Corporate Losses

Carryforward of Tax Losses

Companies are allowed to carry forward tax losses incurred within any tax year to the subsequent five years. This enables these losses to be offset against future taxable income.

Group Relief for Losses

Tax losses from the current year can be transferred within a group of companies for tax purposes. A Cyprus tax resident company can accept the surrender of current year tax losses from another group company that is also a Cyprus tax resident. Additionally, a group company that is a tax resident in another EU country can surrender its current year tax losses to a Cyprus tax resident company, provided it has fully explored all options to utilize its tax losses domestically or in any intermediary EU holding company’s country.

To qualify for group relief, both companies must be part of the same group for the entirety of the tax year. Group membership for relief purposes is defined under the following conditions:

  • One company holds at least a 75% shareholding in the other, or
  • Both companies are at least 75% owned by a third company.

The presence of an intermediary non-Cyprus tax resident company does not preclude eligibility for group relief, provided this intermediary company is tax resident in an EU country or in a country that has a tax treaty or an exchange of information treaty (bilateral or multilateral) with Cyprus.

If a company is incorporated by its parent company during the tax year, it will be considered a member of the group for the purposes of group relief for that tax year.

Losses of a Permanent Establishment Outside Cyprus

Tax losses incurred by a permanent establishment outside Cyprus can be offset against the taxable profits of the company generated within Cyprus in the same year. It should be noted, however, that future taxable profits of such a permanent establishment will be subject to tax, up to the amount of the tax losses previously utilized.

Disclaimer

Please note that the information provided here is for general guidance only and does not constitute professional tax advice. Tax laws and interpretations are subject to change, and individual circumstances can significantly affect tax obligations and benefits.

Contact Us

For personalized tax advice tailored to your specific situation, we strongly recommend consulting with a qualified tax professional. Our team is equipped with the expertise to navigate the intricacies of Cyprus tax law and provide you with customized solutions. Contact us to ensure that you are making the most informed decisions for your tax-related matters.

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