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Legal Entities
Tax rates for companies
| Taxable income | Tax Rate |
|
| Companies Public Law Constitutions Ship management companies |
12.5% 25% subject to Tonnage Tax |
Exemptions
- Dividend income from abroad and from Cyprus is exempt from Income Tax.
- Profits earned from a permanent establishment abroad are exempt from income tax.
The exemption does not apply if: - the permanent establishment activities lead to less than 50% investment income, and
- the income tax charged on these profits is not substantially less than the corresponding Cyprus Income Tax.
- Profit on the disposal of securities.
The exemption stands for both shares in public companies and private companies as long as the profit is in the nature of income and not capital gain. - Interest received from non-trading activities.
Interest received in the normal course of business will be considered as business profit taxed at normal rates.
Allowable expenditure
- Donations or subscriptions for educational or other charity purpose are allowable without restriction.
- Business entertaining expenses are only allowable if their total does not exceed 1% of the total turnover for the year up to a maximum of € 17.086.
Not allowable expenditure
- Private motor vehicle expenses.
- Professional tax.
- Interest attributable to the cost of a private motor vehicle (either used or not used for business purposes), and any other fixed asset not used in the business. This provision is only valid for seven years since the acquisition day of the fixed asset.
- Company’s levy paid to Registrar
- Employer’s contribution to social cohesion fund
Goodwill
Proceeds from the sale of trade goodwill are taxed after deduction of any payments made to acquire such goodwill.Tax losses
- Losses incurred can be carried forward for 5 years from the year of the loss.
- Group loss relief is available to a group of Cyprus resident companies in relation to current year losses. Two companies will be considered as part of a group if:
- a company is 75% subsidiary of another
- both companies are 75% subsidiaries of a third company
- Losses from overseas activities can be set off against chargeable income for the year and can be carried forward.
- On the conversion of a sole trader to a company, the accumulated losses of the sole trader can be transferred to the company and carried forward.