TAX TREATIES

WITHHOLDING TAX (WHT) TABLES

WHT on dividends, interest and royalties

Cyprus does not levy a WHT on dividends, interest and royalties paid to non-residents of Cyprus except in the case of royalties earned on rights used within Cyprus, which are subject to a WHT of 10% (5% in the case of cinematographic films). Such Cyprus WHT on royalties for rights used within Cyprus may be reduced or eliminated by double tax treaties entered into by Cyprus or by the EU Interest and Royalty Directive as enacted in the Cyprus tax legislation.

WHT on other types of income

Cyprus levies a 10% WHT on technical services performed by non-residents in Cyprus. However no such WHT is levied if such services are performed via a permanent establishment in Cyprus of the non-resident or if performed between ‘associated’ companies as these are defined by the EU Interest and Royalty Directive as enacted in the Cyprus tax legislation?

Cyprus also levies a 10% WHT on the gross income/ receipts derived by a non-resident individual from the exercise in Cyprus of any profession or vocation and the remuneration of non-resident public entertainers (such as theatrical, musical including football clubs, other athletic missions etc).

Further, a 5% WHT is levied on gross income derived from within Cyprus by non-residents with no local permanent establishment for services in regards to the exploration, extraction or exploitation of the continental shelf as well as the establishment and use of pipelines and other installations on the ground, on the seabed and on the surface of the sea.

WHT on dividend, interest and royalties tables

Table 1 below illustrates the applicable Cyprus WHT rates on outbound dividend, interest and royalty payments.

Table 2, further below, illustrates the WHT rates provided for in the double tax treaties entered into by Cyprus. This table illustrates the maximum tax rates on Cyprus inbound payments which the treaty partner country may charge on such type incomes qualifying under the respective treaty. The actual WHT rate charged may be lower/ eliminated based on each paying country’s domestic law provisions.

Table 1- WHT on outbound payments from Cyprus

Notes:

1. Under Cyprus legislation, there is no WHT on dividends and interest paid to non residents of Cyprus. Further, there is also no WHT on royalties paid to non-residents of Cyprus for rights not used within Cyprus.
2. Royalties earned on rights used within Cyprus are subject to WHT of 10% (except royalties relating to cinematographic films, where the WHT rate is 5%).
3. A WHT rate of 5% is applicable on royalties for cinematographic films including films and video tape for television.
4. 0% on literary, dramatic, musical, or artistic work (excluding motion picture films and works on film or videotape for use in connection with television).
5. The WHT rate of 5% is applicable on cinematographic film royalties.
6. 5% WHT applies for any copyright of literary, dramatic, musical, artistic, or scientific work.
7. Serbia, Montenegro and Bosnia apply the Yugoslavia/ Cyprus treaty.
8. A 5% WHT will be levied on payment of royalties in respect of any copyright of scientific work, any patent, trademark, secret formula, process, or information concerning industrial, commercial, or scientific experience and cinematographic films.
9. The Cyprus-Czechoslovakia treaty applies with the Slovak Republic.
10. 5% rate applies for patents, trademarks, designs or models, plans, secret formulas, or processes, or any industrial, commercial, or scientific equipment, or for information concerning industrial, commercial, or scientific experience.
11. 10% for patent, trademark, design or model, plan, secret formula or process, computer software or industrial, commercial, or scientific equipment, or for information concerning industrial, commercial, or scientific experience.
12. The treaty is effective 1 January 2016.
13. The treaty is effective 1 January 2017.
14. Nil applies if the payer is a company that is a resident in Cyprus and the beneficial owner of the income is a company (other than partnership) that is a resident in Latvia. 5% rate applies for all other cases.

Table 2- Maximum WHT on inbound payments to Cyprus

Notes:

1. The rate of 5% if a dividend is paid by a company in which the beneficial owner has invested less than EUR 150.000.
2. A rate of 5% if the investment is not less than EUR 200.000 in the share capital of the company paying the dividend. If such investment is less than EUR 200000, dividends are subject to 15% WHT which is reduced to 10% if the recipient company controls 25% or more of the paying company.
3. A rate of 15% applies if received by a company holding less than 25% of the share capital of the paying company and in all cases if received by an individual.
4. No WHT if paid to the government/Central Bank/ Public Authority of the other state.
5. No WHT for interest on deposits with banking institutions.
6. Serbia, Montenegro and Bosnia apply the Yugoslavia/Cyprus treaty.
7. The 5% rate applies to companies holding directly at least 25% of the share capital of the company paying the dividend. In all other cases the WHT is 10%.
8. The treaty rates do not apply if the payment is made to a Cyprus entity by a resident of Bulgaria owning directly or indirectly at least 25% of the share capital of the Cyprus entity and the Cyprus entity pays tax in Cyprus at a tax rate lower than the usual tax rate.
9. Nil if paid to a government/Central Bank/ Public Authority or for export guarantee.
10. Nil on literary, dramatic, musical, or artistic work (but not including royalties in respect of motion picture films and works on film or videotape for use in connection with television).
11. Nil applies if received by a company (excluding partnership) which holds directly at least 10% of the share capital of the paying company for an uninterrupted period of no less than one year. 5% applies in all other cases.
12. 10% for patent, trademark, design or model, plan, secret formula or process, computer software or industrial, commercial, or scientific equipment, or for information concerning industrial, commercial, or scientific experience.
13. A rate of 15% if received by a company controlling less than 10% of the share capital of the paying company or the duration of any holding is less than one uninterrupted year. A rate of 15% also applies if received by an individual.
14. A rate of 15% applies if received by a company controlling less than 10% of the voting power in the paying company and in all cases if received by an individual.
15. A rate of 15% if received by a company (partnership is excluded) holding less than 10% of the capital of the paying company and in all cases if received by an individual.
16. Nil if paid to a government, bank, or financial institution.
17. A rate of 5% on royalties for cinematographic films including films and video tapes for television.
18. A rate of 15% if received by a company holding less than 10% of the capital of the paying company and in all cases if received by an individual.
19. A rate of 5% on cinematographic film royalties (other than films shown on television).
20. Prior to 1 April 2017, the applicable rate is 15% if received by a company holding less than 10% of the shares of the paying company and in all cases if received by an individual.
21. A rate of 10% is also applicable for payments of a technical, managerial, or consulting nature. Prior to 1 April 2017, a rate of 15% applies on royalties.
22. A rate of 5% if received by a company (other than partnership) holding less than 10% of the capital of the company paying the dividend and in all cases if received by an individual.
23. Nil rate applies if the recipient company (partnership is excluded) holds directly 10% of the share capital of the paying company for an uninterrupted period of at least 2 years. 5% in all other cases.
24. A rate of 5% applies if the beneficial owner is a company (other than a partnership) which holds directly at least 25% of the capital of the company paying the dividends. A rate of 10% in all other cases.
25. 5% rate applies for patents, trademarks, designs or models, plans, secret formulas, or processes, or any industrial, commercial, or scientific equipment, or for information concerning industrial, commercial, or scientific experience.
26. A rate of 10% on dividend if paid by a company in which the beneficial owner has invested less than EUR 100.000 in the share capital of the company paying the dividend.
27. A rate of 7% if paid to a bank or financial institution.
28. A rate of 5% if received by a company holding less than 10% of the capital of the paying company and in all cases if received by an individual or a company not limited at least partly by shares.
29. A rate of 15% if received by a company holding less than 25% of the share capital of the paying company and in all cases if received by an individual or a company not limited at least partly by shares.
30. A rate of 10% on interest received by a financial institution or when it relates to sale on credit of any industrial, commercial, or scientific equipment or of merchandise.
31. A rate of 5% applies for any copyright of literary, dramatic, musical, artistic, or scientific A 10% rate applies for industrial, commercial, or scientific equipment. A 15% rate applies for patents, trade marks, designs or models, plans, secret formulas, or processes.
32. A rate of 15% if a dividend is paid by a company in which the beneficial owner holds less than 20% of the share capital of the paying company and the beneficial owner has invested less than Eur 100.000.
33. A 5% WHT will be levied on payment of royalties in respect of any copyright of scientific work, any patent, trade mark, secret formula, process or information concerning industrial, commercial or scientific experience. 10% WHT will be levied in all other cases.
34. A rate of 15% applies to individual shareholders regardless of their percentage of shareholding. Companies controlling less than 10% of the voting shares are also entitled to a rate of 15%. Companies controlling at least 10% of the voting shares are entitled to nil WHT.
35. A rate of 15% if received by a company controlling less than 10% of the voting power of the paying company and in all cases if received by an individual. If a company controls at least 10% of the voting power of the paying company in order to benefit from the WHT rate of 5% other conditions relating to the income of the paying company need to be satisfied, otherwise a WHT rate of 15%.
36. Nil rate applies if the beneficial owner is a company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividends or if the beneficial owner of the shares is the Government of Cyprus or Norway. A rate of 15% in all other cases.
37. The Cyprus - Czechoslovakia treaty applies with the Slovak Republic.
38. 10% rate applies on payment of royalties of any copyright of literary, artistic or scientific work including cinematograph films, and films or tapes for television or radio broadcasting. A rate of 15% applies on payments of royalties of any patent, trade mark, design or model, plan, secret formula or process, or any industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience.
39. A rate of 5% if received by company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividend. 10% in all other cases.
40. The treaty is effective from 1 January 2016.
41. Nil rate applies if the beneficial owner is a company (other than a partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends during an uninterrupted period of at least one year (the holding period condition may be satisfied post the date of the dividend payment). Nil rate also applies if the beneficial owner is a pension fund or other similar institution or relates to the Government of Cyprus or Switzerland. 15% in all other cases.
42. A protocol to the treaty entered into force on 18 September 2015 but may apply retrospectively. 5% rate applies if the beneficial owner is a company which holds at least 10% of the capital of the company paying the dividend. 10% in all other cases.
43. The treaty is effective from 1 January 2017.
44. Nil applies if the payer is a company that is a resident in Latvia and the beneficial owner of the income is a company (other than partnership) that is a resident in Cyprus. 10% rate applies for all other cases (except for certain governmental interest).
45. Nil applies if the payer is a company that is a resident in Latvia and the beneficial owner of the income is a company (other than partnership) that is a resident in Cyprus. 5% rate applies for all other cases.
46. Nil if paid to a government or any other institution agreed upon between the two States. Prior to 1 April 2017, nil rate also applies if paid to a bank or financial institution.

CORPORATION TAX

Cyprus Tax Resident Companies are those which are managed and controlled in Cyprus. These are taxed on profits based on their income accrued or derived from all sources in Cyprus and abroad.

Non-resident Companies are taxed on income accrued or derived from a business activity which is carried out though a permanent establishment in Cyprus and on certain income arising from sources in Cyprus.

Foreign taxes paid can be credited against the corporation tax liability.

Tax rate:

                        Corporation tax          12,5%

Tax Allowances/ Exemptions of Legal Entities

Deductible Expenditure of Legal Entities

Non-Deductible Expenditure of Legal Entities

Corporate Tax Losses

Tax losses can be carried forward and set off against the profits of the next five (5) years, subject to conditions as from the year 2007 onward.

A partnership or a sole trader transferring business into a company can carry forward tax losses into the company for future utilization.

Losses from a permanent establishment abroad can be set off with profits of the company in Cyprus. Subsequent profits of the permanent establishment abroad are offset in previous periods, will be included in the taxable income of this year, up to the amount of profit from permanent establishment abroad.

The current year loss of one company can be set off against the profit of another, subject to conditions, provided the companies are Cyprus tax resident companies of a group. Group is defined as:

One company holding at least 75% of voting shares of the other company.

Both of the companies are at least 75% (voting shares) held by another third company.

Group Relief

Current year tax losses within group of Cyprus tax resident companies can be surrendered provided that the group companies are members of the same group for the entire year.

Current year tax loss from another EU group Company can be surrendered provided such losses have not firstly been utilised in its country of residence or any intermediary EU holding company.

Group Relief

Group is considered when:

One is a 75% subsidiary of the other, or

Both are 75% subsidiaries of a third company

Group relief may be claimed even if there is a non-Cyprus tax resident company in the group provided that such company is in an EU Country or a country which has either a tax treaty with Cyprus or exchange of information treaty (bilateral or multilateral).

Foreign Tax Credit

Foreign tax paid on income taxed in Cyprus can be credited against Cyprus income tax irrespective of the existence of a tax treaty.

Salaries -Allowable Expense

Salaries will only be treated as allowable expense when declared in full at the social insurance office and all the necessary deductions are paid (social insurance, redundancy, training & development, cohesion, trade union, provident fund etc). Any salaries for which no above deductions are paid will not be treated as allowable expense for taxation purposes.

In cases where the deductions are paid within two years from the date they become due, then the expense will be tax allowed at the year of payment.

Reorganisations

Transfers of assets and liabilities between companies can, subject to conditions, be affected without tax consequences within the framework of a reorganisation and tax losses can be carried forward by the receiving entity.

Reorganisations include mergers, demergers, partial divisions, transfer of assets, exchange of shares and transfer of the registered office from/ to Cyprus.

Annual Wear & Tear Allowances

Annual Government Fee to Registrar of Companies for Cyprus Registered Companies

The Annual Government fee is €350, payable to the Registrar of Companies by 30 June.

In the case of group companies the total amount payable is capped at €20.000.

Late payment of the levy will give rise to the following penalties: in case of up to a 2 month delay - a 10% penalty; in case of a delay between 2 and 5 months - a 40% penalty.

Non-payment of the levy may result in deregistration (strike-off) of a company by the Cyprus Registrar of Companies (which will not allow the company to submit documents or request certificates from the Registrar of Companies). If a company is re-instated within a two year period from its strike-off a fixed penalty of €500 (in addition to the outstanding amount of the levy) is imposed. The fixed fee will be increased to €750 where a company is re-instated after the two year period.

Individuals who are not tax residents of Cyprus are taxed on certain income accrued or derived from sources in Cyprus.
All Cyprus tax residents are taxed on all chargeable income accrued or derived from all sources in Cyprus and abroad.
A person is regarded to tax resident in Cyprus if he/she spends in Cyprus more than 183 days in any calendar year.
 

CAREER OPPORTUNITIES

14/09/2021

AUDITOR QUALIFIED

Ref. No.: V12533

Forward us your CV now: This email address is being protected from spambots. You need JavaScript enabled to view it. 

☎️ +357 22669017

Qualifications & Experience:

• Qualified ACCA. Degree in Accounting/ Finance or related.
• Fluent in Greek and English.
• Computer literate (MS Office, Accounting and Audit Softwares).
• At least one year of previous experience in the profession..

Duties & Responsibilities:

•  Candidate will join our audit practice and following an induction-training program, will manage audit assignments.
• Participate in various stages of audits, analytical reviews, budgeting, planning, working papers, preparation of financial statements, due diligence.
• Participate in execution of audit engagement of both local and international clients in a wide spectrum of industries.
• Tax return preparation (IR4, IR7, IR63, IR1).
• Communicate with clients for smooth execution of the above tasks

10/09/2021 

AUDIT TRAINEE (Newly of Partly Qualified)

Ref. No.: V12532

Qualifications & Experience:

• Newly or Partly Qualified ACCA. Degree in Accounting/ Finance or related.
• Fluent in Greek and English.
• Computer literate (MS Office, Accounting and Audit Softwares).
• Previous experience in the profession or in accounting will be considered an advantage.

Duties & Responsibilities:

• The Trainee ACCA candidate will join our audit practise, for audits and international clients.
• The candidate will be offered training, monitoring, supervision, guidance, study support and leave as per our firm’s ACCA Employer’s policy.
• Participate in various stages of audits, analytical reviews, budgeting, planning, working papers, preparation of financial statements, due diligence.
• Participate in the execution of audit engagements in accordance with the professional standards of both local and international clients in a wide spectrum of industries.

Forward Applications to HR Director by email: This email address is being protected from spambots. You need JavaScript enabled to view it.

or Fax: +(357) 22 66 90 19

Tel.: +(357) 22 66 90 17

P. Kalopetrides & Co is an ACCA approved Employer & Training Practise | 

Established in 1962 | www.pkalopetrides.com.cy |

Our Clients

Serving our Clients is the scope of our existence

Our People

Our people are our power.

We seek professionals to join us that have values, ambition and drive to work.
We are prepared to offer a challenging and rewarding working environment.
We are an ACCA approved training practice.

If you are seeking a position in any of area below:

• Auditing
• Taxation
• Accounting
• Office Administration

Individuals who are not tax residents of Cyprus are taxed on certain income accrued or derived from sources in Cyprus.
All Cyprus tax residents are taxed on all chargeable income accrued or derived from all sources in Cyprus and abroad.
A person is regarded to tax resident in Cyprus if he/she spends in Cyprus more than 183 days in any calendar year.
 

Corporation Tax Rates

Cyprus Tax Resident Companies are those which are managed and controlled in Cyprus.
These are taxed on profits based on their income accrued or derived from all sources in Cyprus and abroad.
Non-resident Companies are taxed on income accrued or derived from a business activity which is carried out
though a permanent establishment in Cyprus and on certain income arising from sources in Cyprus.
Foreign taxes paid can be credited against the corporation tax liability.

Tax Allowances of Legal Entities

Corporate Tax Losses

Tax losses can be carried forward and set off against the profits of the next five (5) years, subject to conditions as from the year 2007 onward.
A partnership or a sole trader transferring business into a company can carry forward tax losses into the company for future utilization.
Losses from a permanent establishment abroad can be set off with profits of the company in Cyprus. Subsequent profits of the permanent establishment abroad are offset in previous periods, will be included in the taxable income of this year, up to the amount of profit from permanent establishment abroad.
The current year loss of one company can be set off against the profit of another subject to conditions provided the companies are Cyprus tax resident companies of a group. Group is defined as:

• One company holding at least 75% of voting shares of the other company.
• Both of the companies are at least 75% (voting shares) held by another third company.

Taxations on Loans / Advances from Companies to Directors, Shareholders and Related Persons

When a Director, shareholder and their spouses or their second degree relatives obtains any loan or money advances above their salaries from a limited company, then a benefit on their salary (9% on this amount) will be added on their monthly salary.
This benefit will be taxed monthly and paid through the PAYE system.
Article 39 'Loans to Directors' is abolished, where 9% deemed interest on the above loans/advances was added to the company's tax computation as additional income.

Salaries -Allowable Expense

Salaries will only be treated as allowable expense when declared in full at the social insurance office and all the necessary deductions are paid (social insurance, redundancy, training development, cohesion, trade union, provident fund etc...,). Any salaries for which no above deductions are paid will not be treated as allowable expense for taxation purposes.
In cases where the deductions are paid within two years from the date they become due, then the expense will be tax allowed at the year of payment.

Wear & Tear Allowances

Deductible Expenditure of Legal Entities

Reorganisations Transfers of assets and liabilities between companies can be affected without tax consequences within the framework of a reorganisation and tax losses can be carried forward by the receiving entity.
Reorganisations include mergers, demergers, partial divisions, transfer of assets, exchange of shares and transfer of the registered office from/ to Cyprus.

Deemed Dividend Distribution

As from the year 2003 and onwards 70% of the accounting profits after deduction of the corporation tax (and other adjustments) are deemed to be distributed as dividends the latest two years following the year that they were incurred. This deemed distribution does not apply in the case shareholders are non-resident in Cyprus.
Deemed dividend distribution is subject to special defence contribution 20% till 31/12/2013 and 17% as from 01/01/2014 (see below special Deference Contribution).
However, the proportion of the deemed dividend distribution that corresponds to non-Cyprus tax residents is exempt from the payment of the special defence contribution.

Annual Government Fee to Registrar of Companies for Cyprus registered companies

Registered companies and those registered between 01/07/2013 till 30/06/2014, the Annual fee of
2014 is payable to the Registrar of Companies by 30 June 2014 . In the case of group companies
the total amount payable is capped at €20.000.
Late payment of the levy will give rise to the following penalties: in case of up to a 2 month
delay - a 10% penalty; in case of a delay between 2 and 5 months - a 40% penalty.
Non-payment of the levy may result in deregistration (strike-off) of a company by the Cyprus
Registrar of Companies (which will not allow the company to submit documents or request
certificates from the Registrar of Companies). If a company is re-instated within a two year
period from its strike-off a fixed penalty of €500 (in addition to the outstanding amount of the levy)
is imposed. The fixed fee will be increased to €750 where a company is re-instated after the
two year period.

Notes

1. Under Cyprus legislation there is never any WHT on dividends and interest paid to non-residents of Cyprus

2. Royalties earned on rights used within Cyprus are subject to WHT of 10%

3. A rate of 5% on film and TV royalties

4. Nil if paid to a government/Central Bank/ Public Authority or for export guarantee

5. Nil on literary, dramatic, musical, or artistic work

6. Nil if paid to the government/Central Bank/ Public Authority of the other state

7. This rate applies for patents, trademarks, designs or models, plans, secret formulas,
   or processes,or any industrial, commercial, or scientific equipment, or for information
   concerning industrial,commercial, or scientific experience

8. A rate of 15% if received by a company controlling less than 25% of the voting power.

9. A rate of 15% if received by a person controlling less than 10% of the voting power

10. Nil if paid to a government, bank, or financial institution

11. A rate of 5% on film royalties

12. A rate of 5% if received by a person controlling less than 50% of the voting power

13. This rate applies to individual shareholders regardless of their percentage of shareholding.
    Companies controlling less than 10% of the voting shares are also entitled to this rate

14. A rate of 10% for payments of a technical, managerial, or consulting nature

15. Treaty rate is 15%, therefore restricted to Cyprus legislation rate

16. A rate of 10% if a dividend is paid by a company in which the beneficial

17. If investment is less than EUR 200,000, dividends are subject to 15% WHT
    which is reduced to 10% if the recipient company controls 25% or more of the paying company

18. No WHT for interest on deposits with banking institutions

19. Kyrgyzstan, Tajikistan, and Ukraine apply the USSR/Cyprus treaty

20. A rate of 10% on interest received by a financial institution or when it relates
    to sale on credit of any industrial, commercial, or scientific equipment or of merchandise

21. This rate applies for any copyright of literary, dramatic, musical, artistic, or scientific work.
    A 10% rate applies for industrial, commercial, or scientific equipment.
    A 15% rate applies for patents, trade marks, designs or models, plans, secret formulas, or processes

22. This rate applies to companies holding directly at least 25% of the share capital
    of the company paying the dividend. In all other cases the WHT is 10%

23. This rate does not apply if the payment is made to a Cyprus international business entity
    by a resident of Bulgaria owning directly or indirectly at least 25% of the share capital of the Cyprus entity

24. A rate of 7% if paid to a bank or financial institution

25. Serbia, and Montenegro apply the Yugoslavia/Cyprus treaty

26. This rate applies if received by a company (excluding partnerships) that holds directly 25% of the shares.
    A rate of 10% applies in all other cases

27. Applies to any consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work
    (including cinematograph films and films, tapes or discs for radio or television broadcasting), computer software,
    any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial,
    commercial, or scientific experience

28. This rate applies if received by a company (excluding partnership) which holds directly at least 10% of the shares
    for an uninterrupted period of no less than one year. 5% applies in all other cases

29. 10% for patent, trademark, design or model, plan, secret formula or process, computer software or industrial, commercial,
    or scientific equipment, or for information concerning industrial, commercial, or scientific experience

30. A rate of 5% if a dividend is paid by a company in which the beneficial owner has invested less than EUR 150.000

31. The provisions of the Parent-Subsidiary EU directive are applicable

32. A rate of 15% if received by a company controlling less than 10% of the share capital of the paying company or the duration
    of any holding is less than one uninterrupted year

33. A new treaty has been signed and it will apply as from 1st January of the year following the year of ratification.
    This rate applies if the recipient company (partnership is excluded) holds directly 10% of the shares for an uninter­rupted period
    of at least 2 years. 5% in all other cases.

Special Defence Contribution

Special Defence contribution is imposed on dividend income, ‘passive’ interest income and ‘passive’ rental income earned by Cyprus tax residents. Non-tax residents are generally exempt from special contribution for the defence.

The special defence contribution is charged at the rates shown in the table below:

Notes:

1. Dividends received by a Cyprus tax resident company from other Cyprus tax resident companies are excluded from all taxes, unless they are indirectly declared after the lapse of four years from the end of the year in which the profits were generated, in which case they may be subject to Special contribution for defence at 17%.

Dividends which emanate directly or indirectly out of such dividends on which special contribution for defence was previously suffered are exempt.

This exemption does not apply if:

a) more than 50% of the paying company’s activities result directly or indirectly in investment income and

b) the foreign tax is significantly lower than the tax burden in Cyprus. The tax authorities have clarified through a circular that “significantly lower” means an effective tax rate of less than 6,25% on the profit distributed.

When the exemption does not apply, the dividend income is subject to special contribution for defence at the rate of 17%.

2. Such interest income is subject to income tax / corporation tax.

Deemed dividend distribution

A Cyprus tax resident company is deemed to have distributed as a dividend 70% of its after tax (note 1) accounting profits (as adjusted for Special contribution for defence purposes-note 2).

Such a deemed dividend distribution is reduced with payments of actual dividends paid during the relevant year the profits were generated or paid during the two following years.

On the remaining net amount (if any) of deemed dividend 17% Special contribution for defence is imposed to the extent that the ultimate direct/ indirect shareholders of the company are Cyprus tax resident individuals.

When an actual dividend is paid after the deemed dividend distribution date, then if Special contribution for defence is due on such a dividend, the tax is imposed only on the amount of the actual dividend paid which is over and above the dividend that was previously deemed to have been distributed and previously suffered Special contribution for defence.

Notes:

1.    The term ‘’tax’’ in addition to corporation tax includes also the special defence contribution,the capital gains tax and any foreign taxes suffered.

2.    A number of adjustments to the accounting profit are required for deemed distribution purposes, including for tax years 2012, 2013 and 2014 if the company has acquired in those years plant, machinery or buildings (excluding private motor vehicles) for business purposes, the cost of these assets will be deductible against the accounting profits.

Disposal of assets to shareholder at less than market value

When a company disposes of an asset to an individual shareholder or a relative of his up to second degree or his spouse for a consideration less than its market value, the difference between the consideration and the market value will be deemed to have been distributed as a dividend to the shareholder. This provision, does not apply for assets originally gifted to the company by an individual shareholder or a relative of his up to second degree or his spouse.

Company dissolution

The cumulative profits of the last five years prior to the company’s dissolution, which have not been distributed or deemed to have been distributed, will be considered as distributed on dissolution and will be subject to Special contribution for defence at the rate of 17%.

This provision does not hold in the case of dissolution under a Reorganisation.

Reduction of capital

In the case of a reduction of capital of a company, any amounts paid or due to the shareholders over and above the previously paid-in equity will be considered as dividends distributed subject to special defence contribution at the rate of 17% after deducting any amounts which have been deemed as distributable profits.

The above provisions apply only to the extent that the ultimate shareholders (direct or indirect) are Cyprus tax resident individuals.

Capital Gains Tax

Capital gains tax is imposed at the rate of 20% on:

·  gains from the disposal of immovable property situated in the Republic

·  gains from the disposal of shares of companies not listed on a recognised stock exchange which own immovable property situated in Republic. In this case, the gain is calculated exclusively on the basis of the gain from the immovable property. The value of the immovable property is its market value at the time the shares sold.

The taxable gain is the difference between the sale proceeds and the original cost of the property plus improvements as adjusted for inflation up to the date of disposal on the basis of the consumer price index in Cyprus. If the disposed property was acquired before 1 January 1980 its original cost is deemed to be the value of the property as at 1 January 1980. Any expenditure incurred for the production of the gain e.g. legal fees, is deducted from the sale proceeds. The following expenses however are not deductible:

·  Immovable Property Tax

·  Immovable Property fees

·  Sewerage fees

Lifetime Exemptions to individuals:

The above exemptions are given only once and not for every disposal.

No individual can claim all three exemptions but can claim one of these exemptions whichever  is the higher.

Exemptions

The following disposals of immovable property are not subject to Capital Gains Tax:

•       Transfers arising on death.

•       Gifts between spouses, parents, to children and between relatives up to third degree of kindred.

•       Gifts to a company where the company's shareholders are members of the donor's family and the shareholders continue to be members of the family for five years after the day if the transfer.

•       Gifts by a family company to its shareholders provided such property was originally acquired by the company by way of gift and given that the ownership will remain in the shareholder’s ownership for at least three years.

•       Gifts to charities and the Government.

•       Transfers as a result of reorganisations.

•       Exchange or disposal of immovable property under the Agricultural Land (Consolidation) Laws.

•       Expropriations.

•       Transfer of property as a settlement by court decision, between ex-husband and wife.

•       Transfer of property of a missing person during the administration of such property.

•       Exchange of properties, provided that the whole of the gain made on the exchange has been used to acquire the other property. The gain that is not taxable is deducted from the cost of the new property, i.e. the payment of tax is deferred until the disposal of the new property.

Immovable Property Tax

Immovable Property Tax is imposed on the market value as at 1 January 1980 and applies to the immovable property owned by the taxpayer on 1 January of each year.

This tax is payable on 30 September each year. Physical and legal persons are both liable to Immovable Property Tax.

Owners with property valued (as at 1 January 1980) less than €12.500 are exempt from immovable property tax.

Properties exempt from IPT:

-       Public cemeteries

-       Churches and other religions buildings

-       Public hospitals

-       Schools

-       Properties owns by the Republic, foreign embassies and consulates

-       Building under preservation order (subject to conditions

-       Building of charitable organisations

-       Agricultural land used for agriculture or animal husbandry by a farmer

-       Properties situated in inaccessible areas

-       Property of a missing person under administration

-       Turkish- Cypriot property in the unoccupied area of the Republic leased from the Government Trustee by a refugee for private accommodation

Estate Duty

Estate duty has been abolished as from 1 January 2000.

The executor/administrator of the estate of the deceased is required by the Deceased Person's Estate Law, to submit to the tax authorities a statement of assets and liabilities of the deceased within six months from his/her death.

Immovable Property Transfer Fees

The transfer fees are paid by the acquirer to the Department of Land and Surveys on transfers of immovable property on values estimated by the Department of Land and Surveys.

As from 2 December of 2011 until 31 December of 2016, a transfer relating to properties that are subject to VAT will be exempt from the above transfer fees and a transfer relating to properties that are not subject to VAT will be eligible for 50% exemption from the above transfer fees (subject to conditions).

In the situation of transferring of immovable property to a family company and provided the shareholders remain members of the same family, then after the passing of 5 years the immovable property transfer fees are being refunded.

In the case of property transferred from a company whose shareholders are spouses and/or their children, to one of the two spouses, or their children or to third degree of relation the transfer fees are calculated on the value of the property as follows:

-       transfer is to spouse                   8%

-       transfer is to child                      4%

-       transfer is to a relative               8%

Also the following rates are applicable in the case of free transfers:

-       from parents to children                          0,2%

-       between spouses                                   0,4%

-       between third degree relatives                0,4%

-       to trustees                                              €50

Value in these cases is the one written on the title deed which refers to values of the year 1980

No immovable property transfer fees are payable in the case of reorganization of companies.