Cyprus tax year coincides with the calendar year (only the first year of the company may take up to 18 months). Tax settlement must be made by 1 August of the next year. Advance on income tax paid in three installments until 1st August to 30th September and 31st December. Tax residency, and thus the use of tax preferences, needs to locate on the island resort management and full control of the company. In practice, this means that the majority of the directors must be residents in Cyprus, where it is necessary to carry out the board meeting. In setting up companies in Cyprus, legally offices are involved in consulting (eg tax advice). These companies ensure the achievement of the Cypriot tax residency of the company and by an indication of the persons as directors. Entities residing in Cyprus pay tax at CIT in 10 percent of income, regardless of where their achievement. Non-residents apply to this rate only to the revenue generated in Cyprus.

There are not taxable:

• dividends paid by a Cypriot company its on members - regardless of residence;
• interests (from the deposits and accounts in Cyprus) - shall be paid unless the person is not a Cypriot resident;
• Cypriot companies profit from trading in securities;
• receipts from royalties of the services provided by foreign licensees.

Preferably, it is written agreement between the Poles and the Polish Cyprus for the avoidance of double taxation. Owing to the income taxed in Cyprus are exempt from more stringent obligations to the tax office in Poland. The example is the preferential taxation of company directors in Cyprus. In Poland, the person who manages the income is taxed according to the scale or flat rate. However, income derived by the taxpayer with respect to sit on the board of the company in Cyprus is exempt from taxation in Poland, provided that if the taxpayer would acquire in a tax year other taxable income in Poland, income earned in Cyprus should be taken into account for purposes of calculating the tax rate on the remaining taxable income in Poland.
Functioning of the VAT is similar to the Polish one. The only difference is that rate is 15 percent, and is required to register entities whose annual turnover exceeds EUR 4500.