Corporate tax

Companies with Cyprian residence have taxpaying obligations for their income originating both from Cyprus and from abroad. Non-resident companies are taxable on

• activities conducted at their Cyprian branches and
• income originating from owned real estate.

The corporate tax is 12.6% of the positive tax base.

Similarly to the Hungarian corporate tax, companies are required to make an advance corporate tax payment in three installments a tax year on their estimated revenues.

Cyprian tax resident companies

In order to precisely define resident and non-resident companies, the followings shall be considered: a company is a Cyprian tax resident if it locates the actual place of business management in Cyprus. Although the definition of actual place of business management is not stipulated by law, it has the following features:

• the place of management is in Cyprus
• the company sustains a constantly available place for the board of directors
• general business decisions are made on the Cyprian location.

No corporate tax is payable on the following income

• revenues originating from the sales of financial investments (e.g. ordinary, management, preferred shares, bonds, etc. – 100%)
• revenues originating from dividend (100%)
• income from interest occurring from activities of the company other than normal operating ones (50%)
• income of a branch abroad (if minimum 50% of the income originates from trade activities AND the foreign taxpaying obligation on this income is at least 6.25%) – 100%

Tax base decreasing items

Costs related to the business activities of the company with proper invoice or receipt decrease the corporate tax base.

Further decreasing items:

• interest costs from the purchase of the tangible assets of the company
• business representation costs (up to 1% of gross income OR EUR 17086.01 – the lower value is valid)
• costs of sustaining the real estate (maximum EUR 700/1100/1200 – depending from the size of the building)
• social contributions of the employer paid after the salary of employees
• donation to charity organizations acknowledged by the state
• 80% of royalty revenue

Write-off

Loss occurred during the year can be carried forward to decrease earnings before taxation for the subsequent 5 years. This tax allowance has already been restricted by the Hungarian tax law; however, taxpayers in Cyprus may apply the loss carried forward from previous years as a tax base decreasing item.