Accounting and tax

Cyprus business tax obligations and legal considerations

  • Income tax considerations

    1. The standard corporate income tax rate is levied at a flat rate of 12.5% on all net income in Cyprus. To enjoy this tax rate, a local company must be tax resident in Cyprus and have its management and control exerted in Cyprus;
    2. Branches of foreign companies are also subject to taxation at the standard corporate income tax rate of 12.5%. Branches are however exempt from payment of branch remittance tax in Cyprus;
    3. The VAT on provision of goods and services in Cyprus is levied at a standard rate of 19%, with a reduced rate of 0%, 5% and 9% depending on the nature of business activity of the company or the products provided;
    4. The company registration threshold for VAT in Cyprus is €15,600, and for intra-community acquisitions of goods the amount is €10,251;
    5. Interest paid to a resident is subject to withholding tax at the rate of 30%. Royalties paid to a non-resident for the use of rights in Cyprus are subject to a withholding tax of 5% on film royalties and 10% on all other royalties;
    6. Capital gains derived from the sale of shares of Cyprus companies are tax exempt; dividends paid to both non-resident and resident companies are additionally not subject to withholding tax;
    7. New equity in the form of paid-up share capital or share premium is eligible for an annual notional interest deduction (NID). This regulation was launched in 2015 to reduce corporate debt;
    8. Cyprus has an attractive IP regime, under which 80% of the profits generated from IT assets are tax exempt. Once the qualifying conditions of the regime are fulfilled, the tax rate can be as low as 2.5%.
  • Tax administration and other legal considerations

    1. The Cyprus tax year is the calendar year and all tax resident companies must electronically file their tax returns within the first three months following the end of the fiscal year;
    2. VAT returns must be submitted quarterly by the 10th of the second month following the end of the VAT period;
    3. Companies with late submission will be subject to an administrative penalty of €51 per VAT return. In addition, a penalty of 10% is imposed on late payment of outstanding VAT, along with a 3.5% interest per annum on the outstanding amount and the penalty;
    4. It is mandatory for taxpayers to submit a temporary tax return before the 31st of July each year based on the estimated current year’s income. The tax is payable in two equal instalments due by 31st July and 31st December each year;
    5. Since the temporary tax is a provisional declaration of a firm’s estimated income and tax payment, it is possible to revise the same by the 31st of December each year. In case the estimated tax is less than 75% of the actual tax, an additional penalty of 10% is applicable on the difference between actual tax and temporary tax paid;
    6. In case the firm fails to submit the temporary tax computation (Form T.D.6) by the specified dates, a fine of 5% is imposed for late payments. Additionally, late payments are subject to a 3.5% interest per annum;
    7. From 18 December 2019, Annual Returns must be submitted within 28 days prior the deadline. Initial penalty of €50 will be immediately imposed for not meeting the deadline and i) €1 for each day of delay for the first 6 months and ii) €2 for each day thereafter, or maximum penalty of €500;
    8. Tax losses in Cyprus can be carried forward for up to 5 years following fiscal year and may be offset against future taxable profits;
    9. Cyprus has concluded over 55 income tax treaties with 47 countries including Denmark, Belgium, Germany, Kuwait, Ireland, China, Singapore and Sweden;
    10. It is important our Clients are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfil those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.

Legal and compliance

  1. According to the Companies Act, a Cyprus company must have at least one director and one shareholder of any nationality;
  2. The Memorandum of Association is a contract between the shareholders and comprises i) company activities, ii) registered office address, iii) shareholder and director details, iv) share capital, v) profit distribution method;
  3. Each time a change occurs in the particulars of the company or to its officers, the change must be lodged with the Cyprus companies’ registry not later than i) 14 days from the day of the changes of registered office or directors and secretary and ii) 1 month of shares transfer;
  4. The Cyprus Companies Registrar will impose administrative fines of €50 as an initial penalty and €1 for each day of delay or maximum of €250 for missing deadline;
  5. Each company must have a registered office in Cyprus. Healy Consultants can provide this for monthly fee of US$1,200;
  6. Employers must pay social security contributions on behalf of their employees at the rate of 9.5% of their employee gross remuneration and 2% of the total employee earnings to the social cohesion fund;

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Contact us

For additional information on our corporate accounting and legal services in Cyprus, please contact our in-house country expert, Ms. Grace Odhiambo, directly:
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Cyprus chamber of commerce and industry (CCCI) Government web portal of the Republic of Cyprus Cyprus tax department (direct taxation) - Cyprus inland revenue department Cyprus Investment Promotion Agency - invest in Cyprus (CIPA) Cyprus ministry of finance Central bank of Cyprus