TKEG Expat ™ Cyprus Corporate Tax Guide

Standard Corporate Income Tax Rate:
Cyprus has a standard corporate income tax of 12.5%. All Cyprus tax resident companies are required to be taxed on their accrued income, regardless of whether it is sourced from within or outside Cyprus. Cyprus' corporate income tax law provides for tax exemptions for many incomes, profits and gains.

Special Contribution to National Defence (SDC)
Special Defence Contributions are only available for non-tax-exempt dividend income, "passive" interest income and rental income. Dividend income can be exempt from special defense contributions based on the participation exemption criteria.
Until June 2022, "passive" interest income, such as government bonds and foreign corporate bonds, should be paid to the Special Contribution to Defence at a rate of 3%. In addition, the Cyprus State Organization and Local Authorities, Pension Funds, Provident Fund and Cyprus Social Security Fund had a tax rate of 3% until 8 June 2022.
In terms of rent, in addition to the 12.5% corporate income tax, there is a special defence contribution of 3% (i.e. the effective tax rate of 2.25%).

Withholding tax (WHT) rates in Cyprus differ for residents and non-residents. For resident corporations, dividends and interest are generally exempt from WHT, while 'passive' interest is taxed at 17%. Non-residents benefit from 0% WHT on dividends and interest, with a 10% rate on royalties if the rights are used within Cyprus. However, higher rates may apply if the recipient is from a jurisdiction listed on the EU blacklist.

Payroll Tax:
In addition to the employer's own contributions to the employee's gross salary, the employer is also responsible for deducting the employee's contribution to the Social Insurance Fund, the General Health Care System (GHS) and the Pay-As-You-Go (PAYE) system from the employee's income.

Social security insurance:
Employed persons are compulsorily insured by the State Social Insurance Fund. Contributions to the fund are shared between the employee and the employer. Employers calculate their contributions as a percentage of the employee's earnings. Employers also contribute to other funds as listed in the table below:

1. social insurance fund: 8.3%;
2. unemployment insurance: 1.2;
3. training and development fund: 0.5;
4. social solidarity fund: 2.0;
5. general health system contribution: 2.90;
6. Vacation Fund (if not exempt): 8.0.

Overview of import and export taxes:
Many imported goods from outside the EU are subject to customs duties and excise duties. The tariffs and rates applied to different goods vary widely and change frequently.
Excise duty is levied on certain consumer goods such as cigarettes, cigars, mineral oil, alcohol products. If it is used only as a raw material, no consumption tax is levied. If the goods are exported, the excise duty can be refunded.

Personal income tax (PIT) in Cyprus can reach up to 35% depending on the income level of the individual. The deadlines for tax returns and payments vary based on the taxpayer's profile. The final payment is typically due by August 1 of the year following the relevant tax year. Estimated payments are required by July 31 of the current tax year, helping individuals stay on track with their tax responsibilities.