TAX ALERT – Changes to the tax laws making Cyprus an even more attractive jurisdiction
Favorable amendments have been passed to the provisions of the Cyprus Income tax legislation and the Special Contribution for Defence tax legislation. These amendments are applicable as of their date of publication in the Official Gazette (published on 16 July 2015 and thus applicable as from tax year 2015).
The new amendments to theCyprustax system aim primarily to:
· Assist/motivateCypruscompanies in attracting new equity capital in a tax efficient manner
· Provide tax advantages to high-net worth individuals to transfer their residency toCyprus
The above amendments may be used towards avoiding the application of CFC rules where applicable. The changes are summarized below:
Corporation tax – Notional interest deduction:
The main drive towards this change is to provide the initiatives for companies to introduce new equity in their structures, as opposed to debt financing which is provided at a high cost. As per these new amendments notional interest deduction on equity has been introduced as of 1 January 2015 onwards whereby:
Lastly, claiming the above mentioned notional interest deduction is not compulsory. Taxpayers may elect whether to claim this deduction wholly or partly.
Special Contribution for Defence Tax: Non-Domicile Principle:
TheCyprusspecial contribution for defence tax law is amended so that individuals who are not considered to be ‘domiciled’ inCypruswould be exempt from payment of defence tax on dividends, interest and rents. This change is applicable to all relevant income irrespective of their source (ie from sources withinCyprusor abroad).
The special contribution for defence tax law defines domicile in detail in accordance with the rules of the Wills and Succession Law. This change provides the incentives for high-net worth individuals to consider transferring their tax residency toCyprus.
We hope the above are useful, at your disposal for any further assistance or clarifications required.