More Tax Benefits in Cyprus
On 9 July 2015, the House of Representatives enacted into laws a number of significant tax law proposals, in an effort to improve Cyprus’ competiveness and to provide additional incentives to investors from around the globe.
The aim of these ammendments are:
- to harmonise and align the Cyprus tax system with relevant EU guidelines
- to simplify the Cyprus tax system and making it more attractive
- to strengthen the use of Cyprus companies in international tax structuring
- to make the island more attractive as a prime destination choice for persons wishing to invest in Cyprus property, move to Cyprus permanently along with their families, setting up real business substance and moving key employees to Cyprus. This is achieved by introducing certain tax exemptions or relaxations on property transactions, income from Cyprus employment and the introduction of the non-dom status. The non-dom status that is being introduced for the first time will also solve many inherent issues that foreign High Net Worth Individuals have when it comes to taxing their worldwide income after they become Cyprus tax residents. Non-doms will be exempted from defence tax which is applicable on Cyprus tax residents on dividends, interest and rental income.
The various tax law amendments tackle areas of the:
Capital Gains Tax Exemption:
Exemption from Capital Gains Tax on Immovable Property acquired until 31st December 2016. 100% exemption from Capital Gains Tax in Cyprus, for the disposal of real estate located in Cyprus provided that the real estate has been purchased between 16/7/2015 until 31/12/2016 and it is acquired through purchase or purchase agreement and not through exchange or donation at market value from a non-relative party. The prior applicable regime imposed a 20% capital gains tax on the seller.
Capital Gains Tax from sale of shares in property companies:
Under current laws, Capital Gains Tax (CGT) is charged on the disposal of immovable property situated in Cyprus or of shares of a company that directly owns such property. It is now being proposed to also cover the cases where such property is indirectly held through layers of more than one company. In such cases, the relevant CGT charge will apply if the value of the immovable property situated in Cyprus represents more than 50% of the value of the assets of the company.
Department of Lands and Surveys (Transfer) Fees reduced:
50% discount has been introduced on the duties for the transfer of real estate and of any lease/sublease registration fees until 31 December 2016. Further more, there will be no land transfer fees on transfers of immovable property from parents to children.
DEFENCE TAX RELATED
Non-dom rules for individuals:
A Cypriot Tax resident who does not have domiciling in Cyprus shall no longer be subjected to the Special Defence Contribution tax (SDC) on dividend, interest and rental income. For the purposes of the SDC Law, an individual has a ‘domicile in the Republic’ if he/she has a domicile of origins in Cyprus based on provisions of the Wills and Success Law.
INCOME TAX RELATED
Notional interest deduction on equity: According to the amended law, as of the 01/01/2015 ‘new equity capitals’ and for a period of year are to be given a Notional Interest Deduction (NID) for companies resident in Cyprus and companies not resident in Cyprus which maintain a permanent establishment in Cyprus. The NID shall apply on 80% of the taxable profit and it is not applicable in loss making scenarios. By allowing companies to fund their operations from their own equity/capital and obtain a tax allowance deduction, these new provisions have been introduced to encourage the introduction of new equity into Cyprus tax residents companies.
At Mayfair London Properties we are able to provide you with all the necessary professional guidance, do not hesitate to contact us for any further information you may request.