To hear about taxation in Cyprus, this month Finance Monthly reached out to Panicos G. Loizou, a Board Member at KPMG in Cyprus. After obtaining an Honors degree in Economics from the University of Salford, he trained with a big eight practice in Manchester and became a member of the English Institute of Chartered Accountants and subsequently a Fellow member. Panicos has also attended a crash management Course at Wharton School, University of Pennsylvania, Philadelphia. He is a member of the Institute of Taxation by examinations, and a member of STEP and was recently elected as a member of the Council of STEP, taking full responsibility in January.

 

What are currently the hottest topics being discussed in relation to tax in Cyprus?

The implementation of standards and regulations about exchange of information like CRS and Country by Country reporting, increased the taxpayers’ desire for a last time tax amnesty, aligned with many other jurisdictions. Instead, the Cyprus House of Representatives introduced new legislation which incorporates special arrangements for the settlement of overdue taxes. The legislation has induced a number of tax payers to come forward and declare income and assets not previously reported in their tax returns.

 

What amendments have been made to the tax regulation recently?

Apart from the aforementioned legislation referring to the settlement of overdue taxes, recent amendments include mainly provisions relating to transfer pricing, as well as amending the tax residency definitions for individuals and non-domiciled individuals. These amendments have already arose increased interest by wealthy individuals and families, who are taking necessary steps in order to comply with the provisions of the new legislation. In this way, they will become Cyprus tax residents and at the same time they would be registered with the Tax Authorities for the Non-Dom status.

It is important to pay attention for the revised definition, meaning that the foreign national who is physically present in Cyprus for more than 183 days within a calendar year, will be considered as a Cyprus tax resident and he/she will be subject to taxation in Cyprus on his/her worldwide income. The definition has been amended to also provide that, an individual who does not stay in any other country, for one or more periods exceeding in aggregate 183 days in the same tax year and is not tax resident in any other country for the same year, is deemed as a resident in the Republic in that tax year, if all of the following conditions are met: (i) the individual stays in the Republic for at least 60 days in the tax year, (ii) exercises any business in the Republic and/or is employed in the Republic and/or holds an office with a Cyprus tax resident person at any time during the tax year, and (iii) maintains (by owning or leasing) a permanent residence in the Republic.

 

Do you believe there is potential for further significant legislative development in the tax field in Cyprus?

Yes, indeed, as the Cyprus Government is already fostering the efforts to prepare the new legislation concerning the audiovisual industry. Just to be on the same line, the forms of audiovisual communication include television advertising, sponsorship, teleshopping, product placement, on-demand audiovisual media services and radio broadcasting, which aim the provision of programs in order to inform, entertain or educate the general public. Bound by certain criteria, there would be a number of tax incentives such as “Cash Rebate”, “Tax Credit”, tax reduction for infrastructure and equipment investments and VAT return over eligible expenditure. Moreover, special attention is given by the Authorities to the benefits in kind provisions.

 

In terms of tax structures, what are the advantages for foreign companies wanting to establish a business operation in Cyprus?

Corporate tax of Cyprus tax resident companies is currently imposed at the rate of 12,5% for each year of assessment on the taxable income, derived from sources both within and outside Cyprus. In arriving at the taxable income, deductions on such income and exemptions must be taken into account. All relevant expenses incurred wholly and exclusively for the production of that income are deductible expenses whereas dividends, capital gains or profit from the sale of shares and other securities constitute tax exempt income. Expenses that directly or indirectly relate to tax exempt income are not tax deductible.

 

What actions has Cyprus taken towards remaining competitive as a financial centre?

In the current fluent, economic and political environment, Cyprus takes all appropriate measures to remain competitive as a financial centre. That includes, considering the measures adopted by other competitive countries and undertaking measures in order to attract business and investments through the implementation of tax incentives.

 

Website: https://home.kpmg.com/cy/en/home.html