Corporation Tax

Basis of taxation

All companies tax resident of Cyprus are taxed on all their income accrued or derived from all sources in Cyprus and abroad. A non Cyprus tax resident company is taxed on income accrued or derived from a business activity which is carried out through a permanent establishment in Cyprus.

A company is resident of Cyprus if it is managed and controlled in Cyprus.

Corporation tax rates

Tax rate %
Companies	10
Public corporate bodies	25

Excemptions

Type of income	Exemption limit
Interest income not arising from the ordinary activities or closely related to the ordinary activities of the company	100%
Dividends income	100%
Profit from the sale of securities	100%
Profits of a permanent establishment abroad, subject to certain conditions	100%

Deductions

All expenses incurred wholly and exclusively in earning the income of the company including:

Type of expense	Exemption limit
Interest incurred for the acquisition of a fixed asset used in the business	100%
Donations to approved charities (with receipts)	the whole amount
Employer's contributions to social insurance and approved funds on employees' salaries	the whole amount

But not including:

Type of expense	Exemption limit
Business entertainment expenses including hospitality expenses of any kind which are incurred for the business	amounts in excess of 1% of the gross income or €17.086 (whichever is the lower)
Expenses of a private motor vehicle	the whole amount
Contributions to the Social Cohesion Fund	the whole amount

Losses carried forward

The tax loss incurred during a tax year and which cannot be set off against other income, is carried forward and set off against future profits with no time restriction.

The current year loss of one company can be set off against the profit of another provided the companies are Cyprus tax resident companies of a group.

Group is defined as:

a) one company holding at least 75% of the shares of the other company

b) at least 75% of the voting shares of the companies are held by another company

A partnership or a sole trader transferring business into a company can carry forward tax losses into the company for future utilisation.

Losses from a permanent establishment abroad can be set off with profits of the company in Cyprus. Subsequent profits of the permanent establishment abroad are taxable up to the amount of losses allowed.

Reorganisations

Transfers of assets and liabilities between companies can be effected without tax consequences within the framework of a reorganisation.

Reorganisations include:

a) mergers

b) demergers

c) transfer of activities

d) exchange of shares

Capital Allowances

The following allowances for the annual wear and tear which are given as a percentage on the cost of acquisition are deducted from the chargeable income:

Fixed assets	%
Plant and machinery
Fork lifts, excavators, loading vehicles, bulldozers and oil barrels	25
Motor vehicles of all types except from private saloon cars	20
Personal computers (hardware) and operating software	20
Application software
up to €1.708,60	100
above €1.708,60	33 1/3
Plant and machinery used in agriculture	15
Water drillings, industrial carpets, video recorders, televisions	10
Any other plant and machinery	10
Buildings
Metallic frame of greenhouses	10
Wooden frame of greenhouses	33 1/3
Industrial, agricultural and hotel buildings	4
Commercial	3
Ships
Sailing vessels	4,5
Steamers, tugs and fishing boats	6
Shipmotor launches	12,5
New cargo vessels	8
New passenger vessels	6
Used cargo/passenger vessels	Over their useful lifes
Tools
All tools in general	33 1/3
Videotapes used by video clubs	50