Taxation in Cyprus

Cyprus is a full member of the European Union. All Cypriot companies can register for a Cypriot VAT number, therefore benefiting from the VAT deductions throughout the European Union.

Cyprus has one of the lowest taxes in terms of corporate tax in the EU. This means that it still has favorable taxation laws without the uncertainty that comes with involvement with more dubious tax haven jurisdictions.

One of the first considerations when creating an offshore company in Cyprus is to determine whether the company should be considered a tax resident or non-resident company. Each type of International Business Company (IBC) has certain features that might be right for your business. A tax resident company is controlled and managed inside of Cyprus (with the majority of the directors as residents of Cyprus). It is taxed 12,5 % on business profits, but qualifies for the double-tax treaty and unilateral tax credit.

A non-resident company has everything managed and controlled outside of Cyprus. It has 0% taxation on all income incurred worldwide, but is still taxed 12,5 % of any income produced inside of Cyprus. A non-resident company does not qualify for the double-tax treaty, and the unilateral tax credit is irrelevant.

Tax benefits of a Cyprus based company:

  • No tax on income earned worldwide outside of Cyprus (for non-resident IBCs)
  • 12,5 % income tax on income derived from Cyprus (for non-resident IBCs)
  • 12,5 % income tax (for tax-resident IBCs)
  • Tax-resident IBCs qualify for:
    • double tax treaty protection*
    • unilateral tax credit
    • No requirement for minimum capital
  • No withholding tax on the following:
    • Dividends
    • Interest
    • Royalties
    • Dividend income

While Cyprus has two taxation options to make it a competitive location for offshore companies, there are exceptions that make it somewhat different from other tax haven jurisdictions. An offshore company in Cyprus is required to maintain its accounting records annually, and needs to be prepared for the event that an audit is requested. A Cyprus offshore IBC is also required to submit tax returns every year. Note that even non-resident companies, while they are not subject to submit tax returns if they are not taxed, must still have a registered auditor in Cyprus to oversee and evaluate their financial statements. Lastly, all offshore companies in Cyprus must submit their audited financial statements to the Cyprus Registrar of Companies when they send in their annual tax return.

Financial Guardian Ltd. can establish your offshore company in Cyprus. Our extensive network of local connections can help your business find the right local accounting, financial and legal entities to fully comply with Cyprus’ required documentation. Allow us to help you create a successful business venture in Cyprus today.

*Cyprus has double taxation treaties with the following countries: Azerbaijan, Armenia, Austria, Belarus, Belgium, Bulgaria, Canada, China, CIS (ex-USSR), Czech Republic, Denmark, Egypt, France, Germany, Greece, Hungary, India, Ireland, Italy, Kuwait, Kyrgyzstan, Lebanon, Malta, Mauritius, Moldova, Norway, Poland, Qatar, Romania, Russia, San Marino, Serbia and Montenegro, Seychelles, Singapore, Slovakia, Slovenia, South Africa, Sweden, Syria, Tajikistan, Thailand, Ukraine, United Kingdom, United States of America, and Yugoslavia.