Losses carried forward for Companies:
Companies may carry forward tax losses incurred during a tax year over the next five years to be offset against taxable income.
Current year tax losses may be surrendered by one Cyprus tax resident group company to another. A group company which is tax resident in another EU country may also surrender current year tax losses to a Cyprus tax resident company, provided such company 11 firstly exhausts all possibilities available to utilise its tax losses in its country of residence or in the country of any intermediary EU holding company.
Group relief is available if both companies are members of the same group for the entire tax year. Two companies are considered to be part of a group for group relief purposes if:
- One is a 75% subsidiary of the other, or
- Both are 75% subsidiaries of a third company
The interposition of a non-Cyprus tax resident company does not affect the eligibility for group relief as long as such company is tax resident in either an EU country or in a country with which Cyprus has either a tax treaty or an exchange of information treaty (bilateral or multilateral).
Where a company has been incorporated by its parent company during the tax year, this company will be deemed to be a member of this group for group relief purposes for that tax year.
Losses of a permanent establishment outside the Republic
Tax losses arising from a permanent establishment outside the Republic may be offset against taxable profits of the company arising in the Republic in the same year. However, any subsequent taxable profits from such a permanent establishment are taxable, up to the amount of tax losses previously offset.
Losses carried forward for Individuals:
Individuals who have an obligation to prepare audited financial statements (i.e. those with turnover in excess of €70.000) may carry forward tax losses incurred during a tax year over the next five years, to be offset against taxable income. Where a person, including a partnership, converts his/her business into a limited liability company, any unutilised tax losses can be transferred to the new company.
Losses of a permanent establishment outside the Republic:
Tax losses arising from a permanent establishment maintained outside the Republic can be offset against taxable profits of the company arising in the Republic in the same year. However, any subsequent taxable profits from such a permanent establishment are taxable up to the amount of tax losses previously offset.
About McMillan Woods Cyprus Central offices are located in Nicosia Strovolos, Piraeus Street 36. 22 276000 [email protected] www.mcmillanwoods.com.cy