The House of Representatives voted on April 18th, 2013 a number of changes in the tax legislation as agreed with Eurogroup. The main changes are summarised below.
1. Increase in the Corporate tax rate
Corporate income tax rate is increased from 10% to 12,5% effective from 1st January 2013.
2. Increase in the Special Defence Contribution tax on interest income
Special Defence Contribution applied on interest income is increased from 15% to 30%, effective from the date of the publication of the law in the official Gazette of the Republic.
- Special Defence Contribution on interest income is payable only by Cyprus tax residents (both individuals and companies). We note that interest income earned in the ordinary course of the business of a company (e.g. financing companies) will continue to be taxed under Corporation tax and will not be subject to Special Defence Contribution.
- Non-Cyprus residents are exempt from Defence tax and no withholding taxes apply upon the payment of interest abroad.
3. Increase in the Annual levy on bank deposits
The bank levy on deposits payable by credit institutions is increased from 0,11% to 0,15%, effective from 1st January 2013.
Despite the changes summarised above, Cyprus continues to be an attractive jurisdiction for international clients with a favourable tax regime towards foreign investors. Main features of the Cyprus tax regime that remain unchanged include inter alia the following:
- Dividend income is exempt from Income Tax
- Profit from the disposal of securities is exempt from Income Tax
- No withholding taxes apply upon the payment of dividends, interest and royalties abroad
Order under Articles 4 and 5
Under Articles 4 and 5 of the Act, and upon the recommendation of the Director and with the consent of the Director, the following restrictions are imposed:
Eurozone finance ministers have agreed over the weekend a deal on a EUR 10 billion bailout for Cyprus to prevent its banking system collapsing and keep the country in the eurozone. As part of the deal a significant downsizing of the banking sector shall be affected almost immediately.