Cyprus tax resident companies are taxed on their income from all sources in Cyprus and abroad.

A non- Cyprus tax resident company is taxed on income from a business activity carried out through a permanent establishment in Cyprus and on certain income arising from sources in Cyprus. A company is a resident of Cyprus if it is managed and controlled in Cyprus. Foreign taxes paid can be credited against the Cyprus corporation tax liability.

The Cyprus corporate tax rate is 12.5% and is one of the lowest in the European Union.

Losses carried forward.

The tax loss incurred during a tax year and which cannot be set off against other income, is carried forward subject to conditions and set off against the profits of the next five years.

When is a company considered as a part of a Group of companies?

One Cyprus tax resident company holding directly or indirectly at least 75% of the voting shares of another Cyprus tax resident company.

Both of the companies are at least 75% (voting shares) held, directly or indirectly, by a third company.
As from 1 January 2015 interposition of a non- Cyprus tax resident companies will not affect the eligibility for group relief as long as such companies are tax resident of either an EU country or a country with which Cyprus has a double tax treaty or an exchange of information agreement (bilateral or multilateral).

A Cyprus tax resident company may also claim the tax losses of a group company which is tax resident in another EU country, provided such EU company firstly uses the all possibilities available to utilize its losses in its country of residence or in the country of any intermediary EU holding company. A partnership or a sole trader transferring a business into a company can carry forward tax losses into the company for future utilization.