New laws on taxation have recently been adopted in Cyprus, which has had a major influence on the companies registered and operating in this jurisdiction. The country that used to be considered a tax haven and an offshore paradise has turned into a typical onshore jurisdiction. Companies are now required to pay standard corporate taxes, disclose the names of beneficiaries to the public, and have economic substance in the country.
If you are interested in the latest news in the world of business or simply want to know more about taxes in Cyprus, we recommend our portal where you will find a lot of articles devoted to international business, taxation, accounting, banking, and most popular business destinations where you can set up your business. Our experts keep their finger on the pulse and publish the latest news for you along with the analysis of possible consequences and recommendations.
If you are an entrepreneur or intend to start your business, you can book an individual session with our expert to get valuable tips on your business, including company setup, any accounting and tax optimization issues, company re-domiciliation, opening a bank account, and so on. We will help you run your business smoothly and establish a company in almost any jurisdiction. If you struggle with the choice of a destination to start your company or open a bank account, we will help you for free!
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Company Setup in Cyprus: 2023 Update
Cyprus is often chosen by entrepreneurs wishing to have reliable asset and intellectual property protection. A foreign company in Cyprus can also take advantage of a favorable tax system.
However, the new regulations mean that the company has to follow certain requirements: make arrangements for economic substance in the country, rent an office, and appoint a local secretary and manager.
Cyprus ceased to be a tax haven after it joined the European Union. Nevertheless, it does not seem to have lost its appeal for international businesses: while 2022 saw about 1,000 companies registered here, the first half of 2023 was marked by 6,000 entrepreneurs who applied for company registration. It means that the tax rates offered to Cyprus companies are still attractive, which makes many business owners think of relocation.
Cyprus: Corporate Tax Rate
The rate will differ depending on whether the company is a tax resident of Cyprus or not:
- The company which is a Cyprus tax resident is required to pay a standard corporate tax rate of 12.5% on the profits earned in the country and worldwide.
- If you have an insurance company, you will have to pay standard taxes in most cases. However, there are exceptions: if the life insurance income tax does not exceed 1.5% of the total premium, the company is required to pay an extra income tax from the difference.
- A shipping company registered in Cyprus is not liable for taxes if it complies with the requirements set out in tonnage tax regulations.
- Alternative Investment Funds and collective investment companies that carry out their activities in Cyprus are regarded as tax residents and pay taxes at regular rates.
- Non-resident companies are not subject to corporate tax.
Cyprus: Value Added Tax
Let’s look at the VAT rate applicable to companies registered in Cyprus:
- The standard value added tax rate equals 19%.
- If you have a café or a restaurant, you will be liable for a reduced rate of 9%.
There are also several cases when the minimum rate of 5% may be applied:
- If you buy a residential property that you are going to use as the place of primary/permanent residence for the subsequent 10 years.
- If you are going to renovate or repair private houses used for at least 3 years after their construction was completed (however, this does not apply to the cases when the construction materials cost more than 50% of the total value of services rendered).
- If you intend to make major repairs or build an extension to your private house.
Also, there are cases when no VAT is applicable, and these include certain transactions:
- Renting out residential premises
- Most services connected with banking and insurance
- A number of medical services
- Some sports, cultural, and educational events
- Lottery tickets
- Coupons for football/horse racing bets
- Management services provided to mutual funds
VAT returns are filed on a quarterly basis. The value added tax is required to be paid by the 10th day of the second month which follows the end of the respective quarter.
Cyprus: Property Tax
The taxes payable on real property in Cyprus depend on its cost and include, among others, property transfer tax and stamp duty.
The stamp duty payable in Cyprus:
- Is not applied to the first 5,000 euros.
- Equals 0.15% if the cost of the transaction ranges between 5,001 euros and 170,000 euros.
- Equals 0.2% if the property costs more than 170,000 euros.
If you buy real estate, you will have to pay a property transfer tax depending on the cost of the facility you purchase:
- If the real estate costs no more than 85,000 euros, you pay 3%.
- If the cost of the real estate ranges between 85,001 and 170,000 euros, you will pay 5%.
- If the cost of the real estate equals or exceeds 170,001 euros, you will pay 8%.
If you are a seller, you will be required to pay a property sales tax on the amount received at the rate of 0.4%.
You will also have to pay a local property tax set by a particular local council or municipality.
If you sell the property, you are liable for a capital gains tax at a rate of 20%.
Tax Planning in Cyprus
Cyprus has adopted some changes to its tax legislation since it joined the EU, and it is actively attracting foreign capital by providing extra tax benefits and an opportunity to obtain a European passport.
If you would like to choose Cyprus as a country of residence, click on the above link and see the tax rates for individuals applicable in the country. You can compare them with the current rates you have to pay and decide whether they are affordable or book a consultation with a portal expert to find out more details.
