What Expenses Can Be Deducted by a Company in Cyprus

Cyprus is not just an island in the Mediterranean — it is a safe harbor for business, where the tax system is as welcoming as the Cypriot sun. The corporate tax rate here is still only 12.5%, making Cyprus one of the most attractive addresses in Europe for those who know how to manage money wisely. But the true secret lies not only in the low rate — it’s in knowing how to use the opportunities the law provides, allowing companies to deduct certain expenses and optimize their taxable profit.

General Rules

• Connection to business: Expenses must be directly linked to your company’s activities.
• Documentary proof: Each expense should be backed by invoices (contracts may also be required, preferably in simple form; acts of completion are not mandatory).

Main Expenses Eligible for Tax Deduction

1. Operating Expenses

• Office or warehouse rent
• Utilities (electricity, water, internet, phone) — essential resources
• Office supplies (stationery, equipment, furniture)

1. Salaries and Social Contributions – an investment in your team

• Employee salaries — the driving force of your business
• Contributions to Social Insurance and GESY (healthcare system) — caring for your staff’s well-being
• Bonuses and incentives, documented — motivation for new achievements

1. Professional Services

• Lawyers, accountants, auditors
• Consulting services
• Company registration and maintenance costs

1. Marketing and Advertising

• Media and online advertising (Google, Facebook, etc.)
• Website creation and maintenance
• Printing business cards, banners, promotional materials — the tangible face of your brand

1. Travel Expenses

• Air tickets, hotels, transport during business trips
• Per diems (with supporting documents)

1. Depreciation of Assets

• Computers, equipment, vehicles, office furniture
• Software (useful life usually 3–5 years) — tools that make work easier

1. Banking Costs

• Bank service fees — inevitable expenses
• Interest on business-related loans — the cost of raising capital

1. Insurance

• Employee insurance — taking care of your most valuable asset
• Company property insurance — protection from the unexpected
• Professional liability insurance — confidence in tomorrow

Special Categories of Expenses – Important to Know

• Bad debts: deductible if there is solid proof that the debt cannot be recovered.
• R&D costs: often treated on favorable terms — investments in innovation that pay off generously.
• Dividends: not deductible (though sometimes taxed at reduced rates or exempt).

Expenses That Cannot Be Deducted

• Personal expenses of owners or directors — beyond the business.
• Fines and penalties imposed by authorities — the price of mistakes.
• Expenses not related to company activities.

 Practical Advice from Lawyers and Accountants

From our experience, Cypriot tax authorities and auditors are generally reasonable. For small expenses — such as office supplies or minor services — they usually don’t scrutinize too closely.

However, for larger sums — office rent, advertising budgets, salaries, or professional services — it is best to have the documents in perfect order:

• contract,
• invoice,
• proof of payment.

This approach not only ensures expenses are accepted but also gives the company peace of mind that everything will be in order during any inspection.