Cyprus - Tax News 2011
During the course of the year 2011, Cyprus has approved a series of tax measures to improve its public finances. These measures have been designed to minimize their impact on those multinational groups that have operations in Cyprus.
The most significant changes are outlined below:
Special Contribution for the Defense
The rate of the Special Contribution for the Defense (“SCD”) on interests is increased from 10% to 15%. However, interest income that arises from ordinary business activities of a company continues to be subject to corporate income tax, rather than SCD, at a rate of 10%.
Levy of the Cyprus Register of Companies
While not technically a tax measures, it is worth to note that as of 2011 included, all Cyprus companies are in principle subject to an annual EUR 350 levy to the Registrar of Companies. The levy is payable on June 30 of each year. The levy for 2011 must be paid by Dec 31, 2011.Penalties are applicable in case of late payments (10% if the levy is paid with less than 2 month delay and 30% if the levy is paid with a delay of 2 months to 5 months).
Income Tax (Individuals)
Subject to the respect of certain conditions, highly paid expatriate employees settling in Cyprus can be granted a temporary 50% tax deduction.
Income Tax (Businesses)
Deductions for expenses incurred for business related purposes will be allowed only to the extent that they are supported by invoices, receipts or other supporting documents.
Loans to shareholders and directors
Loans to individual shareholders and directors carry a notional interest rate (current rate: 9%). In case of corporate shareholders and corporate directors, the notional interest rate will be imposed only to the extent that an arm’s length interest rate is not received.
Bank Levy Legislation
Initially designed as a temporary measure to provide extraordinary resources to the Cyprus government, aimed at reducing the public deficit, the Bank Levy has been enacted as a permanent tax. It affects banks operating in Cyprus according to the Cyprus Banking Law (or cooperative societies operating according to the Cooperative Societies Law). The taxable basis is represented by the total amount of deposits held with such banks on Dec 31 of each year. The tax rate is 0.095%. However, the total amount of the tax cannot exceed 20% of the assessable taxable profits of the banks.
For more information please contact:
Jean-Robert Bartolini, Senior Vice President
+352 466 111 3795, jean.robert.bartolini@sgg.lu
Fabio Gasperoni, Manager
+352 466 111 2610, fabio.gasperoni@sgg.lu
