Recent Amendments to Cyprus Tax Regime
On the 9th July 2015, Cyprus Parliament passed number of new laws, which purport to make Cyprus a more attractive investment destination.
The Laws are still not in force and are due to be published this current month.
Below appears a short summary of the proposed changes.
1. Non – Dom Law Regime
Non- Domiciled persons are now exempt from Special Contribution for Defence (the ‘SCD’) defence tax.
Individuals are considered to be domiciled in Cyprus, if:
(i) Individual is a Cyprus tax resident; and
(ii) Individual is a Cyprus tax resident for 17 years out of the last 20; or
(iii) Individual born in Cyprus and have not been Cyprus tax resident for at least 20 years before returning to Cyprus.
If an individual is outside the description in 1(ii) and (iii) above he or she will be considered a Non- Dom Cyprus Tax resident and will see an immediate tax benefit in saving 17% SCD on dividends, 30% SCD on bank deposits and 3 % SCD on rental income.
2. Incentives to High Earners- Saving Plans
(a) High Earners, the income of which exceeds EURO 100,000 can enjoy 50% exemption from personal income tax for longer. The period of applicability is extended from five to ten years, provided that an individual was not a Cyprus tax resident for three years out of last five years, since commencement of their employment and the year immediately preceding their employment. OR
(b) 20% exemption income with maximum exemption EURO 8,550 per year is extended for the first 3 to five years until year 2020.
3. National Interest Deductions on Equity (the ‘NID’)
As of 1 January 2015 companies will be allowed deductions on ‘new capital’ (the ‘NID’). New capital means the in –cash or in-kind contribution, which has been injected in the Cyprus company and which has been actually paid up and used for the operations of the Company. The NID granted cannot exceed 80% of the taxable income for the year and if tax computation results in tax losses then the NID is restricted.
In kind contribution is permitted, but such should be supported by the appropriate valuations and carried out by the qualified professionals.
The legislation includes number of anti – abuse provisions.
4. Foreign Exchange and Gain Losses
As from 1 January 2015, exchange differences, whether losses or gains are not tax deductible or taxable respectively.
Companies specifically trading in FX Currencies, FX currency options and certain derivatives are exempted.
5. Extension of Group Relief Provisions
As of 1 January 2015, group loss relief is extended to include qualifying group subsidiary companies that are also tax residents in any EU member state.
6. Incentives for Investment into real estate
Immovable property purchased from the date of the Law comes into effect and 31 December 2016 will be exempted from CGT on any capital gain arising upon the future disposal. The property must include the buildings to be eligible.
There will be a reduction of property transfer fees by 50% if such is transferred until 31 December 2016.
For further information on this topic please contact Mr. Soteris Pittas and Mrs. Liza Bokova at SOTERIS PITTAS & CO LLC, by telephone (+357 25 028460) or by fax (+357 25 028461) or by e-mail (firstname.lastname@example.org).
The content of this article is intended to provide a general guide to the subject matter. Specialist advise should be sought about your specific circumstances.