Cyprus Tax Revisions

The following tax revisions, which we feel you may find of interest have recently taken effect: 

1. Extension of the accelerated tax depreciation

Accelerated tax depreciation rates were initially provided for the years 2012-2014 for certain assets. In an effort to encourage business investment, an extension was provided for their use for the years 2015-2016 as well. The accelerated depreciation applies for the following:

• Plant and machinery tax depreciation rate at 20% per annum instead of 10%
• Industrial buildings and hotels tax depreciation rate of 7% per annum instead of 4%

1. Group tax loss relief provisions

Prior 01/01/2015

In order for two Cyprus tax resident companies to be considered as part of the same tax group, there shouldn’t be any non-Cyprus resident company interposed between them.

After 01/01/2015

For establishing a tax group, the imposition of a non-Cyprus tax resident company does not affect the eligibility of a group, provided that the interposed Company is a tax resident in an EU member or in any country with which Cyprus has duly signed Double Tax Treaty or Exchange of Information Agreement.

1. Definition of terms “Republic” and “Permanent Establishment” as from 01/01/2015

“Republic” also includes the exclusive economic zone of Cyprus and its continental shelf and any constructions or plants located in these zones.

“Permanent Establishment” has been extended in order to include activities relating to the exploration, extraction and exploitation of the seabed subsoil or the natural resources, including the installation and exploitation of pipelines and other installation on the seabed.

1. Deemed dividend distribution (“DDD”) for provisions on reorganizations

The DDD provisions shall not be applicable on profits arising as a result of a reorganization, provided that such reorganization falls under the provision of the Income Tax Law.

As a result of the above, such profits will be included in the DDD profits at a later stage, once they are realized as a result of a disposal by the receiving company of the assets transferred during the reorganization or the shares of the receiving company that were acquired during the reorganization or reduction of capital that was issued during the reorganization.

1. Land transfer fees

As per the Department of Land and Surveys, (Fees and Charges) Law, Cap 219Amendment, in July 2016, the same is applied by the Land Department:

• No land transfer fees apply if the transaction is subject to VAT
• Land transfer fees are reduced by 50% if the transaction is not subject to VAT

1. Submission of tax rulings

Finally, the Government has, starting from 30/09/2016, imposed the following charges for issuing tax rulings:

• EUR 1,000 for non-expedited ruling requests – no envisaged timeframe has been provided if this route is followed;
• EUR 2,000 for expedited ruling requests. In such case, the reply from the authorities should be expected within 21 working days.

The following tax revisions, which we feel you may find of interest have recently taken effect: 

1. Extension of the accelerated tax depreciation

Accelerated tax depreciation rates were initially provided for the years 2012-2014 for certain assets. In an effort to encourage business investment, an extension was provided for their use for the years 2015-2016 as well. The accelerated depreciation applies for the following:

• Plant and machinery tax depreciation rate at 20% per annum instead of 10%
• Industrial buildings and hotels tax depreciation rate of 7% per annum instead of 4%

1. Group tax loss relief provisions

Prior 01/01/2015

In order for two Cyprus tax resident companies to be considered as part of the same tax group, there shouldn’t be any non-Cyprus resident company interposed between them.

After 01/01/2015

For establishing a tax group, the imposition of a non-Cyprus tax resident company does not affect the eligibility of a group, provided that the interposed Company is a tax resident in an EU member or in any country with which Cyprus has duly signed Double Tax Treaty or Exchange of Information Agreement.

1. Definition of terms “Republic” and “Permanent Establishment” as from 01/01/2015

“Republic” also includes the exclusive economic zone of Cyprus and its continental shelf and any constructions or plants located in these zones.

“Permanent Establishment” has been extended in order to include activities relating to the exploration, extraction and exploitation of the seabed subsoil or the natural resources, including the installation and exploitation of pipelines and other installation on the seabed.

1. Deemed dividend distribution (“DDD”) for provisions on reorganizations

The DDD provisions shall not be applicable on profits arising as a result of a reorganization, provided that such reorganization falls under the provision of the Income Tax Law.

As a result of the above, such profits will be included in the DDD profits at a later stage, once they are realized as a result of a disposal by the receiving company of the assets transferred during the reorganization or the shares of the receiving company that were acquired during the reorganization or reduction of capital that was issued during the reorganization.

1. Land transfer fees

As per the Department of Land and Surveys, (Fees and Charges) Law, Cap 219Amendment, in July 2016, the same is applied by the Land Department:

• No land transfer fees apply if the transaction is subject to VAT
• Land transfer fees are reduced by 50% if the transaction is not subject to VAT

1. Submission of tax rulings

Finally, the Government has, starting from 30/09/2016, imposed the following charges for issuing tax rulings:

• EUR 1,000 for non-expedited ruling requests – no envisaged timeframe has been provided if this route is followed;
• EUR 2,000 for expedited ruling requests. In such case, the reply from the authorities should be expected within 21 working days.