Q1.I am resident in Cyprus and receive dividends and gross interest from abroad. When do I need to pay any tax?
A1. Hi Tom, As you are resident in Cyprus there is no tax to pay on dividends or interest. However, there is special defence contribution to pay only if you are domiciled in Cyprus. Individuals who are Cyprus tax resident for 17 out of the last 20 years are considered to be domiciled in Cyprus. Non-domiciled persons are exempt from defence tax on rental income, dividends and interest as from 17 July 2015. If you are non-domiciled there are forms to complete that need to be submitted to the Cypriot Inland Revenue. The payment of special defence contribution on dividends and interest, when withheld at source is due on or before the end of the month following the month in which the withholding is made. When special defence contribution is payable by the recipient of the dividend or interest, as in the case of dividends and interest received from overseas sources for domiciled persons in Cyprus, under the self-assessment system, the special defence contribution is due by two instalments. For dividends and interest received up to 30 June 2019 the special defence is payable by 30 June 2019 and for amounts received from 1 July 2019 to 31 December 2019 the special defence is payable by 31 December 2019. Any foreign tax is deducted as a credit against the special defence contribution. Special defence contribution payable according to any assessment issued by the Inland Revenue is due on or before the end of the month following the month in which the assessment is issued.
If the special defence contribution is not paid by the due date, there is a penalty of 5% plus interest is charged from the due date until the date of payment. The rate of the special defence contribution is 17% for dividends from 1 January 2014( from 1 January 2012 to 31 December 2013 was 20%) and 30% for interest received from 29 April 2013 (from 31 August 2011 to 28 April 2013 was 15%). However, there is a reduced rate of 3% for interest if the total income , including the interest is less than €12,000.
Clearly Read can help you to complete the appropriate form and calculate the special defence contribution to be paid.
Q2. Is there any tax relief on entertaining expenses in Cyprus?
A2. Hi Sue, Entertaining expenses are treated as a business expense up to 1% of the turnover but to a maximum of €17086.Entertainment includes hospitality of any kind, such as cost of annual dinner parties of staff, clients, customers, office drinks and food, theatre tickets, provision of sports facilities to staff, made in connection with a business. As an example, if the turnover was €200,000 and the entertaining cost was €5000 then the amount allowed as an expense is the lower of 1% of €200,000=€2000 or €17086 i.e €2000
Q3. I am resident in Cyprus and provide consultancy services to businesses in the UK. I have not Registered for Vat as I understand it is not compulsory as all my sales would be zero-rated. Is this correct?
A3. Hi John
As from 1st January 2010, you will have to register for Vat in Cyprus and also register for Vies 11. In order to ensure transparency within the EU and facilitate prevention and identification of fraud, by cross-checking data from the different Member States the VIES (vat information and exchange system) returns have to be submitted by persons providing certain services to other member states.