Особенности налогообложения на Кипре

Taxation in Cyprus: Types

The whole tax system in Cyprus is tentatively divided into two classes: for residents and non-residents of the island. Tax resident is considered to be only those enterprises which activities are subject to management and control in local jurisdiction. Accordingly, the directors of the company should be citizens of this state, and the main office of the company should be located in the territory of Cyprus. All meetings should also be held in the territory of the state.

Taxation in Cyprus for non-residents is not provided, since they do not have permanent representation office in the island. If there is a branch of a non-resident firm, it is possible to impose tax sanctions, but only on the level of income being received from the local representation.

The main disadvantage of non-resident enterprises is the impossibility of avoiding double taxation between Cyprus and Russia, as well as Cyprus and other countries.

Types of tax rates for non-residents

Foreign entrepreneurs with representative office in Cyprus and level of its income of at least 9,000 in local currency should be registered with VAT. The system provides opportunity to obtain unique registration number to facilitate filing of tax reports. In accordance with the abovementioned system, the tax rate equals to 15% of the income of the branch. Submission of reports to the tax authorities is carried out quarterly within 40 days after the end of the reporting period.

Taxation of the companies in Cyprus pursuant to VAT is provided for local entrepreneurs. The foregoing tax is added to the amount of income of the branch on the island according to the common system for foreigners.

Types of tax rates for residents

  1. Income tax or corporate tax. It is charged from all local enterprises at the rate of 10%. This is the lowest indicator among all the EU countries. The income in the form of dividends, from the sale of securities, from permanent representation offices abroad, as well as from half of the amount of passive income is not subject to taxation in Cyprus.
  2. Tax on letting property. It is the most complex one, because the counterparty is obliged to pay from 3 to 75% of all the income being received from activity. If the service is provided by non-resident, he falls under the double taxation law in Cyprus.
  3. Special tax or defense tax. It has begun to be charged from residents of Cyprus since the beginning of 2006. In addition to enterprises, it is paid by natural persons who are citizens of the island. The interest rate depends on the particular income from which the tax is levied. Dividends received from local foreign companies, as well as interests received by the counterparty in the process of conducting investment or other activity similar by type are not subject to fee. All other profits are taxed at the rate ranging from 10 to 15%. Details and nuances of this taxation system can be clarified by the specialists of Law&Trust.

Taxation in Cyprus for non-residents on the basis of the defense tax system is not levied from passive income and in the event the owner holds less than 1% of the shares of the enterprise.

Double taxation in Cyprus: agreements

Interstate agreements allowing to avoid double taxation significantly simplify the life of entrepreneurs. If a businessman is a citizen of one country, but carries out his activities in the territory of another state, he pays tax to both parties, which significantly affects the level of income. Avoiding double taxation in Cyprus is possible with 40 republics. Important peculiarity is the fact that treaties take precedence over the rules of the island.

Agreement for avoidance of double taxation in Cyprus regulates tax rates on income, dividends, interest and royalties received by citizen of one country in the territory of another state. The list of countries having signed agreement on avoidance of double taxation also includes Russia.

Under the operation of the agreement, the counterparty selects the state to which it would be more convenient for him to pay the tax. When selecting foreign jurisdiction, entrepreneurs often save all the funds due to the availability of offshore zones.