Taxation of Corporate Entities

Companies are treated as taxable entities and are subject to corporation tax. For the purposes of the income tax law the term "company" covers all companies incorporated or registered under any law in force in Cyprus and any company incorporated or registered elsewhere which carries on business or has an office or place of business in Cyprus.

All companies, within the meaning of the income tax law, are liable to Cyprus corporation tax for each year of assessment upon their income derived from, accruing or received in Cyprus in respect of:

• gains or profits from any trade or business; (the expression "trade" includes every manufacture or adventure or concern in the nature of trade)
• any interest or discount
• any rent, royalty, premium or other profit arising from property
• any profit from any farming or animal breeding business
• any other income not elsewhere specified

Income from foreign sources from any trade or business is deemed to be derived in Cyprus whether remitted to Cyprus or not, if the control and management of such trade or business is exercised from Cyprus. In the case of a company incorporated in Cyprus, however, the shares of which belong exclusively to foreigners, the whole of the income is deemed to be derived from Cyprus irrespective of the place where the control and management of its business is exercised.

The whole of the investment income arising outside Cyprus is also deemed to be derived from Cyprus whether or not remitted to Cyprus. Investment income is defined as any income other than earned income which in the case of companies means income from any trade or business, including farming.

Foreign companies operating through a branch or permanent establishment (registered under s.347 of the Companies Law) are taxable in Cyprus on the profits arising in Cyprus.

Corporation tax is also payable upon the taxable income of other bodies, corporate or unincorporate. Statutory bodies are taxable unless specifically exempted by statute. The income tax law specifically exempts from tax religious, charitable or educational institutions of a public character, co-operative societies, approved provident, pension or other funds, local authorities and institutions formed exclusively for promoting art, science or sport.

The contents of this article are intended to provide a general guide to the subject matter. Specialist advice should be obtained before any action is taken.