Tax resident and not tax resident companies in Cyprus – what are the main differences?
Cyprus is an attractive destination for holding company jurisdiction because of its tax regime. It is important to know that Cyprus levies tax based on the taxpayer’s tax residency. Under the Income Tax law, A Cyprus company can be either Tax Resident in Cyprus or Non-Tax Resident.
Cyprus resident company
A company is a Cyprus tax resident if it is managed and controlled in Cyprus. Tax resident companies are taxed on income accruing or arising from sources both within and outside the Republic. The standard corporate tax rate in Cyprus is 12.5%.
Cyprus non-resident company
Companies that are managed and controlled outside of Cyprus are not tax resident in Cyprus. A non-resident company is taxed on income accrued or derived only from the sources within the Republic. It means that a non-resident company is taxable at 0% on its worldwide income. Any income generated in Cyprus is taxed at the same corporate tax rate – 12.5%. A Cyprus non-tax resident company is also required to submit tax returns and indicate that tax return relates to a non-tax resident company.
It is important to note that Cyprus non-resident companies as well as Cyprus resident companies must produce annual financial statements and audit them. However, the benefits of Cyprus double-tax treaty network are not eligible for non-resident companies.