How should I reply to – are stocks taxed in Cyprus?

Yes, stocks are subject to tax in Cyprus. The capital gains tax rate on the sale of stocks is 20%.

Detailed responses to the query

Yes, stocks are subject to tax in Cyprus. The capital gains tax rate on the sale of stocks is 20%. Additionally, dividends from stocks are also subject to a 17% withholding tax, although this can be reduced under double taxation treaties.

According to KPMG’s Cyprus Taxation 2019 guide, “Gains from the sale of shares are subject to capital gains tax at a rate of 20 percent. The gain is computed as the difference between the sale proceeds and the cost of acquisition, together with any other, directly related costs of acquisition or disposal, and any enhancement expenditure”.

It’s important to note that tax legislation and rates may change over time, so it’s essential to consult with a trusted tax advisor for the most up-to-date information.

Here are some interesting facts about the Cyprus tax system:

  • Cyprus has a relatively low corporate tax rate of 12.5%, attracting many foreign investors to establish companies on the island.
  • The country has over 50 double taxation treaties with other countries, making it an attractive jurisdiction for international business.
  • Certain income categories, such as dividends, interest, and royalties, are exempt from tax in certain situations, such as when they are received from a foreign company.
  • Capital gains derived from the disposal of immovable property situated outside of Cyprus are exempt from tax, while capital gains from the disposal of immovable property in Cyprus are subject to a reduced rate of 20%.
  • Cyprus offers a “non-domiciled” tax status, which is available to individuals who are considered not to have a domicile in Cyprus and offers numerous tax advantages.
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Here is a table summarizing some of the key tax rates applicable in Cyprus:

Type of tax Rate
Corporate tax 12.5%
Capital gains tax (e.g. on sale of stocks) 20%
Withholding tax on dividends 17% (potentially reduced under double taxation treaties)
Value-added tax 19%

See related video

The tax treatment for trading activities depends on whether the income is from passive investments or active trading. Passive income is typically taxed punitively in some countries, while active income from trading is usually considered a business or profession and taxed differently. The video suggests that structuring an international company to generate active business income can potentially be tax-free if set up correctly. For day traders, opening a corporate account and paying themselves a salary can help reduce tax obligations. It’s important to understand the tax treatment for your trading activity and structure yourself accordingly to pay the lowest legal amount of tax possible.

Other responses to your inquiry

Exempt from corporate tax

Any income arising from trading in securities is completely exempt from corporate tax. The term ‘Securities’ includes but is not limited to: ordinary and preference shares, founders shares, options on titles, debentures, bonds, short positions on titles, futures/forwards on titles, swaps on titles, depositary receipts on titles, rights 6 7

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How much tax do you pay in Cyprus?
There are income tax deductions and allowances available. Tax on pension income from abroad is 5% (fixed rate) with the first €3,420 exempt from tax. Corporate tax is 12.5% for all tax resident companies of Cyprus (managed and controlled from there) on profits received in and outside Cyprus.

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Are dividends taxable in Cyprus? Response will be: 5 (21) 5 5 (15) 0 0 0 0 (24) 0 0 5 (5) 10 (10) 0 0 0 0 Payments of dividends and interest by Cyprus tax residents to non-Cyprus tax residents are exempt from withholding tax in Cyprus according to the Cyprus tax legislation. Royalties granted for use outside of Cyprus are also free of withholding tax in Cyprus.

Does Cyprus tax a Bulgarian company?
Response: This rate does not apply, where 25% or more of the capital of the Cypriot resident is owned directly or indirectly by the Bulgarian resident paying the royalties and the Cyprus company pays less than the normal rate of tax.

Are intellectual property rights taxable in Cyprus? There is a 2.5% tax on royalties received in connection with intellectual property rights held in Cyprus. Personal income in Cyprus is taxed on a tiered basis, with quite a substantial tax-free allowance of €19,500. The maximum income tax rate on personal income in Cyprus is presently set at 35% for income in excess of €60,000.

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