Cyprus and Russia recently signed a protocol amending the double tax treaty (DTT) between the two states. Businesses in Cyprus that will be subject to the protocol are advised to review their corporate structures and assess what impact, if any, the DTT changes will have on their overall effective tax exposure.
Cyprus recently agreed an updated double tax treaty (DTT) with Switzerland. The amendments made to the DTT focus on business profits, associated enterprises, mutual agreement procedures and benefit entitlement, and the amending protocol introduces the mandatory minimum standards of the Organisation for Economic Cooperation and Development's Base Erosion and Profit Shifting actions regarding arrangements on bilateral conventions and verbal amendments agreed bilaterally.
The Tax Department recently informed the Cyprus International Businesses Association that it expects its new electronic taxation service to be operational imminently. The Tax Gateway aims to provide a central point via which all citizens, businesses and their representatives can gain information about debts owed and payments made to the department.
The government has introduced a variety of tax measures intended to help taxpayers preserve their cash flows and ease the administrative burden on them during the COVID-19 health emergency. In this regard, the deadlines for payment of indirect taxes and those pertaining to tax returns have been extended.
The Cyprus-Kazakhstan double tax treaty recently entered into force. The agreement – which is the first of its kind between the two countries and closely based on the latest Organisation for Economic Cooperation and Development Model Tax Convention framework – is to be welcomed in view of the possibilities for business, transactional work and business synergies that it may help to create between the two countries.
Innovation and entrepreneurship are heavily sought after by countries looking to ameliorate and modernise their economies. Cyprus is no different in this respect and has prioritised creating a vibrant landscape which addresses the needs of start-ups and their investors. The defining features of the Cypriot system are its IP box regime, notional interest deduction, alternative investment funds and various tax incentives which can be coupled with research and development and innovation.
The House of Representatives recently approved legislation implementing the EU Anti-tax Avoidance Directive in Cyprus with the aim of improving the resilience of the internal market against cross-border tax avoidance practices. The new legislation has once again demonstrated the government's commitment to supporting international efforts to tackle tax avoidance practices.
The Cyprus Tax Department recently issued a circular giving guidance on the tax residence provisions for individuals introduced by Law 119(I)/2017. The circular makes clear that an individual who holds office as a director of a Cyprus tax-resident company and delegates this office to an alternate or nominee director at any time during the tax year does not qualify for Cyprus tax residence under the 60-day rule.
Article 9(B) of the Income Tax Law 2002 (as amended) provides for a notional interest deduction for tax purposes on new equity capital injected into companies and permanent establishments of foreign companies on or after 1 January 2015 to finance business assets, calculated by applying a reference rate to the new equity. The Tax Department recently announced the 10-year government bond yields for 31 December 2018, which will be used as the basis for the notional interest deduction for the 2019 tax year.
The Ministry of Finance recently announced that the double tax agreement with Saudi Arabia – which was signed on 3 January 2018 – will enter into force on 1 March 2019. The agreement will apply to amounts paid or credited on or after 1 January 2020 with regard to taxes withheld at source and to tax years beginning on or after 1 January 2020 with regard to other taxes.
The Tax Department recently announced a time extension for banks and other financial institutions to submit their corporate tax returns for the 2017 tax year. Unlike other companies, which must submit their tax returns electronically, banks and other financial institutions must submit hard copy tax returns, giving additional details of their business, by the end of the year following the tax year in question.
The Income Tax Law was recently amended to provide an exemption of up to 50% for income derived from the production of films, series and other relevant audiovisual media. In addition, small enterprises may claim an annual deduction of 20% of the cost of cinematographic infrastructure and technological equipment, provided that it has been used in Cyprus for at least five years.
The Tax Department recently announced that the procedures for ratifying the protocol amending the Convention on the Avoidance of Double Taxation between Cyprus and San Marino have been completed. The protocol, which entered into force on 27 June 2018, replaces the text of Article 25 of the convention with the text of the corresponding article of the Organisation for Economic Cooperation and Development Model Convention 2014.
The Tax Department recently announced that constituent entities of Cyprus ultimate parent entities (UPEs) will not be subject to local filing in their jurisdiction of tax residence, provided that the tax information exchange arrangement under the Common Reporting Standard Multilateral Competent Authority Agreement has been activated. Further, local filing will not apply to Cyprus-resident constituent entities which have no Cyprus tax resident UPEs.
The Cyprus Tax Department recently announced that the procedures for ratification of the protocol dated 23 October 2017 amending the Convention on the Avoidance of Double Taxation between Cyprus and Mauritius have been completed, and that the protocol entered into force on 2 May 2018. The protocol replaces the text of Article 27 of the convention with the text of the corresponding article of the Organisation for Economic Cooperation and Development Model Convention 2014.
The Cyprus Tax Department recently published for consultation draft legislation to implement the EU Tax Dispute Resolution Mechanisms Directive. The draft legislation comprises an amending law, which adds two new articles to the Income Tax Law 2002 and regulations to be issued under the second of those articles. The new law is intended to take effect from 1 July 2019.
The Tax Department recently issued Interpretative Circular 25, which clarifies the tax treatment of non-returnable capital contributions by Cyprus taxpayers to companies that are tax resident abroad. The circular confirms that Article 33 of the Income Tax Law will not apply to debit or credit balances generated by non-repayable capital contributions to non-tax resident companies, provided that a number of conditions are satisfied with full documentary evidence.
The Tax Department recently issued a circular clarifying the taxation of insurance agent earnings. A representative of an insurer who is not in an employment relationship with that insurer will be treated as a commercial enterprise whose revenue is derived from fees or commissions for the conclusion of insurance contracts. If their annual revenue exceeds €70,000, the intermediary must maintain accounting records and prepare audited financial statements.
Following the extension of tax relief for the disposal of immovable property for the restructuring non-performing loans introduced by Laws 96(I)/2018, 98(I)/2018, 99(I)/2018 and 100(I)/2018, the Tax Department has announced that its Form 415 (Disposal of Property due to Loan Restructuring) has been revised and that a new Form 415B (Immovable Property Declaration due to Loan Restructuring – Supplementary Certificate) has been published.
Parliament recently passed a package of legislative measures that aims to encourage the resolution of non-performing loans. The measures include an extension of the current tax exemptions on transfers of immovable property from a borrower to a lender in the course of a loan restructuring to borrowers that dispose of the property themselves in the open market in order to restructure debt. Both sets of exemptions will be available until the end of 2019.