In 2003, the Cyprus tax system was overhauled in full compliance with EU directives, before the accession of Cyprus to the EU in 2004. In April 2009 the OECD accepted Cyprus onto the White List of jurisdictions that have substantially implemented the internationally agreed standard on exchange of information.
The Cyprus tax legislation and its regulation is generally predictable and straight forward in nature. Relations between the business community and the tax authorities are excellent and ensure the efficient taxation of the commercial and financial sector. By providing a transparent and efficient environment, the tax system enhances Cyprus’ competitiveness and contributes to making Cyprus an attractive jurisdiction in which to structure international operations.
Cyprus has a corporate income tax rate of 12.5%, which is still one of the lowest corporate tax rates in the European Union. The personal tax rates are progressive and reach a top marginal tax rate of 35% on income in excess of €60.000 per annum.
The Government of the Republic of Cyprus has repeatedly stated that maintaining stability in the taxation system is one of the overarching goals of its economic policy.
Cyprus also boasts an extensive network of double tax treaties, including countries in North America, Western and Eastern Europe, Asia, the Middle East as well as emerging markets such as China, India and Russia. Generally, most treaties provide for reduced or zero rates of withholding tax on dividends, interest and royalties paid out of the treaty country and the avoidance of double taxation in the case where a resident in one of the treaty countries derives income from the other treaty country.
The tax year for the purpose of the Income Tax Law coincides with the calendar year. Where an individual is a resident in the Republic for tax purposes, tax is imposed on income accruing or arising from sources both within and outside the Republic. Where an individual is not a resident in the Republic for tax purposes, tax is imposed on income accruing or arising only from specified sources within the Republic. Resident in the Republic for tax purposes is an individual who is present in the Republic for a period or more, which in aggregate exceed 183 days in the same tax year.
For further information:
Ministry of Finance website: www.mof.gov.cy
Inland Revenue Department website: www.mof.gov.cy/ird