Cyprus government amends the tax legislation in a way to attract International Businesses and High Net Worth individuals.
- Provide Income Tax exemptions for senior employees relocating in Cyprus. Actually in an extension of the current legislation for another 5 years over €100.000 Gross Salary’s employees / directors and another 2 years for the 20% deduction on Gross Salary.
- Offer planning advantages to High Net Worth Individuals (HNWI) residing or considering residing in Cyprus through the introduction of ‘’non-domicile’’ status.
- Reduce the cost of investing in Cyprus Real Estate (which is related to VIP citizen scheme/Cyprus passport).
For Cyprus Companies
- Extend considerable tax incentives that create new equity share capital. Reduction of the corporation tax from 12.5% up to 2.5%.
Summary of Changes
- Currently any employee relocated to Cyprus or received a job to Cyprus can take the advantage of 50% deductions on his Gross Salary for 5 years starting employment after the year 2012 can be extended another 5 years. In addition, for any employee relocated to Cyprus or received a job to Cyprus any salary, can take the advantage of a tax credit of 20% on Gross Salary for 3 years. The law extended for another 2 years. Note that employee cannot take advantage both incentives.
- Tax exemption for ‘’Non-Domicile’’ Cyprus tax resident. Any individual is considered as ‘’Domicile in Cyprus’’ either by i) domicile of origin, or ii) domicile of choice, as defined by the Wills and Succession Law. The law changes to accommodate HNWI for residing in Cyprus more than 183 days, but they choose not to be treated as ‘’Domiciled in Cyprus’’ for special contribution of Defense law in Dividends and Interests received (50c tax).In common language, individuals will stay and enjoy Cyprus but will pay no tax or Dividends or Interest received around the world. SDC tax currently is payable on dividends (17%), interest revived (30%) and rental income (3% on 75% of gross rentals). All the above rates for ‘’Non – Domicile’’ will be zero.
- Any purchase done of Real Estate for the period 16/7/2015 up to 31/12/2016 will be except for Capital Gain Tax (CGT). The exception does not apply if it is a sale of shares of Cyprus Company holding Real Estate. Also does not apply if purchased made by way of donation, gift or exchange of properties. CGT applies to properties sold that was bought for private use or rental properties and hold by Individuals for long period of time. Currently CGT office estimates the period to be more than 2-3 years depended on the situation. We would like to advice you for this matter based on case by case.
For Cyprus Companies
Introduction of National Interest Deduction (NID) or Equity.
With retrospective effect from 1 January 2015, Cyprus tax resident companies that create ‘’new equity’’ will be able to clearing NID of up to 80% of their taxable income reducing the overall effective tax rate to as low as 2.5% from 12.5% regular rate. The NID will remove any distortions between equity and debt financing by bringing equity and debt into acceptable levels of other Tax Jurisdiction Parties. For example in Russian tax authorities not accepting the concept of Back to back loan and tax request with holdings interest paid to Cyprus Company. The Russian Tax office will consider that CyCo is not the final receiver of the interest and not accept that interest paid applies based on DTT. NID is a good vehicle to escape for such structure and received the same advantage.