Η Βουλή των Αντιπροσώπων έχει πρόσφατα ψηφίσει τροποποιήσεις σχετικά με το Ετήσιο Τέλος των €350 που καταβάλουν εταιρείες. Ετήσιο Τέλος – 5/2/2013 Συγκεκριμένα οι ακόλουθες τροποποιήσεις έχουν ψηφιστεί: Επαναφέρεται το ανώτατο ποσό των €20.000 για συγκροτήματα εταιρειών Η τελευταία ημερομηνία καταβολής του Ετήσιου Τέλους για το 2012 είναι η 29η Μαρτίου 2013. Αδρανής εταιρείες ή εταιρείες που εγγράφηκαν το 2012 και είχαν εξαίρεση από την καταβολή του Ετήσιου Τέλους δεν εξαιρούνται πλέον εκτός αν αιτηθούν για διαγραφή μέχρι την 29η Μαρτίου 2013. Special levy tax > Contact us > P. Constantinou & Co Ltd is an Audit, Tax & Consulting firm based in Limassol, Cyprus, offering a full range of professional services. OUR SERVICES Audit & Accounting – Professional & Accurate Auditors and Accountants in Limassol Tax – Get the best from our deep knowledge of the Cyprus Taxation system, VAT, and compare Corporate – Benefit from the correct company structure and jurisdiction Business & Management Advisory -We advise for your profit

Στα πλαίσια του μνημονίου μεταξύ Κύπρου και Τρόικας, η Βουλή των Αντιπροσώπων ψήφισε καινούργια και τροποποιητικά νομοσχέδια, τα πιο σημαντικά  εκ τον οποίον παραθέτονται πιο κάτω. Αύξηση στο Φόρου Προστιθέμενης Αξίας Από 14 Ιανουαρίου 2013 αυξάνεται  ο κανονικός συντελεστής ΦΠΑ από 17% σε 18%. Από 13 Ιανουαρίου 2014 θα αυξηθεί σε 19%. Από 13 Ιανουαρίου 2014 ο μειωμένος συντελεστής που ισχύει κυρίως για υπηρεσίες που προσφέρονται από ξενοδοχεία και εστιατόρια θα αυξηθεί από 8% σε 9%. Ετήσιο Τέλος Εταιρειών για όλες τις Κυπριακές εταιρείες Από το 2013, η πληρωμή του ετήσιου τέλους των €350 είναι υποχρεωτική για όλες τις εταιρείες που είναι εγγεγραμμένες στο Κυπριακό Μητρώο Εταιρειών. Καταργούνται οι εξαιρέσεις που αφορούσαν αδρανείς εταιρείες και παύει να ισχύει το ανώτατο όριο των €20,000 για συγκροτήματα εταιρειών. Το ετήσιο τέλος θα είναι πληρωτέο από το έτος εγγραφής μιας νέας εταιρείας. Φόρος Εισοδήματος- χρονικός περιορισμός ζημιών που μεταφέρονται Νομικά πρόσωπα (εταιρείες) καθώς και φυσικά πρόσωπα με κύκλο εργασιών μεγαλύτερο των €70.000 θα μπορούν να μεταφέρουν φορολογική ζημία μόνο κατά τα επόμενα πέντε έτη από το τέλος του φορολογικού έτους εντός του οποίου προκύπτει φορολογική ζημιά. Η πιο πάνω τροποποίηση εφαρμόζεται από 1 Ιανουαρίου 2012. Αύξηση στις εισφορές στο Ταμείο Κοινωνικών Ασφαλίσεων Για τα έτη 2014-2018 το ποσοστό εισφοράς στο Ταμείο Κοινωνικών Ασφαλίσεων από εργοδότες και εργοδοτουμένους αυξάνεται στο 7,8% ενώ η εισφορά από αυτοτελώς εργαζόμενους και προαιρετικά ασφαλισμένους αυξάνεται στο 14,6%. Αύξηση στην Έκτακτη Εισφορά Εργοδοτουμένων, Συνταξιούχων και Αυτοτελώς Εργαζομένων του Ιδιωτικού Τομέα Νόμο Ο εν λόγω Νόμος επεκτείνετε μέχρι τις 31 Δεκεμβρίου 2016 και ο υπολογισμός της εισφοράς από 1 Ιανουαρίου 2014 διαφοροποιείται ως εξής- Διατήρηση βιβλίων και αρχείων Από 1 Ιανουαρίου 2013, η χρονική περίοδος για τη διατήρηση των βιβλίων και αρχείων της επιχείρησης μειώνεται σε έξι έτη (αντί επτά) από την λήξη του φορολογικού έτους στο οποίο αναφέρονται τα βιβλία και αρχεία. Προσωρινή φορολογία Από το 2013, η προσωρινή φορολογία θα πληρώνεται σε δύο δώσεις (αντί τρεις) στις 31 Ιουλίου και 31 Δεκεμβρίου. Μείωση του Ενιαίου Δημόσιου Επιτοκίου Υπερημερίας Το Ενιαίο Δημόσιο Επιτόκιο Υπερημερίας έχει μειωθεί από 5% σε 4,75%. About Cyprus Τροποποιήσεις στο Νόμο που ψησίστηκαν από τη Βουλή

In December 2012 the House of Representatives voted on a number of new and amending laws, as a consequence of the Memorandum of Understanding between Cyprus and Troika. The most important amendments are described below. Increase in VAT rates From 14 January 2013, the standard rate of VAT is increased from 17% to 18%. From 13 January 2014, it will be increased to 19%. Also, From 13 January 2014, the reduced rate which applies to services offered by hotels and restaurants will be increased from 8% to 9%. Special Levy Tax for all Cyprus companies Please note that from 2013 the annual Special Levy Tax of €350 is applicable to all companies registered with the Cyprus Registrar of Companies. The exemption for dormant companies is abolished and the maximum limit of €20.000 for groups of companies is also abolished. The Special Levy Tax will be payable from the year of incorporation of a company. Income Tax- time limitation for tax losses carried forward Companies and individuals with a turnover exceeding €70.000 will be able to carry forward losses for only five years from the end of the tax year in which the tax loss arises. This amendment is effective from 1 January 2012. Increase in Social Insurance Fund Contributions For the years 2014-2018 to the percentage of contribution to the Social Insurance Fund of employers and employees is increased to 7.8% while the contribution of self-employed individuals is increased to 14.6%. Increase of Special Contribution for salaries and pensions of employees in the private sector The Law regarding the special contribution on salaries and pensions of employees in the private sector is extended to 31 December 2016 and the calculation of the contribution for 2014 onwards is as follows: Retention of books and records From 1 January 2013, the period of retention of the books and records of any business is decreased to 6 years (rather than 7) from the end of the tax year to which the documents relate. Temporary Tax Assessments From 2013, the temporary tax must be paid in two installments (rather than three) as follows: 31 July and 31 December. Decrease of Public Interest Rate As of 1 January 2013, the Public Interest Rate has been decreased from 5% to 4.75%. Our Services. Learn more Obtaining Citizenship in Cyprus made easy

A tax treaty, which is based on the OECD Model Convention on Income and Capital, has been signed between Cyprus and Portugal in November 2012. Its signature follows the removal of Cyprus from Portugal’s tax haven “blacklist” and will encourage further investment between the two countries. The main provisions of the treaty are described below. Types of tax The treaty applies to the income tax of both individuals and corporations for both countries. In addition, for Cyprus, the treaty applies to Capital Gains Tax and Special Defence Contribution, while for Portugal it applies to surtaxes on corporate income. Property rich companies The sale of shares of companies that are rich in property may be taxed in the country where the property is located. Withholding tax (WHT) 10% WHT applies to dividends, interest, and royalties. Under the legislation in Cyprus, there is no WHT on interest and dividends paid to non-residents. In cases where WHT on royalties applies, if the rights are used in Cyprus, the WHT can be reduced to 0% under the EU Interest and Royalties Directive. As a result of the relevant EU Directives, under the Portuguese tax legislation, the WHT rate can be reduced to 0%. Double tax treaties list Νομοσχέδια που έχουν ψηφιστεί στα πλαίσια του μνημονίου μεταξύ Κύπρου και Τρόικας

Following an amendment to the BVI Mutual Legal Assistance (Tax Matters), Act 2003 on 26 November 2012 the requirements for record-keeping for BVI companies have been revised as explained below. “Records and underlying documentation” must now be kept by a BVI company either at the registered office of the company or anywhere else the directors decide. The records and underlying documentation must be kept “in such a form as are sufficient to show and explain the company’s transactions and will, at any time, enable the financial position of the company to be determined with reasonable accuracy”. The records and underlying documentation must be maintained by the BVI company for a period of at least 5 years from “the date of completion of the transaction to which the records and underlying documentation relate or from the date the company terminates the business relationship to which the records and underlying documentation relate”. If the directors of the BVI company decide to keep the records and underlying documentation at a location other than at the registered office of the company then a written notice must be given to its registered agent regarding the physical address at which the records and underlying documentation will be kept. Corporate Sevices information

A new tax treaty has been signed between Cyprus and Ukraine. The treaty will come into effect on the 1st of January following the year in which the parties exchange notifications of ratifications. The main provisions of the treaty are explained below. Dividends There will be withholding tax at 5% on dividends if the beneficial owner holds at least 20% of the capital of the company which pays the dividends or has an investment in the acquisition of shares/ rights of the company paying the dividends of at least €100.000. In all other cases, the withholding tax is 15%. Interest Interest payments to a beneficiary who is a resident of the other Contracting State shall be subject to withholding tax of no more than 2% of the gross amount of the interest. Royalties In the case of royalties on any patent, trademark, secret formula or process concerning industrial, commercial or scientific experience, the tax levied will not exceed 5% of the gross amount of the royalties. The responsible authorities of the Contracting States shall, by mutual agreement, set the method of application of this limitation. Payment of royalties of general nature to a beneficiary who is a resident of the other Contracting State shall be subject to withholding tax which does not exceed 10% of the gross amount of the royalties. Capital gains Gains from the sale of shares will only be taxable in the Contracting State of which the seller is resident even if they are in respect of profits from the sale of shares or similar rights of a company that derive more than 50% of their value directly or indirectly from immovable property situated in the other Contracting State. Permanent Establishment The treaty clarifies that a building site or construction site will constitute a permanent establishment only if it lasts more than 12 months. Exchange of Information The Convention adopts the new article on Information Exchange of the Model Convention of the Organisation for Economic Cooperation and Development (OECD). The Protocol to the Convention sets out in detail the procedures needed to exchange information and ensure that the information requested is relevant. The contract does not include any provision that restricts the benefits which may arise. See our latest information about double tax treaties. A recent article about Ukraine.

Τροποποιήσεις σχετικά με τόκους σε επιστροφές φόρου εισροών έχει δημοσιευτεί στην Επίσημη Εφημερίδα της Δημοκρατίας στις 19 Οκτωβρίου 2012. Οι πρόνοιες του Άρθρου 20 του περί Φόρου Προστιθέμενης Αξίας Νόμου του 2000 μέχρι 2012 θα εφαρμόζονται από την 19η Φεβρουαρίου 2013 και θα εφαρμόζονται σε φορολογικές περιόδους μετά την έναρξη ισχύος του εν λόγω Νόμου. Οι τροποποιήσεις προβλέπουν όπως όταν γίνει αίτηση από υποκείμενο στο φόρο πρόσωπο για επιστροφή φόρου εισροών και η επιστροφή έχει καθυστερήσει πέραν τον τεσσάρων μηνών από την ημερομηνία της αίτησης, το υποκείμενο στο φόρο πρόσωπο δικαιούται το επιστρεπτέο ποσό μαζί με τόκο, ο οποίος θα υπολογίζεται από την λήξης των τεσσάρων μηνών. Το υποκείμενο στο φόρο πρόσωπο δικαιούται το επιστρεπτέο ποσό μαζί με το τόκο εάν η καθυστέρηση του επιστρεπτέου ποσού δεν είναι ως αποτέλεσμα πράξεων/ παραλήψεων του υποκείμενο στο φόρο πρόσωπο και η αποπληρωμή του επιστρεπτέου ποσού έχει καθυστερήσει πέραν των τεσσάρων μηνών από την ημερομηνία της αίτησης (αυξάνεται σε οκτώ μήνες σε περίπτωση ελέγχου από τον Έφορο). More on special levy tax

An amendment to the VAT law was published in the Government Gazette of the Republic on the 19th of October 2012 and refers to the refund of VAT amounts together with interest. The provisions of this Law will come into effect from 19th February 2012 and will be applicable to claims made in relation to VAT periods following the date of enforcement. The amendment provides that when a claim for a refund of VAT is made by a taxable person and this refund is overdue for more than four months from the date the claim was made, the person is entitled to a refund of the principal amount and interest, which will be calculated from the end of the four months. A taxable person is entitled to a VAT refund together with interest if the delay in refunding the principal amount was not the result of the taxable person’s actions/ omissions and the refund has been overdue for more than four months from the date of the claim (extended to eight months in case there is an investigation from the VAT Commissioner). More Information on VAT

On 24th May 2012, the House of Representatives of Cyprus voted on a number of amendments to the Income Tax Law in order to establish Cyprus as a favorable jurisdiction for companies owning any kind of intellectual property rights, patents, and trademarks (collectively referred to as IPRs). The amendment comes into effect from the 1st of January 2012. Tax treatment Prior to the amendment royalty income was taxed like any other income- that is at 10% corporation tax. Under the new amendment, 80% of the net profit from the exploitation of IPRs is exempt from tax. Net profit is derived by deducting all direct expenses. The remaining 20% of the net profit is taxed at the rate of 10% corporation tax, thus resulting in a maximum effective rate of 2.5%. It should be noted that the amendment also provides for 80% of the profit on disposal of IPRs to be tax-free thereby not only providing tax benefits while holding the IPRs but also on their disposal, thus providing an exit route which is tax efficient. Capital Allowances on the cost of acquisition of IPRs The tax benefit of the first five years from the date of acquisition or development is even more attractive since the amendment also provides that the cost of acquisition or development of the IPRs is written off at the annual rate of 20%. The company holding the IPRs will write off the cost within five years by claiming tax-deductible capital allowances at the annual rate of 20%. In conclusion, the amendments to the Income Tax Law have resulted in a tax burden on income from the exploitation or disposal of IPRs with a maximum of 2.5% on the net profits, and this will be further reduced in the first five years of acquisition by claiming capital allowances at the rate of 20%. P. Constantinou & Co Ltd services

In an effort to attract foreign investors the Republic of Cyprus has put in place new and accelerated procedures for granting Immigration Permits to applicants who are third party nationals and intend to invest in the Republic. It is estimated that the examination process of the application shall not exceed one or two months. Based on the new provisions the following criteria must be met: The applicant must prove that he has at his disposal a secured minimum annual income of €30.000 from sources other than employment in Cyprus. This income could be the result of employment abroad, pensions, rents, etc. The minimum annual income is increased by €5.000 for each dependent person Along with the Immigration Permit application form, the applicant must also submit a Title of ownership or contract of sale of a house, apartment or other building in Cyprus of a minimum market value of €300.000. This must also be accompanied by proof of payment for at least €200.000. The contract of sale should already have been submitted to the Department of Lands and Surveys. The applicant must submit a confirmation from a Cypriot bank that he has deposited a minimum of €30.000 in an account which will be pledged for a period of at least three years. It must be proven that the money for the purchase of the property as well as the money pledged in the bank has been transferred to Cyprus from abroad. The applicant must submit a Criminal Record Certificate which is issued by the Authorities of his country of origin, and he should not constitute in general any threat against public order or security in Cyprus. A statement that the applicant does not intend to work in Cyprus or be engaged in any form of business must be also submitted. The applicant should visit Cyprus at least once every two years. Cyprus information page

Back to back are loans which the Cyprus tax resident company borrows, and in turn, lends this amount to related parties. This arrangement is widely favored by international companies that use a Cyprus company to redistribute their profits, leaving a small profit margin in Cyprus. The ultimate shareholders of all the companies involved must be non-tax residents. A Cyprus tax resident company is used as an intermediate company to borrow and in turn, lend the funds to a related non-tax resident company. No circular has been issued by the Commission of Inland Revenue yet, but the tax treatment is described in the correspondence between the Inland Revenue Department (IRD) and the Institute of Certified Public Accountants in Cyprus (ICPAC) dated 27/6/11. Why is the agreement between the IRD and ICPAC important? The provisions of section 33 of the Income Tax Law which states that transactions between related parties must be at arm’s length, do not apply to back to back loans, meaning that back to back arrangements can be carried out with interest-free or low-interest rates. The certainty of the tax treatment of back to back loans which were previously not clear. No restriction of interest paid with respect to back to back loans when the company possesses assets that are not used in the business. No imposition on notional interest income in case of a waiver of the receivable loan. Which loans fall under back to back loans? Loans between group companies The loans borrowed and lent can be either interest-free or interest-bearing. The matching of the funds must be supported, ie the fund borrowed are the funds which are lent. If part of the funds lent is derived from own funds (capital/ reserves) only the part of funds lent which is derived from the borrowed funds will be considered back to back. On the remaining balance of the loan, market rates will apply. Minimum profit margins accepted by the IRD From 2008 for interest-bearing loans the below minimum profit margins are accepted by the IRD: From 2008, for interest-free loans, the minimum profit margin irrespective of the amount of the loan is 0.35%. For the years 2003- 2007 the minimum profit margin for back to back loans is 0.3%. Other requirements for the application of the agreed profit margins In case of a waiver of the loans, this will not result in either taxable income or tax loss in the Cyprus intermediate company. If a waiver occurs for one side of the arrangement then it ceases to be considered as back to back and the agreed profit margins apply until the date of the waiver. If the payable loan is waived then the Cyprus company will be taxed on interest at market rates on the receivable loan. If the receivable loan is waived, the payable interest on the payable loan will not be tax-deductible. The loan granted by the Cyprus company must be lent within 6 months from the date is borrowed the funds. The minimum profit margins accepted are net, ie all expenses directly attributable to the arrangement as well as a proportion of overheads must be deducted in arriving at the profit margin. Foreign exchange differences which may arise in cases where the loan borrowed and that lent are in different currencies are not taxable in case of gains and are not tax-deductible in case of losses. The agreed profit margins are applicable for each back to back arrangement individually. The agreed profit margins are applicable also in cases where the Cyprus intermediate company borrows one loan and in turn, uses these funds to grant more than one loan as well as in cases where more than one loan is borrowed and only one loan is granted. The above profit margins are also applicable when the Cyprus company borrows from outside the group (eg a bank) as long as guarantees are provided by other group companies. In cases where the Cyprus company borrows from within the group but lends the funds to a company outside the group, the profit margins may apply upon a written ruling request to the IRD. Need more information about Back to back loans for Cyprus companies? Visit our services section for Corporate Services or contact us directly.

Following the ratification of the DTT Protocol between Cyprus and Russia, Cyprus has officially been removed from Russia’s “blacklist” of offshore jurisdictions meaning that dividends received by Russian companies from Cyprus subsidiaries can qualify for the Russian dividend participation exemption. The participation exemption provides that dividends received by a Russian company from an overseas subsidiary are tax-free if the Russian company holds at least 50% of the share capital of the overseas subsidiary for at least 365 days and the overseas subsidiary is not in a blacklist jurisdiction. The Protocol will come into effect from 1 January 2013 (with some provisions that will be effective from 1 January 2017). The major features of the Protocol are described below. Withholding tax Dividends- No changes have been made to the withholding tax rates on dividends which are set at 5% or 10%, but in order to apply the reduced 5% withholding tax rate, a direct investment of at least €100.000 in the capital of the company paying the dividends is required, instead of the existing investment of $100.000. Interest and Royalties- No changes have been made to the 0% withholding tax rate on interest and royalties. Capital gains on the sale of shares in real estate rich companies The new provision states that capital gains arising on the sale of shares in companies that are real estate rich will be taxed in the country where the real estate is located. This provision will come into effect from 1 January 2017. Distributions from mutual investment funds Distributions from mutual investment funds that have invested mostly in immovable property will be considered as income from the sale of immovable property and thus be taxed in the country where the real estate is located. This provision will come into effect from 1 January 2017. Exchange of information The revised provisions are aimed at promoting greater transparency and are in line with the latest standards published by the OECD Model Treaty. The revised article provides clarifications with respect to the obligations and powers of the two countries regarding the exchange of information and cooperation in the collection of taxes. See our latest information on double tax treaties. Contact us >