Tax
A 12.5 percent corporate rate with notional interest and IP regimes
Corporate income tax is 12.5 percent under the Income Tax Law 118(I)/2002, among the lowest in the European Union. Cyprus applies no withholding tax on outbound dividends to non-residents, exempts most dividend income received, and offers a notional interest deduction on new equity.
Key rules
- Jurisdiction — Areas under the effective control of the Republic. Administered by the Tax Department.
- Deadline — Corporate income tax return: 31 March of the second year following the tax year
- Deadline — Provisional tax instalments: 31 July and 31 December
Governing law
- Income Tax Law 118(I)/2002
- Special Contribution for Defence Law 117(I)/2002 — the SDC levy
- VAT Law 95(I)/2000 — standard rate 19 percent
In practice
The headline 12.5 percent rate is combined with several features that make Cyprus a common holding jurisdiction: participation exemption for most dividends received, no withholding on dividends and interest paid to non-residents, an exemption for gains on disposal of securities, and a notional interest deduction of up to 80 percent of taxable profit on qualifying new equity. The intellectual property regime was rewritten in 2016 to comply with the OECD modified nexus approach. The non-domiciled regime exempts qualifying individuals from the Special Defence Contribution on dividends and interest for 17 years. Substance requirements and the EU anti-tax-avoidance directives now constrain aggressive use of these features.