Laws introduced pursuant to the MOU agreed between Troika and the Cyprus government for strengthening the public finances.
Towards the end of the year, the Cyprus parliament voted a number of legislative actions introducing new and amending existing laws in order to strengthen public finances and reduce administrative burden. The laws while forming the basis for more stability in the financial sector retain the full benefits that Cyprus offers as an international business center. We present and analyze below some of the most relevant amendments made:
- Value Added Tax (VAT)
The standard VAT rate increases to 18% (previously 17%) for the period 14 January 2013 until 12 January 2014 and to 19% from 13 January 2014.
In addition, the reduced VAT rate increases from 13 January 2014 to 9% (previously 8%).
- Annual Government Levy of €350
The annual levy/license fee of €350 introduces in 2011 effective 2013 and onwards becomes now payable for all companies. All exemptions previously available (such as dormant companies or assets having no assets of having property in the Turkish occupied areas) are now abolished. The upper ceiling of €20.000 for group companies is also abolished. Further the annual fee is now payable from the year that a new company is registered.
- Bank Levy payable by Financial Institutions
From 2013, the bank levy tax rate introduced in 2011 imposed on banks on their total deposits (domestic and foreign), excluding interbank deposits increases from 0,095% to 0, 11% and the provisions of this law are extended indefinitely. Further, with retrospective effect from 2011, the provision that the levy paid would not exceed 20% of total taxable income as well as the provision for refund of the excess levy paid are abolished.
- Regulations for the Provision of Fiduciary and other Corporate Services
The provision of fiduciary and other corporate services is now regulated by the Cyprus Securities and Exchange Commission and the regulation applies to eligible persons providing such services to or from the Republic of Cyprus (excluded from the scope are lawyers and auditors that are already regulated by their respective regulatory bodies). Transitory provisions exist for firms already operating in this field.
- Exchange of Information
Directive 2011/16/EU on administrative cooperation in the field of taxation which regulates between member states exchange of information on tax matters has been transposed into national law. The Assessment and Collection of Taxes Law has been amended to allow Cyprus to provide information to the competent authorities of another state, based on agreements for the exchange of information or the Directive 2011/16/EE of the Council of European Communities of 15 February 2011 on administrative cooperation in the field of taxation. The Director of Inland Revenue may not inform the person to whom the information is requested for, if the information could hinder the investigation being conducted.
- Tax administrative measures
- Filing obligations for non-resident companies: -Companies established in Cyprus but are not tax residence in Cyprus, are obliged to submit tax returns until 31 December of the year following the tax year (or March 31 in case of electronic submission) to which they relate to.
- Employers’ returns: - Starting 2013 these must be filed electronically.
- Temporary Tax returns: -Returns for provision of temporary tax should be filed now before July 31st instead of August 1st. Installments for the payment of temporary tax is reduced now to two installments instead of three previously and are due on July 31st and December 31st.
- Trusts: - Trusts now need to keep accounting records.
- Document Retention Period: - Companies should keep their accounting records for six years after the end of the calendar year to which they relate to (previously seven).
- Other laws that were voted
A number of other laws have been voted such as laws reducing or eliminating various subsidies (i.e. child, mother, student), introduction of taxation on winnings from betting on government lotteries and OPAP games and increases in excise duties on tobacco, alcohol and petrol. Further, significant changes have been introduced in relation to the government payroll such as reduction in government employee emoluments and freezing of automatic salary increases, changes in the working hours of the government employees, extension of the special contribution payable by government employees for a further two years to 2016 and changes in the government pension plan.