For the determination of the tax system need to clearly define the status of resident and non-resident of Cyprus. The company is tax resident in Cyprus if its activities " managed and controlled" in Cyprus. In spite of the fact that the Cypriot tax legislation does not provide for a clear definition of "management and control", it is assumed that the place of management and control is the place of the Board of Directors of the company decisions regarding the company's activities, as well as the location (residence) of its Directors. Accordingly, to consider the company a tax resident of Cyprus, its Directors must be residents of the island, and regular meetings of the Board of Directors/management Board shall be held in Cyprus. The company, officially registered in another country, may also be a tax resident of Cyprus if it is managed and controlled from Cyprus.
In Cyprus it is possible to establish a company that will not deemed to be a resident of Cyprus for tax purposes. Non-resident companies, i.e. companies, management and control of which is exercised in Cyprus, are not subject to taxation in Cyprus if they do not have here a permanent representation. If the company has a representative office, the tax will be levied only the income, which refers to the activity of the representative office. Non-resident companies may not be able to use the advantages of the Treaty on the avoidance of double taxation and, therefore, are used, mainly, to the business of banking, law, and accounting.
Корпоративній tax (profit tax)

The income of the companies-residents is subject to corporate tax on profits at the rate of 10%. This is the lowest corporate tax rate in the EU. From this tax exempt are the following income:
• Income in the form of dividends received from sources in Cyprus and abroad. (the applicable tax rate, which is set in the agreement on avoidance of double taxation).
• Profit from the sale of securities.
• 1/2 of the amount of the passive interest income. Active interest income fully taxable for corporate tax. Under active interest income is understood as interest income from ordinary activities of the company, interest income is closely related to the ordinary activities of the company.
• Profits derived by a permanent establishment abroad. This exemption does not apply if: a permanent establishment in 50% and more involved in the activities leading to the investment income or tax paid by the permanent establishment outside Cyprus, are significantly lower than the tax on the island.
Value added tax (VAT)

Registration of VAT is normally carried separately from the productions of the company at the General tax accounting. Taxpayers may be as resident, and non-resident Cyprus company. It is necessary to note, that the reception of the VAT-number in Cyprus, compared with other European jurisdictions (great Britain, etc.), the procedure of affordable and easy to use.
The responsibilities for registration with tax authorities on VAT does not arise until the turnover from the sale of goods and services on the territory of Cyprus does not exceed the level of 9 thousand. CYP. The size of the tax rate is 17%. The tax is calculated payable and is the offset in the same tax period (in fact, the VAT is not paid to the state budget).
Reporting on VAT must be made within 40 days after the end of each quarter. In the implementation of activities within the European Union can also be submitted Intrastat report (report for the physical movement of goods across the border) and EU Sales List (special monthly reports).
The use of agreements on avoidance of double taxation
Agreement on avoidance of double taxation have been concluded between many States to settle the situation, when a person has to pay the tax from received income them twice: first in the country in which the income was received, and then in the country, in which the individual is a resident of and, respectively, by the taxpayer.
The Republic of Cyprus has entered into about 40 Agreements for the avoidance of double taxation. It is important to note that these agreements have precedence over national legislation. In some cases, the Agreement is in force nominally, because the internal regulations of a Contracting state are more favorable to the taxpayer.
In the standard case, the agreement on avoidance of double taxation regulate tax deductions for the following items:
• tax on profit derived by a resident of one country on the territory of another country;
• tax on the payment of dividends arising in one country to residents of another country;
• tax on payment of interest arising in one country to residents of another country;
• tax on the payment of royalties (license fee) arising in one country to residents of another country.