Tax and Interest in Cyprus

The treatment of interest is as follows:
  • If the interest is received in the recipient’s ordinary course of business or in close relation to it, it will be taxable as trading income at the corporate tax rate of 10%.

  • If the interest received, on the other hand, is not closely related to the recipient’s ordinary course of business, it will be subject to:

    • A “special contribution” tax at a rate of 10%; and

    • 50% of such interest will be taxed at the 10% corporation tax rate. The effective tax rate in this case will, therefore, be 15%. In view of this, it would appear that if substantial interest income is expected, it is advisable to create a special company for this purpose.