All tax-resident companies are charged for corporate income tax of 12.5% on their worldwide income. However, foreign-source income originating from a Permanent Establishment (PE) abroad may be exempted from corporate income tax subject to anti-avoidance rules override as the following conditions are satisfied:
- More than 50% of foreign PE’s activities directly or indirectly result in investment income, and
- The foreign tax levied on the income of foreign PE is significantly lower than the tax burden in Cyprus.
In addition, a non-tax resident company whose control and management are executed from outside of Cyprus is exempt for all its foreign income. Any income originating from Cyprus would be subject to a tax rate of 12.5%.
