Considering that it is time for an update in the Cypriot tax legislation, the House of Representatives has come with several proposals that would help the country to become more competitive and to attract more foreign investors. Two of those measures refer to the Cypriot income tax and the defense tax. For a complete picture of the taxation system you can get in touch with our law firm in Cyprus.
The new Income Tax Law will contain a Notional Interest Deduction (NID) on equity which would allow Cypriot companies to fund their operations from their own capital and to obtain a tax deduction on the capital used for funding. The best part about the NID is that both domestic and foreign companies operating in Cyprus will be entitled to apply for the deduction. The NID will be calculated by multiplying the capital used for business undertakings with the “reference interest rate”. In order to clarify issues that may arise, the new Tax Law specifies the following:
The NID offered on new equity will not exceed 80% of the Cypriot company’s taxable profits. The company will be allowed to claim the NID in any tax year. For details about the new Income Tax Law you can also refer to our Cypriot lawyers.
The Cypriot Special Contribution for Defense (SDC) Law was updated with the introduction of the new term “domicile”. The new tax law establishes that an individual is considered a Cypriot resident based on the Wills and Succession Law. Exceptions apply to those who:
The law establishes that citizens, regardless their domicile of origin, living in the country for at least 17 out of the last 20 years will be required to pay the special defense tax in Cyprus. The new law aims to attract foreign citizens to apply for Cypriot residency.
The new tax amendments were enabled at the middle of July.
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