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Archives for July 2017

New Law regulating the settlement of overdue Taxes providing for an exemption of up to 95% discount from additional charges imposed

The law applies to tax liabilities arising under the Income Tax Law; Special Contribution Law; Immovable Property Law; Capital Gains Tax Law; Inheritance Tax Law; Special Contribution Law; Stamp Duty Law and VAT Law.

The scheme applies in the following cases:

  • Taxpayers who have tax liabilities under the above-mentioned laws for the years up to and including 2015 which at the time of application have been assessed by the Tax Department and need to be settled.
  • Amounts due as a result of submission of a self-assessment for the years up to and including 2015 where the tax returns have been submitted but no tax payments have been made.
  • Tax liabilities assessed by the Commissioner of Taxation after 3 July 2017 and relate to tax years up to and including 2015. In such cases, the application for the scheme must be made within three months from the date which the tax becomes due.

The relief of interest and/or penalties will be applied on the overdue taxes based on the number of instalments arranged (with a maximum amount of 60 instalments permitted under the scheme). Significantly, the law provides for up to a staggering 95% relief from the charges imposed if a lump-sum payment is made for the full settlement of the tax debt.

The law allows a taxpayer who is not satisfied with the Tax Commissioner’s decision to object, providing the reasons for the objection and providing supporting documentation and the Commissioner must respond within 30 days from receiving the objection. Furthermore, where a taxpayer who makes an application for settlement under the new scheme is under criminal prosecution, the Commissioner informs the Attorney General accordingly to consider suspending the prosecution.

An agreed settlement scheme can be terminated in the following instances; where the taxpayer fails to file tax returns and VAT returns during the agreed settlement period; where the taxpayer fails to settle a liability for the period after 15 December 2015; delays in paying any three instalments or one instalment for more than three consecutive months.

If you are interested in benefiting from the new amendments, applications to enter this scheme must be submitted within three months from the date the law comes into force (3 July 2017). Exemptions are made for cases where the tax liability is assessed after 3 July 2017.

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Cyprus Company Formation, Company Registration in Cyprus

Amendments to law of the term -Cyprus Tax Residency-

As of 14 July 2017, the Cyprus House of Representatives voted a bill that amended the law for the criteria for determining the rights of an individual to be considered as a tax resident of Cyprus.

In the past, for an individual to be eligible to be considered as tax resident of Cyprus, he/she had to remain in Cyprus for 183 days in one year.

As per the new law, the below three criteria must be met for an individual to be considered as tax resident of Cyprus. It is noted that an individual who fulfils all the criteria, but if in the year of the exercise of any business and/or employment in Cyprus and/or holding of position to a table person of Cyprus have ceased, then he/she will not be considered as tax resident of Cyprus in that specific tax year.

New Criteria for Cyprus Residency

  1. The individual must remain in Cyprus for at least sixty days in the tax year and must not be tax resident in any other state for the same tax year;
  2. The individual must carry out business in Cyprus and/or be employed in Cyprus and/or be a director in a company which is tax resident in Cyprus during the tax year of consideration;
  3. The individual must maintain a permanent residence in Cyprus, which can be rented or owned.

The total number of days of stay in Cyprus are calculated as follows:

  • The day of departure from Cyprus is considered not considered as a day of stay in Cyprus;
  • The day of arrival in Cyprus is considered as one day of stay in Cyprus;
  • Arrival in Cyprus and departure from Cyprus on the same day is considered as one day of stay in Cyprus;
  • Departure from Cyprus and arrival to Cyprus on the same day is not considered as a day of stay in Cyprus.

It is reminded that Cyprus tax residents are taxed on their worldwide income under Cyprus income tax rates which are as follows:

Up to €19,500 0%
Between €19,501 – €28,000 20%
Between €28,001 – €36,300 25%
Between €36,301 – €60,000 30%
Over €60,000 35%

·             New Non – Domiciled Rules:

Individuals who are tax resident of Cyprus but are not domiciled in Cyprus are exempt from special defence contribution imposed on dividends, interest and rental income.

·             Relief for high paid individuals taking up employment in Cyprus:

50% exemption applies to non-residence individuals taking up residence in Cyprus for an employment in Cyprus with income exceeded €100,000 for a period of 10 years (extended from 5 years to 10 years).

·             Relief for non resident individuals taking up employment in Cyprus:

20% exemption of the remuneration with a maximum amount of €8,550 from any office or employment exercised in Cyprus by an individual who was resident outside Cyprus before commencement of employment. The exemption applies for a period of 5 years (extended from 3 years to 5 years). 


New Criteria for Companies

Based on the new provisions, and in accordance with the Government’s scheme for the Acquisition of Citizenship by Investment, incentives are now offered to high-paid employees / executives of companies located outside the Republic of Cyprus with the purpose of attracting these companies to transfer their base to Cyprus.


Such International Business Companies will need to show substantial presence which will determine the tax base of the company.

Actions or measures that indicate substantial presence of companies include:

  • Who the company’s Directors are, what their business background is, how much time they can dedicate to the running of the company.
  • How the Directors make decisions.
  • Maintaining bank accounts with the local banks.

By creating sufficient presence in Cyprus, the company minimizes the risk of double taxation if a foreign tax authority seeks to challenge the tax residency of a Cyprus company with the purpose of imposing tax in accordance with its own legislation.

Please contact us for further information or simply if you would like to explore the benefits of Cyprus Tax Residency for your particular situation.

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Cyprus signs three new Double Taxation Agreements with Luxembourg, Barbados and San Marino

During the month of May 2017, Cyprus has concluded 3 new Double Tax Agreements in an effort to further strengthen its ties with other countries and establish Cyprus as a forceful international financial centre.

Cyprus – Barbados Double Taxation Treaty

On 3 May 2017 Cyprus and Barbados signed an agreement for the avoidance of double taxation in London based on the Organisation of Economic Cooperation and Development (OECD) model. The agreement was reached following several years of negotiations.

The double taxation agreement signed between Cyprus and the Caribbean island lays the groundwork for cooperation between the two countries.

Paradoxically, Cyprus and Barbados have a lot in common; both countries are former British colonies that gained independence in the 1960s; both countries have a strong service-based economy with tourism and financial services playing an important role.

Cyprus – Luxembourg Double Tax Treaty

On 8 May 2017 Cyprus and Luxembourg signed a bilateral treaty on the avoidance of double taxation based on the OECD model.. The Agreement is now awaiting ratification and if it is ratified before the end of 2017 then it is expected to enter into force as of 1 January 2018.

The Grand Duchy of Luxembourg was one of the few European countries with which Cyprus did not have a Double Tax Treaty in force.

This new agreement is expected to pave the way for the enhancement of the financial and trade ties between the two countries.

The main characteristics of the treaty are as follows:

  • Withholding taxes will be imposed only on dividends at the following rates:
  • 0% where there is at least 10% participation by a tax resident company
  • 5% in all other cases
  • No withholding taxes will be imposed on interest.
  • No withholding taxes will be imposed on royalties (as long as the recipient of the royalties is the beneficial owner of the income).
  • Gains from the sale of shares of immovable property will be taxed in the country where the asset is located.


Cyprus – San Marino Double Tax Treaty

The Minister of Foreign Affairs of Cyprus, Mr Ioannis Kassoulides and the Minister of Foreign Affairs of San Marino, Mr Nicola Renzi, signed a double tax treaty in Nicosia on 19 May 2017.

The agreement is expected to strengthen the ties between the two countries.


The conclusion of new Double Tax Treaties between Cyprus and other countries is aimed at establishing Cyprus as an international financial centre and attracting additional foreign investment and further solidifying Cyprus’s international diplomatic ties.

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