In General
Regarding indirect taxation the community acqui includes the harmonization of the VAT legislation and excises.

VAT is charged on every taxable supply of goods or services, that is on every supply of goods or services made within the Republic, by a taxable person in the course or furtherance of any business carried on by him, other than a supply exempted in accordance with the provisions of the Law. Additionally, VAT is charged on the importation of goods into the Republic and on the acquisition of goods from other member states.

VAT is an indirect form of taxation intended to burden consumption expenditure. It is an indirect tax because the trader / taxable person acts as an agent of the VAT Service, collecting VAT from customers / consumers on its behalf and returning the tax to the Republic.

VAT is imposed on supplies and collected at every stage of the production, transportation and distribution of goods and services.

VAT as applied in Cyprus is fully harmonized to the Community legislation.

More information about VAT, can be found at the Customs and Excise Department website.

Cyprus imposes corporation tax on 'companies': this term includes all companies incorporated or registered under any Cyprus law, and any foreign company which carries on business or has an office or place of business (permanent establishment) in Cyprus.

In July, 2002, as part of the Income Tax Act No. 118(I) of 2002, Parliament approved a uniform 10% corporate tax rate, to apply to both onshore and offshore companies, plus a 2% levy on wage bills (meant to subsidise pensioners), and a 'Special Contribution' related to defence which in effect applies the 10% corporate tax rate to inter-company dividend and interest payments. However, the rules are complex.

An additional tax of 5% is imposed on company profits exceeding CYP1,000,000 for the years 2003 and 2004.

As from 2003, Cyprus applies a residence-based taxation regime: "Resident in the Republic", when applied to a company, means a company whose management and control is exercised in the Republic; and "non-resident or resident outside the Republic" will be construed accordingly.