Changes in Cyprus Tax System
This year significant changes in the Cyprus tax system have been implemented. The government is trying to improve the state of economy in the country by all means, offer the best conditions for natural and legal persons, and make the registration of companies easier. Let`s have a look at main amendments in Cyprus tax system.
July 1, 2015 Cyprus council of ministers approved a number of bills offering significant changes in tax legislation.
July 2, 2015 the corresponding proposals were placed for consideration of Parliament. If the bills are approved, the changes will come into effect after the publication of the text of corresponding laws in the Republic Official Newspaper.
July 9, 2015 the House of Representatives adopted a number of amendments to the tax legislation of the country.
Key changes can be singled out:
- NID (“Notional Interest Deduction”) referring to own capital. In force since January 1, 2015
According to the proposed amendments, Cyprus companies can deduct NID from its tax base. NID will equal “qualified own capital”, multiplied by “reference rate”. Reference rate is 10-years old rate, which was increased by 3%.
- NID on new capital can`t be more than 80% of taxable income before the NID
- NID is not applied, if company bears tax losses.
- If the new capital (or part of it) is paid through paying in assets, the amount of new capital for NID can`t exceed the marketable value of paid assets.
- NID is an interest expense which falls under the same restrictions and rules as interest expense.
- Taxpayers are eligible not to apply NID or charge only a part of the necessary amount. Deduction of imputed interests aims at boosting of new companies to dynamic business running on Cyprus through the opportunity to use this tax benefit.
- The extension of exemption period for personal income
|Tax exemption||The period of exemption|
|50% of income, obtained from working on Cyprus, can be exempted from taxes, if income of the taxpayer is more than 100,000 EUR per year.||5 years|
|20% of income, obtained from working on Cyprus, can be exempted from taxes in the amount of up to 8,550 EUR.||3 years|
- Permanent residence for individuals
Individuals not having permanent residence in Cyprus will be exempted from the payment of an extra fee in the defense foundation (SDC) from the dividends received, percentage and income from the property clearance even in the case that these individuals spend more than 183 consecutive days on Cyprus.
This amendment is designed for attraction of individuals with high income to Cyprus.
- Extension of the field of status on tax loss allowance application among the group of companies
Status on tax loss allowance among the group of companies is applied for tax residents of Cyprus only. It is also applied to companies-residents in countries of the EU.
The application of tax loss allowance will be possible if this company has exhausted all possibilities of tax loss application in its country of fiscal residency or in country where intermediate holding companies of the group are registered.
- Tax assessment of company restructuring
The bill offers general conditions on protection from tax abuse concerning companies restructuring.
The tax authorities can impose restrictions related to the number of shares that will be issued by the company getting assets as well as demand that the shares issued during the reorganization, are in possession of the relevant party of reorganization for a maximum period – 3 years. The abovementioned provisions will be applied retrospectively from January 1, 2015 and are expected to be rather contradictory when applied and can lead to numerous disputes with tax authorities.
The reflection of changes in the legislation, introduced in the EU directive on holding and associated companies, is planned on January 1, 2016.
In order to adjust the Cyprus tax legislation in accordance with the revised EU Directive on holding and associated companies, the law will be amended. According to this law, since January 1, 2016 exemption from income tax concerning the dividends received will not be applied if these dividends have been taken to a deduction of the tax base in the jurisdiction of the company paying dividends. If the exemption from dividends taxation cannot be applied, the dividends will be taxed at the statutory rate of 12.5% and will not pay a fee on defense.
The law on register of property duties is planned to come into force by December 31, 2016.
There is a 50% discount on real estate disposal. The amendment will come into force from the coming into effect date of this law in December 31, 2016.
Greece and Cyprus
Due to the situation in Greece many local companies are considering the option of moving their business to Cyprus, as it offers acceptable prices for business operations and a favorable fiscal system.
Besides, as a result of default and uncertain tax prospects in Greece, many businessmen prefer to move their business to other countries with a more sustained economy, more comfortable tax assessment conditions and many other factors. Greek companies begin to consider the transfer of assets under the jurisdiction of Cyprus. Why?
Let`s consider such business type as shipping. Greek ship owners take control of 15% of world fleet, while Cypriot ship owners – 4%. Cyprus merchant fleet is the 10th biggest fleet in the world and 3rd in the EU. Cyprus is more favorable due to the low taxation.
The chief executive of Cyprus Navigable House Thomas Kasakos comments the situation in Greece in the following way: “Greek partners always praised our infrastructure, taxation and management system. They told that Cyprus has an attractive, competitive and healthy environment”.
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The amendment in Cyprus tax system provides the individuals with new prospects that will have now more opportunities while planning their investment for Republic. We recommend you to use the common service “Business move” and move your business to Cyprus. This option is a perfect decision for businessmen – it allows you to reduce risks and significantly lower repayment of taxes. You can get the detailed consultation via phone +357 25 31 61 19, Skype: Olie.Serve1, Email: firstname.lastname@example.org or visit our office at address Office 4C, Roussos Limassol Tower, Kiriakou Matsi 3, Limassol 3040, Cyprus