentures, bonds, options on securities, short positions in securities, futures on bonds, swaps securities, depositary receipts (such as ADRs / GDRs), rights on bonds and debentures, index participations, repurchase agreements / repos, units in open-end or closed-end collective investment schemes) and other.
For questions, comments and selection of topics that might interest you please contact the author of the column:
Charilaos Hadjiioannou, Bsc, Aca