Финансово-консалтинговая компания CYWORLD WEALTH

Amendments to the Income Tax Law and the Law on Special Fees for Defense in Cyprus

27 Dec
Amendments to the Income Tax Law and the Law on Special Fees for Defense in Cyprus CYWORLD WEALTH Advocate Cyprus

Amendments to the Income Tax Law and the Law on Special Fees for Defense in Cyprus

Amendments to the Income Tax Law and the Law on Special Fees for Defense in Cyprus

On December 21, 2021, two amendment laws were published in the Official Gazette aimed at strengthening the tax base of Cyprus to prevent tax abuse.
New provisions amending the Special Contributions for Defense Act (SCDL) and the Income Tax Act (ITL) are effective December 31, 2022.
These laws are in line with the recent EU Country-Specific Recommendations (CSRs) for Cyprus and the EU guidelines for tax safeguards to be adopted by EU Member States in relation to blacklisted EU jurisdictions.
The aim of the new measures is to prevent aggressive tax planning and to make the tax base fairer and more efficient.

Review of new provisions
Introduction of withholding tax (WHT) on payments to companies in jurisdictions included in the EU Blacklist of non-cooperating jurisdictions (“EU Blacklist”) (SCDL amendment).

Dividend
Income tax of 17% applies to dividends paid by a Cyprus tax resident.
companies to companies that:
• resident in jurisdictions included in the EU list, or
• are registered / registered in a jurisdiction included in the EU blacklist and are not tax residents of any other jurisdiction not included in the EU blacklist.
The following conditions apply:
• The company receiving the dividend owns directly, independently or jointly with associated companies, more than 50% of the capital, voting rights or has the right to receive more than 50% of the profits from the company paying the dividends.
• Associated companies must also be resident in an EU blacklisted jurisdiction or incorporated / registered in an EU blacklisted jurisdiction and must not be tax residents of any other non-EU blacklisted jurisdiction.
WHT does not apply in the case of dividend payments on shares listed on a recognized stock exchange.

Interest
Income tax of 30% applies to interest paid by the Cyprus tax company to companies that:
• resident in jurisdictions blacklisted by the EU, or
• are registered / registered in a jurisdiction included in the EU blacklist and are not tax residents of any other jurisdiction not included in the EU blacklist.
NDN does not apply in the case of:
• interest payments on securities listed on a recognized stock exchange.
• Payment of interest by individuals.

Royalty
Income tax of 10% applies to royalties paid by the Cyprus tax company to companies that:
• resident in jurisdictions blacklisted by the EU, or
• are registered / registered in a jurisdiction included in the EU blacklist and are not tax residents of any other jurisdiction not included in the EU blacklist.
The tax does not apply in the case of royalty payments by individuals.
It should be noted that the laws do not specify the effective date of the WHT for jurisdictions added or removed from each updated version of the EU Blacklist. It is expected that this and some other issues (for example, the application of tax tax on a cash basis or on an accrual basis) will be clarified by the Cyprus tax authorities.
Definition of “Cypriot company tax resident” / Additional test for corporate residency

In an effort to strengthen the structure of residency rules outside of the criterion / concept of management and control, the term “Cyprus tax resident company” has been expanded to include also a company that was registered / incorporated in Cyprus, but which is managed and controlled outside Cyprus, since provided that the company is not a tax resident in another state.

The above is for informative purposes only.  Further professional advice should be sought for each particular case. Our firm does not accept any responsibility for any loss or damage occurring by acting on the basis of this information.

Order service

    Request a call back

    Want to consult with one of our financial advisers by phone? Leave your details and we will contact you shortly. You can contact us by specifying your email.

      Получить консультацию

      Хотите проконсультироваться с одним из наших финансовых консультантов по телефону? Оставьте свои данные и мы свяжемся с вами в ближайшее время. Вы можете связаться с нами указав свою электронную почту.

        Заказать услугу