Cyprus Taxation: Major Recent Changes
by Marios Charalambides, Financial Director of MMG Trust (Cyprus)
Published: June, 2012
Submission: August, 2012
The Registrar of Companies (ROC) has introduced an annual government licence fee of €350. The government licence fee for 2011 was payable by 31 December 2011. From 2012 onwards the government licence fee will need to be paid by 30 June of that year.Companies which are dormant and/or do not own any assets are exempt from this licence fee. Such companies should file a form with the ROC, stating the grounds on which they apply for this exemption.
Personal income tax
In 2011 a new income tax rate of 35% was introduced for individuals with annual taxable income in excess of €60,000. From
The reduction is for 50% of their employment income in Cyprus, provided this income exceeds €100,000 per annum.
Directors’ and shareholders’ loans
From 2012 onwards, physical directors and shareholders that have taken interest free loans from their companies will
From 2012 onwards, loans payable to companies from legal persons that act as directors or shareholders are not liable
Special contribution for defence (SDC)
Special contribution for defence (SDC) on interest received has been increased from 10% to 15% since 31 August 2011. SDC on dividends has been increased from 15% to 17% effective 31 August 2011. For the two year period of 1 January 2012 31 December 2013, the SDC on dividends would be 20%. From 1 January 2012, SDC is payable on dividends paid by a Cyprus Company to a Cypruscompany. This applies only in cases were these dividends were not distributed within 4 years from the end of the financial year that the profits from which the dividends have been paid from were realized.
From 1 July 2011, companies paying rent should deduct at source the SDC on rent and pay it directly to the Inland
Revenue by the end of the next month. The SDC payable is 3% on the 75% of the gross rent, i.e. 2.25% on the gross rent.
Special contribution for employees
Special contribution for employees is effective for the period from 1 January 2012 to 31 December 2013. It is payable on the gross salary and/ or pension earned by a person exceeding €2,500 per month. In the case of an employee, this contribution for employees is equally split between the employee and the employer. The employer is liable to deduct this at source and to pay it to the Inland Revenue along with the monthly PAYE.
The basic rate of 15% VAT has been increased to 17% on 1 March 2012.
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