Definition of tax resident of Cyprus
For fiscal purposes in the case of a person, «Resident of Cyprus» indicates a person who remains in the Republic for one or more periods exceeding in their entirety 183 days each fiscal year. In the case of a company, tax resident indicates a company whose control and direction are exercised in the Republic.
Which incomes are taxed at standard rates?
In the case of natural or legal person who is not resident of the Republic, the tax is levied for each fiscal year at the rate or rates based on the income earned in Cyprus, as specifically defined in the Income Tax Act. Regarding the companies, the rate is 10% and regarding individuals the rates are those applicable to residents of Cyprus (ie 0 – 30%) and are derived from the following sources:
– Profits from a permanent establishment:
Any profits or other benefits resulting from a permanent establishment located in the Republic and which belongs to a person not resident in Cyprus are taxed in Cyprus. The permanent establishment of a non-resident of Cyprus is treated as a separate entity and is provided with all the discounts and exemptions applicable to all companies. Under the law, a permanent establishment is considerated as such any administration office, branch, factory, workshop, etc which is used as headquarters.
Rent that is being collected from any permanent establishment of any kind located in Cyprus. Rent which is being collected by a non tax resident of Cyprus is not submitted to the Defense Contribution.
Any amount or contribution for goodwill, reduced by any amount spent on purchase of such goodwill.
Which revenues are taxed at special rates with withholding tax?
The law provides special tax rates on income derived from the following sources of non-natural or legal persons who are not tax residents of Cyprus:
The gross income acquired by any non tax resident of Cyprus from exercising any profession or trade, or entertainment services to the public, including football and other sports delegations in Cyprus, is subject to a 10% of tax withhold.
Intellectual property rights:
The gross amount of any intellectual property, including royalties, compensation or any other income that derives from sources within Cyprus by a person non resident in Cyprus, is subject to a 10% tax withhold.
Lease payments of films, etc.
The gross amount of any lease for viewing films in Cyprus, which derives from a person non resident in Cyprus is subject to a 5% tax withhold.
Interest and dividends:
There is no withholding income tax or defensive contribution, neither to the payment of dividends from companies resident in Cyprus, nor to the interest paid by banks and other organizations to the natural or legal persons who are tax residents of Cyprus. A submition of certain forms attesting that the person who receives interest or dividends is not tax resident of Cyprus is required.
Conventions for avoidance of double taxation:
The withholding amounts listed above may be reduced or eliminated under the provisions of the Convention to avoid double taxation which Cyprus has signed with many countries.