Changes in Cypriot Tax Legislation following MoU with Troika

Dr Michela Pirotta | Published on 20 Mar 2013

company-formation

The Cypriot Parliament has enacted new tax laws and amended existing ones in an attempt to strengthen public finances and reduce administrative burdens. Nevertheless, the full benefits which Cyprus offers as an international business centre have been retained.

The standard VAT rate has increased from 17% to 18% for the period 14th January 2013 till 12th January 2014, and it will go up to 19% as from 13th January 2014. Moreover, the reduced VAT will increase to to 9% as from 13th January 2014.

As regards income tax, losses of any tax year will not will not be set off against income of subsequent tax years after the lapse of 5 years from the end of the tax year in which the loss was incurred. Moreover, the brackets for Special Contribution on gross monthly earnings and pensions of private sector employees, self-employed individuals and private sector pensioners have been narrowed, resulting in a higher contribution. Furthermore, Social Insurance Contribution rates will increase from 6.8% to 7.8% with effect from 1st January 2014, and the rate will increase by 0.5% every 5 years.

Companies incorporated in Cyprus but not resident there for tax purposes are now required to submit income tax returns, and person who only derive income from dividends and interest are now required to keep books and records for the preparation of audited financial statements. In addition, the annual government licence fee of €350 has now been extended to all companies, following the abolishment of all exemptions previously available. Cyprus has also introduced taxation on winnings from betting on government lotteries and OPAP games.

In the sphere of exchange of information, Cyprus is now able to provide information to the competent authorities of another state according to agreements for the exchange of information or in line with Directive 2011/16/EC on administrative cooperation in the field of taxation.



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