We would like to inform you that on 21 February 2024, the President of the Republic of Cyprus announced the decision of the Council of Ministers to abolish the annual fee of €350, which has been a mandatory requirement for all companies registered with the Department of Registrar of Companies and Intellectual Property of Cyprus since 2011.
This decision is part of broader economic measures aimed at bolstering businesses on the island and will take effect starting from this year.
In summary
On 21 December 2021, amendments to the Income Tax Law and Special Defence Contribution Law were published in the Cyprus Government Gazette (“Law amendments”) for the introduction of legislative defensive tax measures that will apply in Cyprus in relation to jurisdictions included on the EU list of non-cooperative jurisdictions for tax purposes (commonly referred to as “EU blacklisted jurisdictions”).
In accordance with the Law amendments, Cyprus will apply withholding tax (WHT) on certain outbound payments of dividends, interest and royalties, if the recipient is a company in an EU blacklisted jurisdiction, as follows:
> Dividends at the rate of 17%
> Interest at the rate of 30%
> Royalties at the rate of 10%
The Law amendment entered into force on 31 December 2022.
EU list of non-cooperative jurisdictions for tax purposes
Following the latest update of the EU blacklist, effective as from 12 October 2021, the EU blacklist currently includes 9 jurisdictions, as follows:
| American Samoa | Palau | Trinidad and Tobago |
| Fiji | Panama | U.S. Virgin Islands |
| Guam | Samoa | Vanu atu |
Companies in scope of the defensive tax measures
In accordance with the Law amendments the defensive tax measures shall apply to companies that are:
> resident in an EU blacklisted jurisdiction; or
> incorporated / registered in such jurisdiction;
and
> not a tax resident in another jurisdiction that is not listed in the EU blacklist.
(“companies in scope”)
WHT on outbound payments of dividends
Currently, no WHT is levied on outbound dividend payments to non-Cyprus tax resident shareholders (companies or individuals).
The Law amendments provide that a WHT at the rate of 17% shall apply, in accordance with Special Defence Contribution Law, on dividends received by a company in scope from a Cyprus resident company in which it participates directly either with more than 50% in the voting rights, or more than 50% in the capital or is entitled to receive more than 50% of the profits.
An exemption applies for outbound payments of dividends received by a company in scope in respect of titles listed on any recognized stock exchange.
In addition, an anti-abuse provision has been introduced in case the Cyprus resident paying company is held directly by more than one company in scope.
WHT on outbound payments of interest
Currently, no WHT is levied on outbound interest payments to non-Cyprus tax resident shareholders (companies or individuals).
The Law amendments provide that WHT at the rate of 30% shall apply, in accordance with the Special Defence Contribution Law, on interest received or credited to a company in scope from a Cyprus resident company.
An exemption applies for outbound payments of interest received or credited to a company is scope in respect of titles listed on any recognized stock exchange.
WHT on outbound payments of royalties
Currently, WHT at the rate of 10% is levied on outbound royalty payments to foreign tax residents (companies or individuals), who are not engaged in any business in Cyprus, for royalty income derived in Cyprus on rights granted for use in Cyprus.
The Law amendments enhance the existing provisions above and provide that a WHT at the rate of 10% shall also apply, in accordance with Income Tax Law, on royalty income derived in Cyprus by a company in scope for rights granted for use outside Cyprus.
December 2021
In summary
On 21 December 2021, an amendment to the Income Tax Law was published in the Cyprus Government Gazette (“Law amendment”) whereby an additional corporate tax residency test is introduced based on incorporation. This additional test aims to capture Cyprus incorporated / registered companies that are not tax resident in any other jurisdiction (commonly referred to as “stateless companies”).
The Law amendment will enter into force on 31 December 2022.
Existing corporate tax residency rules based on management and control
In accordance with the Income Tax Law, a company is considered to be a tax resident of Cyprus if its management and control is exercised in Cyprus.
The existing corporate tax residency test will continue to apply, so that a company that has its management and control in Cyprus will continue to be considered as a tax resident of Cyprus i.e. its tax residency status will not be affected by the Law amendment.
Additional corporate tax residency test based on incorporation
In accordance with the Law amendment the definition of a “resident in the Republic” is enhanced so that a company established or registered under any applicable Law in the Republic, which has its management and control exercised outside the Republic, is considered to be a resident of the Republic, unless such company is a tax resident in any other jurisdiction.
This means that Cyprus incorporated / registered companies, with (i) management and control exercised outside Cyprus; AND (ii) not tax resident in any other jurisdiction will now be considered as Cyprus tax residents and as such, taxed in Cyprus on their worldwide income.
