Tax Rates
Individuals start paying tax at 20% for incomes over € 19.500 plus some 
exemptions/deductions and the tax rate increases in accordance to the following bands.
Taxable Income Tax Rate %
€
0-19.500 0
19.501-28.000 20
28.001-36.300 25
36.301-60.000 30
60.001 and over 35
Cypriot Companies, International Business Companies (IBC) and International branches managed and controlled from Cyprus are taxed at 12.5%.
Company Tax Declaration IR4
The Company Tax Declaration IR4 must be submitted to the Commissioner of Taxation by the 31st March following the next year of the year of assessment.
Temporary Tax Assessment
Every company which is tax resident in Cyprus has to submit two temporary tax assessment forms on the 1st August and 31st December in each financial year if it estimates that it will have a tax liability. If the tax paid is more than 75% of the final tax liability then the 10% penalty is avoided.
Tax payment by self assessment
The final payment of the remaining tax liability needs to be settled by the 31st August following the year of assessment to avoid paying any interest at a flat rate of 5% on tax plus interest at the announced interest rate.
Penalties and interest
Penalties of either € 100 or €200, are imposed by the Commissioner of Taxation for late submission of declarations or late submission of supporting documentation requested by the Taxation Department.
The official interest rates as announced by the Ministry of Finance have as follows:
Period %
01/01/2013 – onwards 4,75
01/01/2011 – 31/12/2012 5,00
01/01/2010 – 31/12/2010 5,35
01/01/2007 – 31/12/2009 8,00
Up to 31/12/2006 9,00
Dividends – Notional Defence contribution
Companies have to pay a notional defense of 17% on dividends of at least 70% of the profits after tax. No defence is payable by shareholders who are not resident. Also no defence is levied if the shareholder is another company with some restrictions after four years. A number of adjustments to the accounting profit are required for deemed distribution purposes, including for tax years 2012, 2013 and 2014 if the company has acquired in those years plant, machinery or buildings (excluding private motor vehicles) for business purposes, the cost of these assets will be deductible against the accounting profits.
Dividends received by a Cyprus tax resident company
-Dividends received by a Cyprus tax resident company from other Cyprus tax resident companies are excluded from all taxes. Unless they are indirectly declared after the lapse of four years from the end of the year in which the profits were generated, in which case they may be subject to Special contribution for defence at 17% (20% in 2013)
-Dividends which emanate directly or indirectly out of such dividends on which special contribution for defence was previously suffered are exempt.
-The above exemption does not apply if:
a. more than 50% of the paying company’s activities result directly or indirectly in investment income and
b. the foreign tax is significantly lower than the tax burden in Cyprus. The tax authorities have clarified through a circular that ‘’significantly lower’’ means no effective tax rate of less than 6.25% on the profit distributed. Where the exemption does not apply, the dividend income is subject to special contribution for defence at the rate of 17% (20% in 2013).
Interest income
-Such interest income is subject to personal income tax / corporation tax.
-The special contribution for defence rate on interest income of 30% is effective for interest received or credited from 29th April 2013 (the previous rate was 15%)
-Interest rate from Cyprus government savings bonds and development bonds and all interest earned by a provident fund is subject to Special contribution for defence at the rate of 3% (instead of 30%).
Consolidated Financial Statements
All companies which have subsidiaries need to prepare consolidated financial statements unless the ultimate parent company in the Group prepares consolidated financial statements or if the Group meets the conditions of a ‘Small Group’ permitted by s. 142 of the Company law Cap 113. For the conditions of the ‘Small Group’ to be met the law says that the Cyprus Company and its subsidiaries must meet two of the following three criteria throughout the financial year in question.
- Gross turnover € 35.000.000
- Employees more than 250
- Total assets € 17.500.000
Individual’s Tax declaration IR1
All employee individuals have to submit their Tax Declaration IR1 by the 30th April following the year of assessment. Individuals are required to submit personal income tax returns only if their gross income exceeds € 19.500. All self employed individuals need to submit their returns by the 30th June following the year of assessment unless their turnover exceeds the € 70.000 in a year in which case audited financial statements have to be prepared and submitted by the 31st December following the year of assessment.
Special levy for defence
A special levy for defense exists for monthly incomes exceeding the amount of € 2.500 to 31 December 2013 and this gets charged from € 1.500 from the 1st January 2014. Monthly Salary or pension
€ % of Special Contribution
0-1.500 0%
1.501-2.500 2,5% (min €10)
2.501-3.500 3%
3.501 and above 3,5%
The special contribution is borne equally by the employer and the employee.
Losses carried forward and Groups
The tax loss incurred during a tax year and which cannot be offset against other income, is carried forward for five years and offset against future profits.
A group is defined as follows:
-One company holding at least 75% of the shares of the other company
-At least 75% of the voting shares of the companies are held by another company. Provided the companies are Cyprus tax resident companies of a group, the current year loss of one company can be offset against the profit of another group company.
Registrar’s Annual return HE32
The company’s Annual Return together with the financial statements for the preceding year have to be submitted by the 28th January after the 31st December following the financial statements year. However from now on the submission of the annual returns HE32 for 2014 onwards will only be done electronically.
Value Added Tax
The standard rate for VAT is currently 19%. There also exist two reduced rates of 5% for generally take away food staff and magazines/books and 9% for sit in at restaurants. The standard rate increased on the 1st March 2012 from 15% to 17%. On 14 January 2013 the VAT rate increased to 18% and on 13th January 2014 it increased to 19%. To be registered compulsorily for VAT purposes the turnover must exceed € 15.600 during the preceding 12 months or there must be an expected turnover in excess of € 15.600 within the next 30 days. Otherwise somebody has the option to register voluntarily.
Social Insurance
For employees the social insurance contributions (8.3% (before 7.8%) and 2.65% GHS for employees, and 12% (before 11.5%) and 2.9% GHS for employers) need to be paid by the end of the month following the month under consideration. For the self employed the contributions are 15.6% (before 14.6%) and 4% GHS (before 2.55%) on the emoluments of the sector as stated by the Social Insurance Department and they are payable on the 10th February, 10th May, 10th August, 10th November.
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 private saloon car 20
Personal computers (hardware) and operating software 20
Application software
-up to € 1.709 100
-above € 1.709 33 1/3 Plant and machinery used in agriculture 15 Water drillings, industrial carpets, video recorders, televisions 10 Any other plant and machinery 10
Furniture and fittings 10
Buildings
Metallic frame of greenhouses 10 Wooden frame of greenhouses 33 1/3
Commercial buildings 3
Industrial, agricultural and hotel buildings 4
(If acquired between 2012 to 2018 7%)
Ships
Sailing vessels 4,5
Steamers, tugs and fishing boats 6
Ship motor launches 12,5
New cargo vessels 8
New passenger vessels 6
Used cargo/passenger vessels and additions Over their useful lives
Tools
Tools in general 33 1/3 Other fixed assets
Motor yachts 6
Wind generators 10
Photovoltaic systems 10
New airplanes 8
New helicopters 8
All Videotapes used in video clubs 50
-Plant and machinery acquired during the tax years 2012, 2013 and 2014 are eligible to accelerated tax depreciation at the rate of 20%(excluding such assets which are already eligible for a higher annual tax rate of tax depreciation) -In the case of industrial and hotel buildings which are acquired during the tax years 2012, 2013 and 2014, accelerated tax depreciation at the rate of 7% per annum may be claimed.