After announcing major tax reforms in order to attract foreign investors to Cyprus, the Government has approved a set of five tax packages. The new Cypriot tax reforms are dedicated to foreign citizens and contain provisions about the simplification of property taxes and encourage local authorities to provide more tax breaks for foreign investors. The International Monetary Fund (IMF) also considers the measures sustainable and supports the Cypriot Government with their implementation.
The Government declared that the new tax reforms are radical and aim to attract more foreign investors to open companies in Cyprus. The Finance Minister also declared the measures will increase Cyprus’ competitiveness with respect to foreign direct investment at European level because they provide for significant tax reductions and simplified collection procedures.
The first measure refers to transfer fees for Cypriot properties that have been reduced by 50%. This measure will be in force until the end of 2016. Additionally, there will be no capital gains tax for property purchases in Cyprus until the end of 2016. Municipal property taxes have been abolished, while the only tax on properties was reduced at 0.1%. Also, the first foreign citizens buying a property in Cyprus will benefit from a 10% discount.
Another measure aims to revive the private sector and, in order to achieve this, the Government plans to introduce an “allowance for new equity” which will allow private investors with difficulties to obtain a loan with a Cypriot bank to find other funding sources. This measure will be applied retrospective and encourages investments in capital.
High net worth foreign individuals registering for taxation purposes in Cyprus will also benefit from tax exemptions on the defense tax on rents, interests and dividends. Another notable measure will be taken in order to attract skilled workforce in Cyprus. Foreign citizens applying for executive positions in Cyprus will benefit from tax reductions that may apply for up to ten years.
The International Monetary Fund also approved the Cypriot Government tax measures which were undertaken during the economic adjustment program supported by the institution. Based on a report issued by the IMF, Cypriot officials have managed to create a new unified tax department based on which a new debt recovery plan will be implemented. The measures taken by the Government will lead to the improvement of collection activities in Cyprus which is what makes the reforms sustainable. However, these are not the only measures to be undertaken, as the Government plans to introduce a self-declaration tax system and a new legislation for foreign investments in Cyprus.
For complete information about the new fiscal reforms, please contact our Cypriot lawyers.
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