Cyprus Corporate Taxes for the Insurance Industry
1. Cyprus Insurance Companies
The tax of isurance business is subject to special tax provisions as explained below:
The income tax payable in Cyprus in relation to life insurance business is the greater amount of:
(a) the tax which is calculated at the rate of 12,5% on the taxable profits attributable to the shareholders, which consists of the net income/expense of life insurance and annuity business and
(b) the tax which is calculated at the rate of 1,5% on gross premium income (minimum tax).
Income tax in respect of accident and health insurance business and of other financial services in Cyprus is calculated at the rate of 12,5% (2020: 12,5%) on the taxable income of the year.
2. Cyprus Insurance Agents & Brokers
Unlike the actual insurance companies, Cyprus Insurance Agents and Brokers are taxed like any other Cyprus Company as follows:
- Corporation Tax - 12.5%
- Divined Tax (if applicable*) - 17%
- Payroll Taxes apply ( The employer has to pay employers Social Security Contribution and NHS for each employee on their gross remuneration – more information click here).
- Branch Profits – branch profits will not be taxed in Cyprus if they have been taxed abroad* (this will have to be examined by our tax experts).
*In this scenario the application of double tax treaty must be applied to avoid double tax on same earnings. Cyprus has a plethora of double tax treaties with almost all developed counties hence it is unlikely to have you pay twice on same profits.
Various Tax Treatments
According to current legislation, tax losses can be carried forward and offset against taxable income of the next five years from the reporting date. Group surrender applies and can offset parent or subsidiary company profits. Branch losses must be used to offset parent company taxable profits (from the parents tax computation).
Insurance services are exempted from VAT and as a result VAT can not be recovered.
Expenses will be booked gross of vat in the insurance company's / agency’s books.
Example of Group Taxation
1. Cyprus Insurance Broker with Overseas Branches
- Branch in UK - profits
- Branch in Greece - losses
- Cyprus Insurance Broker - profits
In this scenario subject to the local tax regulations and transfer pricing study, the UK profits are taxed in the UK and the results will be incorporated in the results of the Cyprus Insurance Broker Company.
Similarly, the Greek branches losses will be incorporated in the Cyprus Insurance Brokers results and the combined results will be taxed in Cyprus subject to the local Cyprus tax regulations.
Double tax treaties between Cyprus and the UK as well as Greece will ensure that the branches profits can not be taxed twice in the UK and in Cyprus and that their losses can be surrendered.
Depending on the specific double tax treaty agreement, branch profits will be taxed up to the maximum amount / ceiling specificed.
2. Cyprus Insurance Broker with overseas subsidiaries
- UK Subsidiary - profits
- Greek subsidiary - losses
- Cyprus Insurance Broker - profits
Subject to the local tax laws and regulations both the UK and the Greek subsidiaries will be taxed and their profits will be returned to the Cyprus parent without any tax. These dividends will then be re-distributed to the shareholders of the Cyprus Insurance Company and depending on their tax residency will be taxed accordingly as follows:
- Cyprus Non-Domiciled Tax Residents - No Tax
- UK Shareholders - subject to UK overseas dividend tax (double tax treaty should be taken into consideration)
- Greek Shareholders - subject to the Greek dividend tax (double tax treaty should be taken into consideration)