CORPORATION TAX

CYPRUS TAX RESIDENT COMPANIES

 

Companies are considered as being tax resident in Cyprus if they are managed and controlled in Cyprus. This is not defined by the Cyprus Tax Law but it is understood to require that the majority of the directors are resident in Cyprus, the Company’s board meetings take place in Cyprus and the formation of the Company’s general policy is in Cyprus.

 

Cyprus tax resident companies are taxed on all their income accrued or derived from all sources in Cyprus and abroad while non-resident companies are taxed on income arising from sources in Cyprus such as immovable property in Cyprus and on income accrued or derived from a business activity carried on through a permanent establishment in Cyprus.

 

A permanent establishment is a fixed place where the business of an enterprise is carried on wholly or partly. The term permanent establishment includes a place of management, a branch, an office, a factory and a workshop.

 

A company is required to register with the Tax Department within 60 days of its incorporation.

 

As per the Income Tax Legislation (Article 5(4)), legal or natural persons non-Cyprus tax resident but with a permanent establishment in Cyprus, may elect to be treated as Cyprus tax resident persons.

 

TAX RATE

 

All companies are taxed at a Corporate tax rate of 12.5%.

 

EXEMPTIONS

 

The following types of income are fully exempt from Corporate Tax:

 

 TYPE OF INCOME

Profit from the sale of securities (Note 1)

Dividends (excluding dividends which are tax deductible for the paying company – applicable as from 1 January 2016)

Interest not arising from the ordinary activities or closely related to the ordinary activities of the Company (passive income) (Note 2)

Profits of a permanent establishment abroad (if more than 50% of the income of the permanent establishment is derived from trading activities or the foreign tax burden rate is not lower than 6.25%) (Note 3)

Gains in relation to foreign exchange differences with the exception of gains arising from trading in foreign currencies or related rights and derivatives.

 

 

NOTES

 

• The term “Securities” is defined as shares, bonds, debentures, founders’ shares and other securities of companies or other legal persons, incorporated in Cyprus or abroad and options thereon. Circulars have been issued by the Tax Authorities further clarifying what is included in the term Securities. According to the circulars the term includes, among others, options on Securities, short positions on Securities, futures/forwards on Securities, swaps on Securities, depositary receipts on Securities (ADRs, GDRs), rights of claim on bonds and debentures (rights on interest of these instruments are not included), index participations only if they result on Securities, repurchase agreements or Repos on Securities, units in open-end or close-end collective investment schemes. The circulars also clarify specific types of participation in foreign entities which are considered as Securities.

 

It should be noted that promissory notes and bills of exchange do not fall under the definition of “securities”.

 

A written request could be submitted to the Tax Department for the issuing of a tax ruling in advance clarifying as to whether a certain transaction/ financing arrangement is to be treated as falling within the ordinary activities/ or closely connected therewith, of the business.

 

As from 1 July 2016, taxpayers have the right to elect to tax the profits of a foreign PE. At the same time the taxpayers can benefit from the tax credit for any foreign taxes incurred on the foreign PE profits, irrespective of the existence of a Double Tax Treaty or not, subject to transitional rules.

 

 

 

TAX DEDUCTIONS

 

Expenses incurred wholly and exclusively for the purpose of generating business income and supported by receipts, invoices or other relevant documents are tax allowable, including the following:

 

 

EXEMPTIONS:

 

• Interest expense incurred for the acquisition of 100% of the share capital of a subsidiary company (applicable from 1 January 2012) is fully allowedvprovided that the subsidiary does not own (directly or indirectly) any assets that are not used in the business. (if the subsidiary owns assets not used in the business the amount of interest is restricted on a prorate basis)
• Annual notional interest deduction (NID) is allowed on new equity introduced to a company after 1 January 2015 (Note 1) up to 80%.(Of the taxable income before the deduction of the deemed expense)
• Employer’s contribution for social insurance, national health system and approved funds on employees’ salaries fully allowed.
• 80% of the net royalty income, including the net income emanating from the disposal of the intangible assets owned by a Cyprus tax resident company would be deemed as a deductible expense (Note 2).
• Tax amortisation on any expenditure of a capital nature for the acquisition or development of IP (provision applies with effect from 1 July 2016) (4). Allocated over the lifetime of the IP (maximum period 20 years).
• Donations to charities approved by the Council of Ministers fully allowe
  
•  
• Entertaining expenses for business purposes - Lower of 1% of the total gross income or €17,086
• Employer’s contributions to a medical fund - 1% on employee's remuneration.
• Provident/pension fund for employees - 10% on employee's remuneration. 
• Expenditure for the maintenance of buildings under preservation order (subject to certain conditions). Up to €700, €1,100 or €1,200 per sq. m. (depending on the size of the building).
• Expenditure for the acquisition of shares in an innovative business (abolished as from 1 January 2017) was fully allowable

 

NOTES

 

1. Notional interest deduction (NID) is allowed on the taxable income of a company resident in Cyprus and is calculated, by multiplying a “reference interest rate” on the “new capital” that is issued by the Company. The term “new capital” means the capital that has been contributed to the company after 1 January 2015 and includes the issue of share capital and share premium, if paid by the shareholder;

The term “reference interest rate is the ten year government bond rate of return of the country the new capital is invested in, increased by 3% and cannot be lower that the ten year Cyprus Government bond increased by 3%. Certain anti-avoidance provisions apply.

 

1. The existing Cyprus IP Box regime applies to a wide range of IP rights falling within the meaning of the Patent Law, the Intellectual Property Rights Law and the Trademarks Law.

 

Tax Incentives offered by the Existing IP Box

1. 80% of any income generated from IP owned by Cypriot resident companies (net of any direct expenses) is exempt from income tax.
2. 80% of profit generated from the disposal of IP by Cypriot resident companies (net of any direct expenses) is exempt from income tax.

iii. Any expenditure of a capital nature for the acquisition and/ or development of IP can be claimed as a deduction in the tax year in which it is incurred and the immediate four years that follow on a straight-line basis.

 

Any capital gains from the disposal of an IP asset which qualifying under the existing regime but no benefits were claimed such as the 80% exemption will be exempt from income tax. In case a loss arises when calculating the qualifying profits, the amount that can be surrendered and carried forward is restricted to 20%.

 

 

Transitional provisions

Businesses with IP assets that already benefit from the provisions of the existing IP Box Regime, will fall under the transitional provisions and will continue to take advantage of Cyprus’s existing IP Box Scheme until 30 June 2021, if these:

• Were acquired before the 2^nd of January 2016, or
• Were acquired directly or indirectly from related persons between 2^nd January 2016 and 30^th June 2016, and the acquisition satisfied the provisions of the existing IP Box Regime or under the provisions of a similar intangible assets regime of another country assuming the main purpose of the acquisition was not to evade taxation
• Were acquired from a non-related person or developed between 2^nd January 2016 and 30^th June 2016.

Intangible assets which do not fall under the above and were acquired directly or indirectly from a related person between 2^nd January 2016 and 30^th June 2016, will continue to claim the provisions of the existing IP Box Regime up to 31^st December 2016.

 

For the purposes of the transitional provisions, intangible assets are considered to be the assets which produced income or their development was completed up until 30^th of June 2016.

 

The New IP Box Regime

As from 1^st July 2016, 80% of the Qualifying Profits derived from a Qualifying Intangible Asset will be considered as a deductible expense. Qualifying intangible assets include Patents as defined in the Patents Law, Computer software and other intangible assets protected by law falling under any of the below:

• Utility models, intellectual property assets which provide protection to plants and generic material, orphan drug designations and patent extensions;
• That are nonobvious, useful and novel, where the person who utilises them in the course of his business does not earn gross income in excess of €7.500.000 per year out of all the intangible assets. In the case of a group of such persons, the group should not have a turnover of more than €50.000.000. For the above calculation an average of five years should be used.

 

Qualifying profits means the amount resulting from the application of the following formula:

 

Overall Income x [(Qualifying Expenditure + Uplift Expenditure)/ Overall Expenditure]

 

In case a loss arises when calculating the qualifying profits, the amount that can be surrendered and carried forward is restricted to 20%. In case of an intangible asset falling under both the provisions of the existing and the new IP Box Regime, the existing regime will apply until this is fully phased out.

 

The taxpayer has the right for every tax year not to claim all or part of the deduction offered by the new IP Regime.

 

 

 

TAX LOSSES

 

The tax loss incurred during a year which cannot be set off against other income is carried forward subject to conditions and set off against the profits of the next five years.

 

Set-off of group losses are allowable only with profits of the corresponding fiscal year between the Cyprus tax resident Companies of a group. A company incorporated by its holding company during the year is considered as member of the group for the whole year of assessment.

 

Two companies are deemed to be members of the group if:

• One is by 75% subsidiary (directly or indirectly) of the other; and
• Both companies are by 75% subsidiaries of a third company (direct and indirect control).

 

As from 1 January 2015 two companies can be considered members of the same group if the interposition companies are residents of another EU member state or of a state with which Cyprus has concluded a bilateral or multilateral convention for the avoidance of double taxation or the exchange of information.

 

A partnership or a sole trader converted into a limited liability company can transfer tax losses into the company for future utilization.

 

Losses from 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.

 

 

 

SPECIAL TYPE OF COMPANIES

 

1. Shipping and Ship Management Companies

 

Tonnage Tax

 

The Merchant Shipping Law provides full exemption to ship owners, charterers and ship managers from all profit taxes by imposing a TT on the net tonnage of the vessels, given that they are ‘qualifying persons’ who own, charter or manage a ‘qualifying ship’ in a ‘qualifying shipping activity’, as defined below:

 

Qualifying persons are tax-resident owners or charterers (bareboat, demise, time and voyage) of Cyprus ships, EU ships or fleets of ships comprising of EU and non-EU ships, and ship managers providing technical or crewing services, or both. 

 

Qualifying activity for ship owners and charterers means maritime transport of goods or people between Cyprus ports and foreign ports/ offshore installations, or between foreign ports or offshore installations and specifically includes towage, dredging and cable laying. 

 

Qualifying activity for ship managers, means services provided to a ship owner or bareboat charterer on the basis of a written agreement in relation to crew and/or technical management and/or both. 

 

Qualifying vessel means a sea going vessel that has been certified in accordance with international principles and legislation of the flag country and that is registered in the register of a member country of the International Maritime Organization / the International Labour Organization. The definition includes vessels that transport humanitarian aid but excludes the following vessels:

 

• fishing and fish factory vessels;
• Vessels used primarily for sport or recreation;
• Vessels constructed exclusively for inland waterway navigation;
• Harbour, estuary and river ferries and tug boats;
• Fixed offshore installations which are not used for maritime transport;
• Non self-propelled floating cranes;
• Non-ocean going tug boats;
• Stationary vessels employed for hotel and/or catering operations (floating hotels or restaurants)
• Vessels employed mainly as gambling facilities and/or casinos (floating or cruising casinos).

 

 

    2. Insurance companies

Profits of insurance companies are liable to corporation tax similar to all other Companies, except in the case where the corporation tax payable on taxable profit of life insurance business is less than 1,5% on gross premium. In this case the difference is paid as additional corporation tax.

 

 

   3. The Cyprus Alternative Investment Funds (AIFs) and Undertakings for Collective Investment in Transferable Securities (UCITS)

The Alternative Investment Funds Law 124(I)/2018, to the extent amended (hereinafter, the ‘’AIF Law’’) defines alternative investment funds as any collective investment undertakings, including investment compartments thereof, which, collectively:

 

• raise capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors, and
• do not require authorisation pursuant to section 9 of Law 78(I)/2012, as amended (hereinafter, the ‘UCI Law’), or pursuant to the legislation of another member state that harmonises the provisions of Article 5 of the Directive 2009/65/EC, as amended.

 

The AIF Law allows for three types of AIFs to be established in Cyprus which are as follows:

• Alternative Investment Funds with Limited Number of Persons (50) (AIFLNPs)
• Alternative Investment Funds with Unlimited Number of Persons (AIFs)
• Registered AIFs (RAIFs)

 

Taxation of Funds

Funds which are opaque for tax purposes and which are managed and controlled in Cyprus are tax resident in Cyprus and are subject to the general provisions of the Cyprus tax framework.

In the case of funds which have compartments, each compartment is assessed separately for tax purposes subject to the provisions of the law.

Under circumstances and depending on the legal form of the fund, some funds may be transparent for tax purposes.

Additional key provisions which are relevant to funds are set out below:

 

Sale of Fund Units

There is no Capital Gains Tax on the gains arising from the disposal or redemption of units in funds unless the fund owns immovable property in Cyprus.

However, even if it owns immovable property in Cyprus, no Capital Gains Tax arises if the Fund is listed on a recognized stock exchange.

 

Stamp Duty

The subscription, redemption, conversion or transfer of a fund’s units should be exempt from Cyprus stamp duty.

 

No creation of a permanent establishment

Based on the Cyprus tax legislation no Cyprus permanent establishment will be deemed to arise:

• for non-Cyprus resident investors as a result of investment into Cyprus tax-transparent investment funds, or,

• as a consequence of the management from Cyprus of non-Cyprus investment funds.

 

Management services

The management fee charged for the provision of collective management services to investment funds is exempt from VAT, provided certain conditions are met.

 

Carried interest / performance fee for AIF and UCITS fund managers

Certain employees and executives of the following investment fund management companies or internally managed investment funds may opt for a different mode of personal taxation:

 

• Alternative Investment Fund Managers authorised under the Alternative Investment Fund Managers Law 56(I)/2013, as amended (hereinafter, the ‘AIFM Law’);
• Internally managed AIFs authorised under the AIFM Law;
• UCITS Management Companies authorised under the UCI Law; and
• Internally managed UCITS authorised under the UCI Law.

 

Subject to conditions, their variable employment remuneration which is effectively connected to the carried interest of the fund managing entity may, through an annual election, be separately subject to Cyprus tax at the flat rate of 8%, with a minimum tax liability of €10.000 per annum. This special mode of taxation is available for a period of 10 years.

 

SPECIAL CONTRIBUTION FOR DEFENCE

 

Special contribution for defence (SDC) is imposed on dividend income, ‘passive’ interest income and rental income earned by Companies tax residents in Cyprus and by individuals who are both Cyprus tax residents and Cyprus domiciled.

 

Such tax is charged at the rates shown in the table below and levied on the gross income received or credited.

 

TAX RATES

 

 

NOTES:

 

An individual who is a Cyprus Tax Resident is subject to both Income Tax and Special Defence Contribution. As from 16 July 2015, an individual who is a tax resident of Cyprus under the provisions of the Income Tax Law but is ‘not-domiciled’ in the Republic of Cyprus, will be exempt from SDC. An individual is domiciled in the Republic if he has a domicile of origin in the Republic of Cyprus according to the provisions of the Wills and Succession Law (subject to conditions) or if he has been a Cyprus tax resident for a period of at least 17 out of the last 20 years before the relevant tax year.

 

Dividends received by a Cyprus tax resident company from other Cyprus tax resident companies are excluded from defense tax, subject to anti-abuse provisions and unless dividends are indirectly declared after the lapse of four years from the end of the year in which the profits were generated. In such case 17% (20% in 2013) defense tax will be imposed if the ultimate beneficial owners is a Cypriot tax resident. Any dividends derived directly or indirectly from such dividends on which Special Defense Contribution has already been paid are exempt from Special Defense Contribution.

 

Dividend income from abroad is exempted from defense contribution provided that:

 

• more than 50% of the income of the company paying the dividends derives directly or indirectly from trading activities, or
• the tax paid by the foreign subsidiary is not significantly lower than that of Cyprus (Effective tax not lower than 6.25%).

 

 When the exemption does not apply, the dividend income is subject to defense contribution at the rate of 17%.

 

Interest income earned by an individual deriving from Cyprus Government Bonds, Development bonds or interest earned by an approved provident fund is subject to a 3%. For individuals, whose annual income (including interest), does not exceed the amount of €12,000 the rate is reduced to 3%.

 

For rental income where the tenants are Cypriot companies, partnerships, the Government and Local Authorities, they have an obligation to withhold Special contribution for defense from the rental payments and to pay the tax by the end of the month following the month in which it was withheld. In all other cases the Special contribution for defense on rental income is payable by the landlord in 6 month intervals on 30 June and 31 December each year.

 

The Special contribution for defence on interest and dividend paid to Cyprus tax residents is withheld at source and is payable at the end of the month following the month in which the income was paid. For interest, dividend and rental income received from abroad the Special contribution for defense is payable in 6 month intervals on 30 June and 31 December each year.

 

DEEMED DIVIDEND DISTRIBUTION

 

If a Cyprus resident Company does not distribute dividend within two years from the end of the tax year then:

 

• 70% of accounting profits (as adjusted for Special contribution for defense purposes) are deemed to have been distributed as a dividend;

 

• 17% special contribution for defence is imposed on deemed dividend distribution applicable to shareholders (both individuals and companies) who are both tax residents of Cyprus and domiciled in Cyprus. Before the amendment of the Law on 16 July 2015 this provision was applicable for Cyprus Tax residents only.

 

• Deemed distribution is reduced with payments of actual dividends which have already been paid during the two years from the profits of the relevant year

 

When an actual dividend is paid after the deemed dividend distribution, then defence tax is imposed only on the additional dividend paid.

 

The profits of a Cyprus Tax resident Company which are attributable either directly or indirectly to shareholders who are not Cyprus tax residents will not be subject to deemed dividend distribution.

 

Furthermore, in case where such non-Cyprus tax resident shareholders constitute 100% of the ultimate shareholders of the company, the company is not required to submit a deemed dividend distribution return.

 

Instead, the company's directors and auditors are required to submit declarations confirming that 100% of the shareholders of the company are directly and/or indirectly non-Cyprus tax residents. 

PERSONAL INCOME TAX

 

TAXATION

Cyprus tax residents are taxed on all income accrued or derived from all sources in Cyprus and abroad. Non-tax resident individuals are taxed only on income accrued or derived from sources in Cyprus.

 

CYPRUS TAX RESIDENTS

An individual is considered to be tax resident in Cyprus if he stays in Cyprus more than 183 days in the year of assessment.

 

Tax residents are taxable on the following income:

 

• Income from business in Cyprus and outside Cyprus;
• Income from any office or employment;
• Dividends and interest;
• Rents and royalties in Cyprus and abroad;
• Pensions and annuities in Cyprus and abroad;
• Loans or financial assistance from a company to a director, shareholder or relative up to second degree are taxable as a monthly benefit in kind equal to 9% per annum on the loans amount, payable on a monthly basis by the company under the PAYE system.

 

NON-TAX RESIDENTS

Non-tax residents are taxable on the following income:

 

• Income from a permanent establishment situated in Cyprus;
• Income from any office or employment exercised in Cyprus;
• Pensions derived from past employment exercised in Cyprus;
• Rent from property situated in Cyprus;
• Any amount or consideration in respect of any trade goodwill reduced by any amount incurred for the purchase of such trade goodwill;
• The gross income derived by an individual from the exercise in Cyprus of any profession or vocation, the remuneration of public entertainers and the gross receipts of any theatrical, musical or other group of public entertainers;
• Directors’ fees and similar remunerations in their capacity as directors of companies considered to be tax resident companies of Cyprus.
• Loans or financial assistance from a company to a director, shareholder or relative up to second degree are taxable as a monthly benefit in kind equal to 9% per annum on the loans amount, payable on a monthly basis by the company under the PAYE system.

 

 

PERSONAL TAX RATES

 

The following income tax rates apply to individuals:

 

 

 

 

EXEMPTIONS FROM INCOME TAX

 

The following are exempt from income tax:

 

• Profits from the sale of securities (Note 1).
  
• Income from Dividends.
  
• Interest, except interest arising from the ordinary business activities or closely related to the ordinary business activities of an individual
  
• Profits from a permanent establishment maintained outside the Republic (subject to certain conditions) (Note 2)
  
• Remuneration for salaried services rendered outside Cyprus for more than 90 days in a tax year to a non-Cyprus resident employer or to a foreign permanent establishment of a Cyprus resident employer.
  

• Remuneration for first employments exercised in Cyprus commencing as from 1 January 2022 with remuneration
  exceeding EUR55.000 by individuals who were not residents of Cyprus for a period of 10 consecutive tax years immediately
  prior to the year of commencement of the employment in Cyprus. For each individual the exemption will apply once
  in their lifetime for a period of 17 years. Subject to certain conditions, individuals whose employment commenced prior to
  1 January 2022, may also be eligible to claim the exemption.

• Exemption of 20% of remuneration for first employment exercised in Cyprus commencing after 26 July 2022, by individuals who immediately prior to the commencement of their employment in Cyprus were not a resident of Cyprus for a period of at least 3 consecutive tax years and were employed outside of Cyprus by a non-resident employer. For each individual the exemption will apply for a period of 7 years, starting from the tax year following the tax year of commencement of employment. Individuals granted the above 50% exemption will not be eligible for this exemption. A maximum of €8,550 can be claimed  annually.

•  Lump sum payment on retirement, commutation of pension or compensation for death or injuries
  
• Capital sums from life insurance schemes or from approved provident fund.

NOTES

 

1. Securities are those listed in the Corporation Tax section.

 

     2. As from 1 July 2016, taxpayers have the right to elect to tax the profits of a foreign PE. At the same time the taxpayers can benefit from the tax credit for any           foreign taxes incurred on the foreign PE profits, irrespective of the existence of a Double Tax Treaty or not, subject to transitional rules.

 

TAX DEDUCTIONS FROM INCOME

 

The following are deducted from income:

 

NOTES

 

In the case of cancellation of a life insurance policy within 6 years from the day of its issue, a percentage of the premiums, which was previously allowed, is taxable.

• Cancellation within 3 years 30%
• Cancellation between 4 to 6 years 20%

 

Subject to cap of 50% of the taxable income of the individual (with maximum deduction of €150.000 per year). Any unutilized deduction can be carried forward and claimed in the next 5 years.

 

 

 

 

SOCIAL INSURANCE

 

Self-employed individual                                                                                             15.6%

Employee                                                                                                                       8.3%

Employer                                                                                                                        8.3%

Employer’s contribution to the Redundancy Fund                                                        1.2%

Employer’s contribution to the Industrial Training Fund                                              0.5%                                                                                      

Employer’s contribution to the Social Cohesion Fund*                                                2.0%                                                                                                                         

Employer’s contribution to the Holiday Fund (if it is not exempt)                                8.0%

 

                                                                     

*The amount of contribution to Social Cohesion Fund is calculated on the total emoluments with no upper limit.

 

Maximum limit of emoluments

The maximum level of annual income on which social insurance contributions are paid on is as follows

                

                                                                 Per week €       Per month €        Per year €

Weekly employees                                     1,051                      -                    54,652

Monthly employees                                        -                      4,554                54,648

 

                      

 In 2018, the social insurance rates for employed persons were 7.8% and for self-employed 14.6%. The rates will increase every five years by 0.5% for employed persons until it reaches 10.3% in 2039 and by 1% for self-employed persons until it reaches 19.6% in 2039.

 

 

 

NATIONAL HEALTH SYSTEM

 

The National Health System was introduced in Cyprus in 2019. Phase A of contributions commenced in March 2019 with phase B commencing a year later. The rates are as follows:

 

 

Contributions are capped at €180.000 annual income.

 

 

 

 

TAX CALENDAR

• Month end - Issuance of invoices within 30 days from the date the transaction was made, unless the taxable person requests in writing and receives such extension from the Commissioner. 
• Within 60days - Obtaining a Tax Identification Code: Following the registration or incorporation of a company with the Registrar of Companies, the company is obliged to submit an application for registration with the Inland Revenue Department. Similar rules apply in the case of companies incorporated outside Cyprus that become tax resident of Cyprus.
•  Within 60 days period of such change - Notification of changes of company’s details (i.e. registered office, activities, auditors etc)
• Four months from the end month of the transaction - Updating of books and records by businesses which are obliged to maintain accounting records
  
• At the end of the financial period - Stock taking must be conducted annually by businesses which have inventory.
  
• Within the time frame specified by the tax authorities - Submission of any information requested in writing by the tax authorities.
  
• 31 January - Submission of declaration of Deemed Dividend Distribution for the year ended 31 December 2016 (TD623).
• 31 March - Electronic submission of Income Tax Return for individuals and companies preparing audited accounts (TD4) / (TD1).
• 30 April - Submission of Income Tax Return by individuals (deadline extended by 3 months in case of electronic submission) (TD1).
• 30 June - Submission of Income Tax Return by self-employed individuals who do not submit audited accounts but are obligated to issue invoices, receipts, etc (deadline extended by 3 months in case of electronic submission).
• 30 June - Payment of tax balance for the previous year by individuals who do not submit audited accounts.
• 30 June - Payment of Contribution to the Defence Fund on rents, dividends or interest received from sources outside Cyprus during the first half of the current year.
•  31 July - Electronic submission of Employer’s Return.
• 31 July - Submission of Temporary Tax Assessment for the current year.
  
• 31 July - Payment οf first instalment of tax based on the Temporary Tax Assessment.
• 1 August - Payment of the balance of tax for the previous year by companies and by self-employed with audited accounts.
• 30 September -Electronic submission of 2018 personal tax returns of self-employed individuals not required to prepare audited financial statements.
• 31 December - Payment of Contribution to the Defence Fund on rents, dividends or interest received from sources outside Cyprus during the second half of the current year
• 31 December - Payment of second instalment of tax based on the Temporary Tax Assessment and submission of revised temporary tax assessment for the current year if necessary.
• 31 December -Payment of premium tax for life insurance companies - third and last instalment for 2019.
• By the end of the next month - Payment of tax deducted from employees’ emoluments (PAYE). Payments of Contribution to the Defence Fund withheld from dividends, interests and rents paid in the previous month. Payment of Social insurance deducted from employees’ salaries
• 40 days after the end of the VAT period - submission of VAT return and payment VAT due.
• By the 10th of the next month after the end of the period - submission of Intrastat.
• By the 15th  of the next month after the end of the period - submission of VIES.

 

 

PENALTIES

 

1. Late issue of invoices results in the imposition of a penalty equal to €100. The penalty is imposed on a monthly basis irrespective of the number of invoices failed to be issued within a specific month.
2. Late registration with the Inland Revenue Department results in the imposition of a penalty equal to €100.
3. Late communication of changes to the Inland Revenue Department results in the imposition of a penalty equal to €100.The penalty is applicable on each change not communicated.
4. Late update of the books and records results in the imposition of a penalty equal to €100 (on a quarterly basis).
5. No stock taking results in the imposition of a penalty equal to €100.
6. Late submission of information requested by the Inland Revenue Department, results in the imposition of a penalty equal to €100 or €200.
7. Upon conviction of failure to submit a return, a person shall be liable to a fine not exceeding €17 per day for as long as failure continues, or to imprisonment for a term not exceeding 12 months, or both. Any person who without any excuse omits any object of the tax from the return shall be liable, on conviction to a fine up to € 3.417 plus the tax due plus an amount equal to two times the difference between the amount of tax properly imposed and the amount of tax that would have been imposed had the assessment been based on the return.
8. Late submission results in the imposition of a penalty equal to €100. If the tax return for a specific year is requested in writing by the tax office and this is not submitted within the requested period, then a penalty of €200 is imposed for every notice issued.
9. If the tax is not paid by the due date, interest is imposed at the rate of 2%* per annum (interest is calculated on the basis of completed months). An additional tax of 5% is imposed in the case where the due tax (as this is declared on the tax return) is not paid within 30 days from the date the tax return is due for filing. No penalty is imposed where the tax return is submitted timely, the tax due based on the Tax Return is timely paid and the Inland Revenue makes an assessment after the lapse of three years from the date of submission as prescribed by the law. In addition, any person omitting to pay the due tax by the due payment date is liable to 5% monetary charge on the due tax.
10. Interest at the rate of 2%* per annum is imposed from the first day after the end of the six-month period (interest is calculated on a daily basis). In case of Defence tax withheld on rents, dividends and interest income, interest is accrued as of the end of the month which follows the month to which it relates (interest is calculated on a daily basis). In addition, in case of delay in payment, a flat 5% monetary charge on the tax due is payable.
11. A penalty is imposed equal to 10% of the difference between the tax due per the final assessment and the tax per the temporary assessment, if the temporary taxable income is less than 75% of the taxable income per the final assessment.
12. If any instalment of the temporary tax assessment is not paid within 30 days from the due date, interest at the rate of 2%* per annum is imposed. In addition, in case of delay in payment, a flat 5% monetary charge on the tax due is payable.
13. Interest is imposed at the rate of 2%* per annum from the due date. Any person omitting to pay the due tax by the due payment date is liable to 5% monetary charge on the due tax.
14. Late payment results in the imposition of interest at 2%* per annum from the due date and an additional penalty of 1% per month for as long as the delay continues (interest is calculated on the basis of completed months).
15. Late payment results in the imposition of a penalty of 3% for each month of delay as long as the delay continues. The total amount of the penalty cannot exceed 27% of the amount due.
16. Late submissions of the VAT return results to the imposition of a penalty of €51 per VAT return form.
17. Late payment of outstanding VAT results to:

• Penalty at the rate of 10% of the outstanding amount
• Interest is imposed at the rate of 2%* per annum on the outstanding amount and the penalty (interest is calculated for complete months)

1. Late submission of VIES results in the imposition of a penalty of €50 for each VIES form.
2. Late submission of INTRASTAT results in the imposition of a penalty of €15 for each INTRASTAT form.

The official rate set by the Minister of Finance applicable as of 1.1.2019 is 2% (3.5% for 2017-2018, 4% for 2015-2016, 4.5% for 2014, 4.75% for 2013, 5% for 2011-2012; 5.35% for 2010; 8% for 2007-2009; previously 9%)

 

 

 

 

The above information is a brief summary of the main taxes applicable in Cyprus. 

Should you require any additional information or clarifications or in order to advise you regarding your specific case please do not hesitate to contact us.

 

Contacts:

  

Savvas Christodoulou – Managing Director

savvas@sgcglobalconsulting.com

 

SGC Global Consulting Limited

25, Marias Syglitikis Street

Engomi,2415 Nicosia, Cyprus

Tel: +357 22 490 330

Email: info@sgcglobalconsulting.com

www.sgcglobalconsulting.com