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Cyprus Personal and Corporate Taxation System

Cyprus Personal and Corporate Taxation System

Posted on March 5, 2024

Before moving to any country, it is worth assessing the current taxation system. Fortunately, it is not a problem, as the information is available to interested parties. In cases where it is necessary to choose the best investment program, experienced accredited agents can help.

Cooperation with knowledgeable lawyers will allow you to find out the peculiarities of the tax system in advance. With this information, the Cyprus Permanent Residence offer looks more than attractive. Favorable investment conditions and many benefits for residents complement the list of incentives for moving to the island.

Cyprus Tax Structure

The tax collection system for local and foreign companies is different. Several things affect the rate that should be taken into account. For example, the income tax is 12.5% if residents of the country own the company. In other cases, the owner is exempt from it.

Other features of the system include benefits for less profitable organizations. In this situation, we are talking about an income of less than 19,500 euros. Owners of family businesses and small commercial organizations can easily take advantage of this privilege.

Several requirements must be met to obtain the status of a tax resident of the country. Foreigners interested in taxation in Cyprus must stay here for 60 days (instead of the 183 days previously established). In addition, the place of work and real estate ownership will help residents obtain benefits. 

Personal Taxation in Cyprus

Those who operate as individuals before the law should also be interested in the government’s approach to taxation. For such cases, Cyprus has a separate taxation system in Cyprus, which includes progressive taxes. The features are as follows:

  • income not exceeding 19,500 euros is not taxed;
  • an increase in income of up to 8,300 euros per year results in a rate of 20%;
  • the next capital increase of 23,500 euros increases the rate to 25%.

The system sets the rate at 35% if profits continue to increase. This way, individuals working within the specified framework can save on tax payments.

Corporate Taxation in Cyprus

The taxation system for corporate entities differs from the one mentioned above. Special conditions have been created to attract capital into the economy. So, according to the current changes, business owners receive:

  1. As a private (public) organization, the company acts as a legal entity and pays a rate depending on the capital received.
  2. As shareholders, holding shares does not define an entrepreneur as an owner. Therefore, shareholders are exempt from paying taxes, as they are responsible only for their personal profits.
  3. As a full (limited) company. In such cases, the company does not pay taxes. This obligation lies with the partners, who receive part of the profit. Here, the taxation rules for individuals apply.

Consultations with experts on the corporate tax system in Cyprus can help you make conclusions about the best form of ownership. This way, you can get additional information and determine how to save money in the new conditions. 

VAT and Other Indirect Taxes

Well-known programs for wealthy pr attract a lot of attention, and the peculiarities of the taxation system keep demand stable. However, you should get information about additional rates before participating in government offers. This category of taxes includes:

  1. VAT. Value-added tax ranges from 5 to 19%. The percentage depends on where the company is registered and its tax residency. In most cases, the state charges 19% of VAT.
  2. SDC. The Security Defense Tax is also included in the list. This category contains profits received passively – rent, dividends, etc. The rate ranges from 2.25% to 17%.

The division of types of passive income allows determining the amount of SDC taxes a resident pays. So, the rate of 17% is assigned to residents of the country who receive dividends. At the same time, resident companies are exempt from this tax. The list of exceptions is provided by expert Zlata Erlach (the Immigrant Invest company). 

Companies that receive rent subject to permanent residence pay a tax of 2.25%. When calculating the amounts, the condition that interest rates are charged on the balance of profits is also used. Therefore, 25% of the capital gains tax is deducted from the total income.

Conclusion

You should start studying the taxation system before reading the proposals. It will help you make an informed decision based on real data. However, it is possible to simplify the “transition period” and familiarize yourself with the personal tax system in Cyprus in advance. For this, you need to seek help from financial experts or accredited agents. 

The advantage of such cooperation is the ability to compare options and get accurate information about the specifics. The taxation system for companies and shareholders is not an issue you can ignore.

We recommend seeking the help of professionals if you need to prepare documents quickly and efficiently, without extra costs. Our specialists will minimize all risks, so the process will be as comfortable and simple as possible for you.

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