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.
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