Tax Losses

Generally, loss from one source of income is set-off against income from other sources in the same year. Any loss remaining after the set-off is carried forward indefinitely.

Losses in respect to the year 1997 and after, which were not set-off against profits up to the year 2002, may be carried forward to the year 2003 and the following years.

In case there is any change in the ownership of the company’s shares and a substantial change in the company’s nature of the business, within any three-year period from the year of the loss, then the loss cannot be carried forward to the following years.

Group Losses Set-off are allowable only with profits of the corresponding year of assessment. Both companies should be members of the same group for the whole year of assessment.

Group relief applies between Cyprus Resident Companies and not with non-resident members of the group.

Two companies shall be deemed to be members of a group if:

  • One is by 75% subsidiary of the other, or
  • Each one separately is 75% subsidiary of a third company.

Losses incurred by any person from any business carried on outside Cyprus, can only be set-off from the same persons’ income from other sources for the same year.

In the case where a business owner, including a partnership, converts his business into a company, any of the owner’s accumulated losses may be carried forward to the company.

Losses of Permanent Establishments (PE) situated outside Cyprus can be offset against profits arising in the Republic. However, in the future when profits arise in the PE, an amount equal to the losses previously utilized will be included in the taxable income of the resident company ("claw-back provisions").