Q. Are there any recent changes in tax in Cyprus?
– Linda, Paphos.
A. Hi Linda— Some of the recent changes that were approved and became law on 16 July 2015 are as follows;
The government has introduced a new concept of non domiciled. An individual is considered to be domiciled in Cyprus by way of domicile of origin or by domicile of choice. Individuals that are Cyprus tax resident for 17 out of the last 20 years are considered to be domiciled in Cyprus. Non domiciled persons are now exempt from defence tax on rental income, dividends and Interest. This will be very good news for most expats as those persons already living in Cyprus who are Cyprus tax residents qualifying as non-doms will see a special defence saving of 17% on dividends, 30% on interest and 3% on rental income.
Cyprus tax resident non-doms will continue to be subject to taxation at the normal applicable personal tax rates in respect of rental and other forms of income that they receive (salaries, etc)
EXEMPTION OF INCOME FROM FIRST EMPLOYMENT IN CYPRUS
Extension of incentives provided to persons obtaining employment in Cyprus;
- 20% exemption of the income from employment in Cyprus with a maximum exemption of €8,550 per year is extended from 3 years to 5 years until 2020
- 50% exemption of the income from employment in Cyprus that exceeds €100,000 per year is extended from 5 years to 10 years. This is available to individuals who were not Cyprus tax residents for three out of the last five years prior to the commencement of their employment including the year immediately preceeding their employment.
The annual tax depreciation for plant and equipment purchased after 2012 of 20% and for new industrial and hotel buildings of 7% is extended for the years 2015 and 2016.
FOREIGN EXCHANGE GAINS AND LOSSES
Apart from Companies trading in foreign currencies exchange differences (gains or losses realised or unrealised) are no longer taxable or tax deductible as from 1 January 2015.
Immovable property purchased from the date the law comes into effect to 31 December 2016 will be exempted from CGT on any capital gain arising from the future disposal. The property must include buildings to be eligible.
For properties transferred by 31 December 2016 there will be a 50% reduction in the transfer fees.
NOTIONAL INTEREST DEDUCTION ON EQUITY
As from 1 January 2015, companies are entitled to a notional tax deduction on ‘new equity’. New equity means funds or in –kind payments introduced into the share capital of the Company after 1 January 2015 and which has actually been paid and is used for the operations of the Company. This notional expense deduction will be tax deductible to the extent that it relates to business assets and cannot exceed 80% of the taxable income of the company for the year.