Corporate taxation | Tech Island

Cyprus offers one of the most attractive tax regimes in Europe, fully compliant with EU and OECD regulations. Its favourable provisions render Cyprus an ideal location for doing business in the region.

A Cyprus tax resident company can enjoy a number of tax benefits. A company is considered to be a Cyprus tax resident if it is managed and controlled from Cyprus. In general, the (worldwide) business profits of a Cyprus tax resident company, adjusted for the relevant disallowances and exemptions, are subject to corporation tax of 12.5%.

As of 2023, a Cyprus-incorporated company will by default be considered a tax resident of Cyprus by default, provided it is not a tax resident in any other jurisdiction. All Cyprus tax resident companies are taxed on their income accrued or derived from all chargeable sources in Cyprus and abroad. As off 1 January 2019 Controlled Foreign Company (CFCs) rules apply, i.e. non-distributed profits of CFCs directly or indirectly controlled by a Cyprus tax resident company may become subject to tax in Cyprus (certain exceptions may apply).

A non-Cyprus tax resident company is taxed on income accrued or derived from a business activity carried out through a permanent establishment in Cyprus and on certain income arising from sources in Cyprus. Foreign taxes paid can be credited against the Cyprus corporation tax liability.

Exemptions

Type of income	Exemption limit
Profit from the sale of securities	The whole amount
Dividends (excluding, as of 1 January 2016, dividends which are tax deductible for the paying company)	The whole amount
Interest not arising from the ordinary activities or closely related to the ordinary activities of the company	The whole amount
Profits of a permanent foreign establishment, under certain conditions	The whole amount
Gains related to foreign exchange differences (forex) with the exception of forex arising from trading in foreign currencies and related derivatives.	The whole amount
Profits from the production of films, series and other related audiovisual programs	The lower of 35% of the eligible expenditure and 50% of the taxable income. Any restriction may be carried forward for five years.

Special Defense Contribution (‘SDC’)

Special Contribution for Defence is imposed on dividend income, ‘passive’ interest income and rental income earned by companies tax resident in Cyprus. The same goes for individuals who are both Cyprus tax resident and Cyprus domiciled. It is charged at the rates shown in the table below

Type of Income	Tax Rate
Dividend income from Cyprus and non-Cyprus tax resident companies	Nil
Interest income arising from the ordinary activities or closely related to the ordinary business activities of the business	Nil
Other interest income (“passive”)	30%
Rental income (reduced by 25%)	3%