Cyprus Tax Facts 2020

TAX UPDATE Volume 10, Issue 2

CYPRUS TAX FACTS 2020

“knowledge” Facts, information and skills acquired through experience or education; the theoretical or practical understanding of a subject. OXFORD DICTIONARY

AUTHORED: FEBRUARY 2020 ΓΝΩΣΗ

205, 28th October Str., Louloupis Court, 1st Floor, 3035 Limassol, Cyprus I P.O. Box 51631, 3507 Limassol, Cyprus T: + 357 25 871000 I F: + 357 25 373737 I E: [email protected] I www.tsielepis.com.cy Tax Updates | Volume 10, Issue 2 PAGE | 1 TABLE OF CONTENTS

INTRODUCTION ...... 3 PERSONAL INCOME TAX ...... 5 GENERAL HEALTHCARE SYSTEM ...... 12 SOCIAL INSURANCE ...... 15 CORPORATION TAX AND SELF-EMPLOYED PERSONS ...... 17 SPECIAL CONTRIBUTION FOR DEFENCE ...... 24 SHIPPING PROFITS ...... 30 ALTERNATIVE INVESTMENT FUNDS ...... 32 SPECIAL MODES OF TAXATION ...... 35 EU ANTI-TAX AVOIDANCE DIRECTIVE ...... 39 INTELLECTUAL PROPERTY (IP) ...... 41 CAPITAL GAINS TAX ...... 45 TRANSFER FEES ...... 47 IMMOVABLE PROPERTY TAX ...... 49 VALUE ADDED TAX (VAT) ...... 51 MAINTENANCE OF BOOKS AND RECORDS ...... 55 TRUSTS ...... 57 STAMP DUTIES ...... 59 COMPANIES REGISTRAR FEES AND CAPITAL DUTIES ...... 61 TAX DIARY ...... 63 YOUR TAX CONTACTS IN CYPRUS ...... 67 COSTAS TSIELEPIS & CO BOARD MEMBERS ...... 67

Tax Updates | Volume 10, Issue 2 PAGEPAGE | | 1 2 INTRODUCTION

Tax Updates | Volume 10, Issue 2 PAGE | 3 INTRODUCTION

INTRODUCTION

e ae pleased to elome ou to ou 2020 ual Tax ats, ou deﬁ�ve ude to te pus Tax stem

ostas Tseleps o pula�os epeset a valuale soue o oma�on o usesses ad dividuals s to aue a ompeesive olede o pus tax sstem

Te oma�o t ts pula�o s o oma�ve puposes ol ad o ase does t epeset tax advie tua�os sould e veed sepaatel ased o te mets ad speﬁ ats o ea tasa�o

Te Taxa�o epatmet o ostas Tseleps o td s ompsed o tax poessoals t deades o expeee te ﬁeld o tax pus ad tea�oall Te dept udestad o tax oepts, te os o doule tax tea�es, te expeee ad olede o te pus loal tax lesla�on ad ts appla�o, te detaled ompeeso o det tax ma�es pus ad te U, all pos�o tem uuel to oﬀe autota�ve ad depedale advie to te lets

Te epatmets osultats use ealold expeee ad teal expe�se to assess, aalse ad te omulate oadt tax eﬀe�ve solu�os tat peempt pote�al sot ad lotem oseuees, tus elp lets mplemet desos tat a delve lolas� value to te pesoal ad usesses plas ad statees

Te Taxa�o epatmet o ostas Tseleps o td ad ou eto o adped assoates pus ad oldde ae at ou dsposal o moe oma�on ad spealsed advie o ou tax ma�es

Tax Updates | Volume 10, Issue 2 PAGE | 4

TAX UPDATE │ VOLUME ISSUE

PERSONAL INCOME TAX

Tax Updates | Volume 10, Issue 2 PAGE | 5

PERSONAL INCOME TAX PERSONAL INCOME TAX Includes employees but not self-employed persons (see p. 18) Includes employees but not self-employed persons (see p. 12)

Tax-residency

A Cyprus tax resident individual is any person who is physically present in Cyprus for more than 183 days in a calendar year. A calendar year is the same as a tax year. It does not matter the purpose of being in Cyprus, nor is it a condition that a Cyprus tax resident person owns or rents accommodation in Cyprus. It is literally based on the number of days without any further conditions.

As of 1 January 2017 an individual will also be considered a Cyprus tax resident if he/she:

 does not spend more than a total of 183 days in any country within a tax year; and  is not a tax resident of another country within the same tax year; and

satisfies the following three conditions:

(a) remains in Cyprus for at least 60 days during the tax year; (b) carries on a business in Cyprus or is employed in Cyprus or holds an office in a Cyprus tax resident company at any time during the tax year; and (c) maintains a permanent residence in Cyprus, which can be either owned or rented.

It is important to note that, if the employment/business or holding of an office as per (b) above is terminated, then the individual shall cease to be considered a Cyprus tax resident for that tax year under the 60 days tax residency scheme.

In calculating the days:

 the day of departure is considered a day outside of Cyprus;  the day of arrival is considered a day in Cyprus;  arriving in Cyprus and departing on the same day is considered a day in Cyprus; and  departing from Cyprus and arriving on the same day is considered a day outside of Cyprus.

Income Tax Rates

The personal income tax rates for 2020 are:

Taxable Income Tax Rate € % 0 – 19.500 0 19.501 – 28.000 20% 28.001 – 36.300 25% 36.301 – 60.000 30% > 60.001 35%

Foreign pensions may be taxed at the above rates or at the flat rate of 5%, with an annual exemption of €3.420. The choice can be made by the tax payer on an annual basis.

Tax Updates | Volume 10, Issue 2 PAGE | 6 TAX UPDATE │ VOLUME 10, ISSUE 2 PAGE 4

PERSONAL INCOME TAX

Cyprus source widow’s pension is taxed at the flat rate of 20% on amounts exceeding €19.500. The taxpayer can hoeer on an annual basis elect to be taxed at the normal tax rates and bands set out aboe.

nterest income interest income arisin in the ordinary course o business includin interest closely connected ith the carryin on o the business is not considered as interest income and is not exempt. The hole amount nterest income may be subect to special contribution or deence see p. 24.

iidend income The hole amount iidend income may be subect to special contribution or deence see p. 24.

ump sum repayment rom lie insurance schemes or rom approed proident unds but see belo under eductions in case o income arisin rom the The hole amount cancellation o the policy.

roits rom the sale o securities includin units in an openended or closed ended collectie inestment scheme. The term “securities” is defined as shares, bonds, debentures, founders’ shares and other securities o companies or other leal persons incorporated in yprus or abroad and options thereon. irculars 2003 and 200 issued by the Tax epartment urther clariy hat The hole amount is included in the definition of ‘securities”. ccordin to these circulars the term “securities” include also options on titles short positions on titles uturesorardssaps on titles depositary receipts on titles rihts o claim on bonds and debentures rihts on interest o these instruments are not included index participations only i they represent titles repurchase areements or repos on titles. romissory notes and ills o xchane do not represent titles. rypto currencies do not also represent titles.

emuneration rom any employment exercised in yprus by an indiidual ho as not a resident o yprus beore the commencement o the employment. 20 o the employment income up to a maximum This exemption applies until the tax year 2020 inclusie but cannot be ranted of €8.550 annually. or a total period exceedin ie years.

TAX UPDATE │ VOLUM Cyprus source widow’s pension is taxed at the flat rate of 20% on amounts exceeding €19.500. The taxpayer can hoeer on an annual basis elect to be taxed at the normal tax rates and bands set out aboe.

iidend income The hole amount iidend income may be subect to special contribution or deence see p. 24.

ump sum repayment rom lie insurance schemes or rom approed proident unds but see belo under eductions in case o income arisin rom the The hole amount cancellation o the policy.

emuneration rom any employment exercised in yprus by an indiidual PERSONALho INCOME TAX as not a resident o yprus beore the commencement o the employment. 20 o the employment income up to a maximum This exemption applies until the tax year 2020 inclusie but cannot be ranted of €8.550 annually. or a total period exceedin ie years.

emuneration rom any employment exercised in yprus by an indiidual ho as not a resident o yprus beore the commencement o the employment provided that the annual remuneration exceeds €100.000. This exemption applies or a period o 0 years. The exemption ill not be aailable here the indiidual as a yprus tax resident in any three o the preious ie tax years precedin the commencement o employment in yprus althouh this only applies to employments that 0 o the employment commence on or ater anuary 20. income The exemption ill not be aailable here the indiidual as a yprus tax resident in the year precedin the year o commencement o employment in yprus althouh this only applies to employments that commence on or ater anuary 20. The exemption ill be ranted or any tax year in hich the annual total ross emoluments from the employment exceed €100.000, regardless if in a specific tax year, these were less than €100.000. This is subject to the total emoluments exceedingTAX UPDATE €100.000 │ VOLUM at the start of the employment and the Tax Department being satisfied that the fluctuation in the total gross emoluments is not solely to obtain the exemption. t is noted that where an individual is benefiting from the 50% exemption, this individual cannot benefit at the same time from the 20% exemption, as stated above.

alaries from rendering services outside Cyprus to a nonCyprus tax resident employer or to an overseas permanent establishment of a Cyprus tax resident The whole amount employer for more than 90 days in a tax year.

ains arising from a loan restructuring ote estructuring means the direct or indirect sale and transfer of immovable property and transfer of rights under a sale agreement submitted with the The whole amount epartment of ands and urveys, between one or more borrowers andor debtors andor guarantors regarding the same credit facility or grant or debt and one or more creditors made up to 1 ecember 2020, which aims to reduce or repay credit facilities or loans or debts granted to borrowers with one or more lenders.

ump sums received as retiring gratuity, commutation of pension, death gratuity or as consolidated compensation for death or inury including capital sums The whole amount accruing to individuals from any payments from approved funds e.g. provident funds

xpenses incurred wholly and exclusively for the production of taxable income Taxwhich Updates are | Volumealso supported 10, Issue 2 by the relevant documentation i.e. invoices, receipts, The whole amount PAGE | 8 agreements etc.

nterest in respect of the acuisition of a building for rental purposes. The whole amount

ubscriptions to trade unions or professional bodies. The whole amount Up to €1.200, €1.100 or xpenditure incurred for the maintenance of a building in respect of which there €700 per square meter is in force a reservation rder. depending on the sie of the building onations to olitical arties subect to conditions. Up to €50.000

onations to approved by the Commissioner of Taxation charitable organiations The whole amount with receipts.

ental income. 20% of rental income

pecial contribution on salaries and pensions abolished on 11201. The whole amount

rofits from the exploitation of ualifying intellectual property rights. 80%

TAX UPDATE │ VOLUM

tax year, these were less than €100.000. This is subject to the total emoluments exceeding €100.000 at the start of the employment and the Tax Department being satisfied that the fluctuation in the total gross emoluments is not solely to obtain the exemption. t is noted that where an individual is benefiting from the 50% exemption, this individual cannot benefit at the same time from the 20% exemption, as stated above.

ump sums received as retiring gratuity, commutation of pension, death gratuity or as consolidated compensation for death or inury including capital sumsPERSONAL INCOME TAX The whole amount accruing to individuals from any payments from approved funds e.g. provident funds

xpenses incurred wholly and exclusively for the production of taxable income which are also supported by the relevant documentation i.e. invoices, receipts, The whole amount agreements etc.

nterest in respect of the acuisition of a building for rental purposes. The whole amount

onations to approved by the Commissioner of Taxation charitable organiations The whole amount with receipts.

ental income. 20% of rental income

pecial contribution on salaries and pensions abolished on 11201. The whole amount

rofits from the exploitation of ualifying intellectual property rights. 80%

Tax losses of current year and preious years for indiiduals required to prepare audited financial statements, current year tax losses and tax losses of the preious The whole amount fie TAX years UPDATE only may │ VOLUM be deducted .

Up to 50 of the taxable income as calculated prior to this deduction subject to a maximum of €150.000 per year. ny unused mount inested each tax year as from 1 anuary 2017 in approed innoatie deduction can be carried small and medium sied enterprises either directly or indirectly forward and claimed in the following 5 years, subject to the cap of 50 of taxable income and oerall maximum of €150.000 per year).

ocial insurance contributions, contributions to approed proident and pension The total amount of the funds, the general health plan, contributions to medical or other approed funds Tax Updates | Volume 10, Issue 2 allowances is limited to 15PAGE | 9 as well as life insurance premiums. of the taxable income as ayments relating to premiums paid to approed medical funds are tax calculated before deducting deductible, proided that they do not exceed 1,5 of the gross salary income. the allowances.

estricted to 7 of the nnual life insurance premiums. insured amount

ancellation within years ancellation of a life insurance policy within years from the date it was entered 0 taxable into, part of the life insurance premiums already gien as an allowable deduction will be taxable. ancellation between to years 20 taxable

xpenses not incurred wholly and exclusiely for the production of taxable income or expenses incurred wholly and exclusiely for the production of taxable income The whole amount which are not supported by the releant documentation i.e. inoices, receipts, agreements etc..

mmoable property tax. The whole amount

rofessional tax. The whole amount

Donations to nonapproed charitable organiations. The whole amount

riate motor ehicle expenses. The whole amount

TAX UPDATE │ VOLUM 7

Up to 50 of the taxable income as calculated prior to this deduction subject to a maximum of €150.000 per year. ny unused mount inested each tax year as from 1 anuary 2017 in approed innoatie deduction can be carried small and medium sied enterprises either directly or indirectly forward and claimed in the following 5 years, subject PERSONALto the cap INCOME of 50 of TAX taxable income and oerall maximum of €150.000 per year).

ocial insurance contributions, contributions to approed proident and pension The total amount of the funds, the general health plan, contributions to medical or other approed funds allowances is limited to 15 as well as life insurance premiums. of the taxable income as ayments relating to premiums paid to approed medical funds are tax calculated before deducting deductible, proided that they do not exceed 1,5 of the gross salary income. the allowances.

estricted to 7 of the nnual life insurance premiums. insured amount

mmoable property tax. The whole amount

rofessional tax. The whole amount

Donations to nonapproed charitable organiations. The whole amount

riate motor ehicle expenses. The whole amount

TAX UPDATE │ VOLUM 7

f a iretor of a ompay or a iiiua areoer or i poue or ay reatie up to te eo eree reeie a oa or ay oter fiaia aitae from te ompay u pero i eeme to ae otaie a moty eefit i i eua to per aum of te moty aae of te oafiaia aitae a ti amout i iue i te iiiua iome uet to iome tax.

The amount of tax on the monthly benefit should be withheld from the individual’s monthly salary and pai to te ax epartmet o a moty ai uer te ytem. Tax Updates | Volume 10, Issue 2 PAGE | 10 e tax reiey of te iretorareoer i irreeat ae o te iterpretatie iruar o. 1.

eefit proie to a empoyee or to a memer of ier famiy eiter i a or oterie y te empoyer are uet to iome tax. etaie uiae o te pratia appiatio of eefit i i a ee iue y te Tax epartmet trou a iformatie eafet effetie from 1 auary 01 i i aaiae oie.

oue taxatio reief i aaiae for ay forei tax ite aroa o iome uet to taxatio i ypru. ere a oue tax treaty exit it proiio i tate te meto of o reief ou e otaie. te aee of a oue tax treaty te forei tax i uiateray reiee a a reit aait te ypru iome tax payae o u iome proie tat te reeat upporti oumetatio i i pae i te ree or i auae.

TAX UPDATE │ VOLUM f a iretor of a ompay or a iiiua areoer or i pouePERSONAL or ay reatie INCOME up to te eo TAX eree reeie a oa or ay oter fiaia aitae from te ompay u pero i eeme to ae otaie a moty eefit i i eua to per aum of te moty aae of te oafiaia aitae a ti amout i iue i te iiiua iome uet to iome tax.

The amount of tax on the monthly benefit should be withheld from the individual’s monthly salary and pai to te ax epartmet o a moty ai uer te ytem.

e tax reiey of te iretorareoer i irreeat ae o te iterpretatie iruar o. 1.

TAX UPDATE │ VOLUM

Tax Updates | Volume 10, Issue 2 PAGE | 11 GENERAL HEALTHCARE SYSTEM

Tax Updates | Volume 10, Issue 2 PAGE | 12 GENERAL HEALTHCARE SYSTEM

s from arh the eneral ealthare ystem aw of as amended ame into effet

ndividuals emloyers and the overnment ontribute to the The ontributions are deduted from the entire earnins of the emloyee as defined in the oial nsurane aw The insurable earnins limit of oial nsurane und ontributions does not aly in this ase

The emloyer is resonsible for ayin both their own and their employees’ contributions

The ontributions are set at for emloyees and ensioners for emloyers for the overnment and for selfemloyed individuals

s from arh the ontributions will inrease to for emloyees and ensioners for emloyers for the overnment and for selfemloyed The ontributions will be deduted from the entire earnins of the individuals inludin dividends interest and rental inome u to a maximum of €180.000.

elow is set a table summariin the relevant ontributions

liable rom ef i mloyees moluments ii mloyers Employees’ emoluments iii elfmloyed wn nome iv ensioners ension v ersons holdin an offie Officers’ emuneration vi eubli of yrus or atural eal Officers’ erson resonsible for the remuneration emuneration of ersons holdin an offie vii ersons earnin rental interest dividend ent interest and and other inome dividend viii Republic’s Consolidated Fund molumentsensions of ersons in i iii iv and v

The ontributions are alied on the soures of inome mentioned in rtile of the nome Tax aw as amended The tax exemtions rovided under the nome Tax aw as amended are inored for G uroses

elow is a list of soures of inome inluded in rtile

. rofits or other benefits from tradin ativities . oldin of an offie diretorshis and seretaries Tax Updates. mloyment | Volume 10, Issueinome 2 and benefits in ind PAGE | 13 . nterest and dividends inludin deemed dividends

TAX UPDATE │ VOLUM

s from arh the eneral ealthare ystem aw of as amended ame into effet

The emloyer is resonsible for ayin both their own and their employees’ contributions

The ontributions are set at for emloyees and ensioners for emloyers for the overnment and for selfemloyed individuals

elow is set a table summariin the relevant ontributions

GENERAL HEALTHCARE SYSTEM The ontributions are alied on the soures of inome mentioned in rtile of the nome Tax aw as amended The tax exemtions rovided under the nome Tax aw as amended are inored for G uroses

elow is a list of soures of inome inluded in rtile

. rofits or other benefits from tradin ativities . oldin of an offie diretorshis and seretaries . mloyment inome and benefits in ind . nterest and dividends inludin deemed dividends . ensions includin oerseas pensions . mounts of income payable in accordance it a court decision or in accordance it a term TAX UPDATE │ VOLUM included in a ill or areement as ell as an annuity . Rents royalties remuneration or oter profits arisin from property includin te alue of te owner’s benefit . radin oodill . deemed benefit relatin to interest free financial assistance proided by companies to sareoldersdirectors.

e folloin are eempt from te G contributions

. ncome ic is eempt under te Cyprus onnae a Reime i.e. diidends from ualifyin sippin actiities . ncome from presered buildins . ncome associated it te nited ations . ncome of indiiduals ic are insured in anoter E ember tate 11 certificate sould be submitted

Cyprus ta resident and nondomiciled indiiduals are not eempt from te contributions. Conseuently suc indiiduals are subect to te not only on teir employment income but also on teir ord ide income suc us forein pensions diidends interest and rental income.

ndiidual directors and secretaries irrespectie of teir ta residency of Cyprus companies are considered persons oldin an office in a company and terefore teir remuneration actual or deemed is subect to te . e responsible person for itoldin te releant contributions is te company ic ill need to itold te contributions from te officers but at te same time pay its portion as an employer.

e aboe coers Cyprus ta resident indiiduals but also nonresident indiiduals bein directors to Cyprus companies earning directors’ fees/remuneration.

Tax Updates | Volume 10, Issue 2 PAGE | 14

TAX UPDATE │ VOLUM E 10 SOCIAL INSURANCE

Tax Updates | Volume 10, Issue 2 PAGE | 15 SOCIAL INSURANCE

e socia security system in Cyprus is designed to proide benefits for unempoyment sicness medica care maternity retirement disabiity deat and arious oter eents. e socia insurance sceme is financed by contributions paid by te empoyers and te insured persons. e main goerning egisation is te ocia nsurance aw.

mpoyer contributions are payabe as foows

ocia nsurance und edundancy und uman esources eeopment und ocia Coesion und Centra oiday und eemptions may appy

e maimum amount of monty earnings on wic te contributions are payabe for te year is €4. (weekly €1.0. e amount of te contributions to ocia Coesion und is cacuated on te tota emouments wit no upper imit.

mpoyees must contribute of teir saary up to a monthly ceiling of €4. to te ocia nsurance und. o empoyee contributions are due in respect of te oter funds. Contributions payabe by empoyees are remitted to te ocia nsurance ffice troug te system on a monty basis payabe by te end of te mont foowing te mont to wic tey reate.

efempoyed indiiduas must contribute on a notiona income determined by te inistry of abour and ocia ecurities wic aries according to te trade or profession of te sefempoyed indiidua. is notiona income is set on an annua basis.

ery empoyer or sefempoyed indiidua wo fais to sette te contributions witin te statutory deadines is obiged to pay interest in te range of and depending on te period of deay cacuated on te amount of contributions due for payment.

Tax Updates | Volume 10, Issue 2 PAGE | 16

TAX UPDATE │ VOLUM

CORPORATION TAX AND SELF-EMPLOYED PERSONS

Tax Updates | Volume 10, Issue 2 PAGE | 17 CORPORATION TAX AND SELF-EMPLOYED PERSONS

y teient cony n y teient elfeloye iniil e ect to t on thei wolwie incoe. o conie the t eiency i eteine y whee the ngeent n contol i eecie. o iniil, ee elntion on . 6.

y teient cony o enent etlihent in y of nony teient cony i ect to cootion t t the te of 1 on it tle ofit. elfeloye iniil e te t the te entione on . 6.

Arm’s length principles

The arm’s length provision applies to transactions between connected persons and requires tht fo t oe ch tnction e entee into on nol coecil te n conition. o 1 ny 01 whee the oiione of tion inteene n chllenge tnction y inceing the incoe of the i tnction cie ot etween two y t eient eon ece the transaction was not carried out at arm’s length, a deem deduction will also be provided to the other eon eing el to the incee of the incoe o enefit.

o 101 tnfe icing ty y nee to e ee n itte to the y thoitie elting to ck to ck intgo finncing ngeent. o the ke of ilifiction ck to ck intgo finncing ngeent will be deemed to comply with the arm’s length incile if the cony eceie ini fte t etn of on the et geneting the inteet incoe. en in ch ce the y thoitie y till eet the iion of tnfe icing ty.

nteet incoe (inteet incoe iing in the oiny coe of ine incling inteet cloely connecte with the cying on of the ine i not coniee inteet incoe n i not eet. he whole ont nteet incoe i ect to ecil contition fo efence (ee . 24.

iien incoe (fo 1101 iien which e t ectile fo the ying cony e not coniee iien t ting ofit ect to cootion t. he whole ont iien incoe y e ect to ecil contition fo efence (ee . 24.

ofit fo the le of ecitie incling nit in n oenene o cloe ene collectie inetent chee. he whole ont o the efinition of ecitie lee ee . 7.

ofit of enent etlihent o (ne cetin conition. he whole ont

he whole ont (fo ofit elting to foeign echnge iffeence. Tax Updates | Volume 10, Issue 2 1101 PAGE | 18

TAX UPDATE │ VOLUM 1

y teient cony n y teient elfeloye iniil e ect to t on thei wolwie incoe. o conie the t eiency i eteine y whee the ngeent n contol i eecie. o iniil, ee elntion on . 6.

y teient cony o enent etlihent in y of nony teient cony i ect to cootion t t the te of 1 on it tle ofit. elfeloye iniil e te t the te entione on . 6.

Arm’s length principles

iien incoe (fo 1101 iien which e t ectile fo the ying cony e not coniee iien t ting ofit ect to cootion t. he whole ont iien incoe y e ect to ecil contition fo efence (ee . 24. CORPORATION TAX AND SELF-EMPLOYED PERSONS ofit fo the le of ecitie incling nit in n oenene o cloe ene collectie inetent chee. he whole ont o the efinition of ecitie lee ee . 7.

ofit of enent etlihent o (ne cetin conition. he whole ont

he whole ont (fo ofit elting to foeign echnge iffeence. 1101 oreign echange dierences arising rom trading in oreign currencies and related derivatives are taable subect to conditions TAX UPDATE │ VOLUM 1 ains arising rom a loan restructuring The whole amount

ote estructuring means the direct or indirect sale and transer o immovable property and transer o rights under a sale agreement submitted with the epartment o ands and urveys, between one or more borrowers andor debtors andor guarantors regarding the same credit acility or grant or debt and one or more creditors made up to ecember 20, which aims to reduce or repay credit acilities or loans or debts granted to borrowers with one or more lenders

ectins

pe ectin ectin pplies t

penses incurred wholly and eclusively or the production o taable income which are also supported by the relevant documentation ie invoices, receipts, The whole amount agreements etc

nterest epense incurred or the acquisition o a directly or indirectly wholly owned ie subsidiary provided that the wholly owned subsidiary does not own directly or indirectly any assets that are not used in the business the wholly owned subsidiary does own directly or indirectly assets not used in The whole amount the business the interest epense is restricted to the amount which relates to the assets not used in the business This applies or acquisitions o wholly owned subsidiaries rom anuary

nterest relating to the acquisition o ied assets used or business purposes The whole amount The whole amount restricted to o penses incurred or the acquisition o shares in an innovative small and taable income beore the medium sied business subect to conditions deduction, with a maimum deduction o €150.000) penses incurred or scientiic research under certain conditions The whole amount

onations to olitical arties subect to conditions Up to €50.000

onations to approved charitable organiations with receipts The whole amount The donations are not ta deductible i they create a taable loss

pecial contribution on salaries abolished rom anuary The whole amount Tax Updates | Volume 10, Issue 2 PAGE | 19 osses rom a permanent establishment abroad subect to conditions ubsequent proits o a permanent establishment abroad are taable up to the The whole amount amount o losses allowed

Lower of €17.086 or 1% of ntertainment epenses the gross turnover The notional interest ew equity introduced to a company as rom anuary is eligible or an deduction cannot annual notional interest deduction provided that the new equity is used or eceed o the

TAX UPDATE │ VOLUM oreign echange dierences arising rom trading in oreign currencies and related derivatives are taable subect to conditions

ains arising rom a loan restructuring The whole amount

ectins

pe ectin ectin pplies t

penses incurred wholly and eclusively or the production o taable income which are also supported by the relevant documentation ie invoices, receipts, The whole amount agreements etc

nterest relating to the acquisition o ied assets used or business purposes The whole amount The whole amount restricted to o penses incurred or the acquisition o shares in an innovative small and taable income beore the medium sied business subect to conditions deduction, with a maimum deduction o CORPORATION TAX AND SELF-EMPLOYED€150.000) PERSONS penses incurred or scientiic research under certain conditions The whole amount

onations to olitical arties subect to conditions Up to €50.000

onations to approved charitable organiations with receipts The whole amount The donations are not ta deductible i they create a taable loss

pecial contribution on salaries abolished rom anuary The whole amount

osses rom a permanent establishment abroad subect to conditions ubsequent proits o a permanent establishment abroad are taable up to the The whole amount amount o losses allowed

Lower of €17.086 or 1% of ntertainment epenses the gross turnover The notional interest ew equity introduced to a company as rom anuary is eligible or an deduction cannot

annual notional interest deduction provided that the new equity is used or eceed o the e prpoe. e oto teret eto te te proft ere teret TAX UPDATE rte o te │ VOLUM ew et. e reet teret rte te e o 10 er fro et fe oeret o t 1 eeer of te pror t er) of te otr ew et. were te f re epoe te e of te op p % pre. e ot te e o te 10 er pr oeret o t te e te p % pre.

nectile penses

Amnt tht is nn pe pense ectile pee ot rre wo ee for te proto of te oe or epee rre wo ee for te proto of te e woe ot oe w re ot pporte te reet oetto .e. oe reept reeet et.)

pee p o ef of oter rop ope. e woe ot

ot ee of 1% of te ro oe or tertet epee €17.086 (whichever is ower)

oe propert t e woe ot

ere t e woe ot

teret pe or eee to e pe for te to of prte otor ee or oter et ot e te e. retrto ppe for 7 e woe ot er fro te te of to of te reet et.

teret pe or eee to e pe for te to of ot wo owe rote. retrto ppe for 7 er fro te te of e woe ot Taxto Updates | Volume of te 10,rote. Issue 2 PAGE | 20

Loe ret to fore ee fferee. e woe ot ore ee oe r fro tr fore rree rete fro 11015) erte re t ete et to oto).

oto to opproe rte orto e woe ot

rte otor ee epee e woe ot

e re o w te reet o re otrto te otrto to proe f f ppe) e ot ee p te er w te were e. e woe ot e te oe otrto pete teret) re p f wt two er foow te e te we re w e t ete te t er w te re p.

pee of pt tre e woe ot

pee ret to te to of erte e woe ot

TAX UPDATE │ VOLUM 1

e prpoe. e oto teret eto te te proft ere teret rte o te ew et. e reet teret rte te e o 10 er fro et fe oeret o t 1 eeer of te pror t er) of te otr ew et. were te f re epoe te e of te op p % pre. e ot te e o te 10 er pr oeret o t te e te p % pre.

nectile penses

Amnt tht is nn pe pense ectile pee ot rre wo ee for te proto of te oe or epee rre wo ee for te proto of te e woe ot oe w re ot pporte te reet oetto .e. oe reept reeet et.)

pee p o ef of oter rop ope. e woe ot

ot ee of 1% of te ro oe or tertet epee €17.086 (whichever is ower)

oe propert t e woe ot

ere t CORPORATION TAX AND SELF-EMPLOYEDe woe ot PERSONS

teret pe or eee to e pe for te to of prte otor ee or oter et ot e te e. retrto ppe for 7 e woe ot er fro te te of to of te reet et.

teret pe or eee to e pe for te to of ot wo owe rote. retrto ppe for 7 er fro te te of e woe ot to of te rote.

Loe ret to fore ee fferee. e woe ot ore ee oe r fro tr fore rree rete fro 11015) erte re t ete et to oto).

oto to opproe rte orto e woe ot

rte otor ee epee e woe ot

e re o w te reet o re otrto te otrto to proe f f ppe) e ot ee p te er w te were e. e woe ot e te oe otrto pete teret) re p f wt two er foow te e te we re w e t ete te t er w te re p.

pee of pt tre e woe ot

pee ret to te to of erte e woe ot

rp TAX elie UPDATE │ VOLUM 1

r reie is we whe he srreeri he ci cies re eers he se r r he eire er (i.e. r 1 r 1 eceer re h rs resie. he cse c icrre is re wihi er i wi e eee h he w cies hve ee eers he r r he eire er.

w cies re csiere e r r rs r reie rses i

 e is 7 ssiir he her r  h re 7 ssiiries hir c.

he sses srreere c e iie he ci is ris he se er.

he iersii rs resie c es ec he eiiii r r reie s s sch c is resie i eiher cr r i cr wih which rs hs eiher re r eche iri re (ier r ier.

r 1101 rs resie c s ci sses r c which is resie i her cr rvie sch c irs ehss ssiiiies vie iise is sses i is cr resiece r i he cr iereir hi c.

Tax Updates sses | Volume 10, Issue 2 PAGE | 21

sses icrre ri er c e crrie rwr ver he e ive ers r he e he er i which he were icrre e se is re e ice.

creit r reign t

e i reie is vie r rei wihhe r ice sec i i rs. here e re eiss is rvisis wi se he eh hw reie sh e ie. he sece e re he rei is ier reieve s crei is he rs ice e sch ice rvie h he reev sri cei is i ce i he ree r ish e.

Annl er n ter llnces n tngile ie ssets

lnt n mchiner te

chier 10

rire iis 10

sri cres 10

chier s se i ricr siess 1

ehicles n ens rnsprttin te

erci r vehices 0

r cces 0

TAX UPDATE │ VOLUM 1

rp elie

r reie is we whe he srreeri he ci cies re eers he se r r he eire er (i.e. r 1 r 1 eceer re h rs resie. he cse c icrre is re wihi er i wi e eee h he w cies hve ee eers he r r he eire er.

w cies re csiere e r r rs r reie rses i

 e is 7 ssiir he her r  h re 7 ssiiries hir c.

he sses srreere c e iie he ci is ris he se er. CORPORATION TAX AND SELF-EMPLOYED PERSONS he iersii rs resie c es ec he eiiii r r reie s s sch c is resie i eiher cr r i cr wih which rs hs eiher re r eche iri re (ier r ier.

r 1101 rs resie c s ci sses r c which is resie i her cr rvie sch c irs ehss ssiiiies vie iise is sses i is cr resiece r i he cr iereir hi c.

sses

sses icrre ri er c e crrie rwr ver he e ive ers r he e he er i which he were icrre e se is re e ice.

creit r reign t

Annl er n ter llnces n tngile ie ssets

lnt n mchiner te

chier 10

rire iis 10

sri cres 10

chier s se i ricr siess 1

ehicles n ens rnsprttin te

erci r vehices 0

r cces 0

cvrs rcrs ers seree ers rs r er TAX UPDATE │ VOLUM 1 cies

rre crs (e.. se ecri ervices 0

eciie chier r he i rirs 0

ew ires 8

ew heicers 8

ii vesses

r chs 6

Taxe Updatesshis | Volume s 10, Issue 2 ishi s 6 PAGE | 22

hi chi chier 1

ew cr vesses 8

ew sseer vesses 6

se crsseer vesses ver heir se ives

chier vehices (eci rive r vehices her sses cire ri he ers 01 018 (icsive re eiie cceere erecii he re 0 (eci sch sses which re re eiie r hiher re erecii.

ther te

eevisis vies 10

er hrwre eri sses 0

ici swre 1

ici swre for less than €1.709 is wrie i he er cisii

i wer eerrs 10

hvic ses 10

s i eer 1

iees rer vie cs 0

ilings te

erci iis

sri ricr he iis

eic reehse srcres 10

e reehse srcres 1 he cse isri he iis h re cire ri he ers 01 018 (icsive cceere erecii he re 7 er ies.

TAX UPDATE │ VOLUM 16

cvrs rcrs ers seree ers rs r er cies

rre crs (e.. se ecri ervices 0

eciie chier r he i rirs 0

ew ires CORPORATION TAX AND SELF-EMPLOYED8 PERSONS

ew heicers 8

ii vesses

r chs 6

eshis s ishi s 6

hi chi chier 1

ew cr vesses 8

ew sseer vesses 6

se crsseer vesses ver heir se ives

chier vehices (eci rive r vehices her sses cire ri he ers 01 018 (icsive re eiie cceere erecii he re 0 (eci sch sses which re re eiie r hiher re erecii.

ther te

eevisis vies 10

er hrwre eri sses 0

ici swre 1

ici swre for less than €1.709 is wrie i he er cisii

i wer eerrs 10

hvic ses 10

s i eer 1

iees rer vie cs 0

ilings te

erci iis

sri ricr he iis

eic reehse srcres 10

e reehse srcres 1 he cse isri he iis h re cire ri he ers 01 018 (icsive cceere erecii he re 7 er ies.

TAX UPDATE │ VOLUM 16

Tax Updates | Volume 10, Issue 2 PAGE | 23 SPECIAL CONTRIBUTION FOR DEFENCE

Tax Updates | Volume 10, Issue 2 PAGE | 24 SPECIAL CONTRIBUTION FOR DEFENCE

rs ersons ho are rs taresent an n the ase of nals also rs ole are set to seal ontrton for efene on the sores of noe nate elo. onrs ta resents or rs taresent nals ho are not rs ole are not set to seal ontrton for efene.

prs t resient t prs t resient n rce ncme nnmicile prs t resient cmpnies micile iniils iniils 0 ens reee a rs ta resent oan fro en noe fro another rs ta resent rs ta resent 0 17 oan after the lase of oanes ears fro the en of the ear n hh the rofts hh ere strte as ens arose are set to 17.

0 he 0 oes not al an the en ll e set to 17 seal ontrton for efene f a ore than 0 of the attes of the foren oan an the en lea to nestent en noe fro noe an nonrs ta resent 0 17 oanes the foren ta ren on the noe of the foren oan an the en s sstantall loer than the ta ren of the rs ta resent oan. he a eartent has clarified that “significantly lower” means an effective tax rate of less than on the strte rofts.

nterest noe arsn fro the ornar attes or losel 0 0 0 onnete th the et to ersonal ta et to ersonal ta et to ororaton ta ornar attes of the sness Tax Updates | Volume 10, Issue 2 PAGE | 25

TAX UPDATE │ VOLUM 17 A

0 he 0 oes not al an the en ll e set to 17 seal ontrton for efene f a ore than 0 of the attes of the foren oan an the en lea to nestent en noe fro noe an nonrs ta resent 0 17 oanes the foren ta ren on A the noe of the foren oan an the en rs ersons ho are rs taresent anSPECIAL n the ase CONTRIBUTION of nalss sstantall also rs FOR loer ole DEFENCE than the are ta ren of the rs ta set to seal ontrton for efene on the sores of noe nate elo. onrs ta resent oan. resents or rs taresent nals ho are not rs ole are not set to seal ontrton for efene. he a eartent has clarified that “significantly lower” means an effective tax prs t resient t prs t resient n rate of less than on the rce ncme nnmicile prs t resient cmpnies micile iniils strte rofts. iniils 0 nterest noe arsn fro the ornar ens reee a rs attes or losel 0 0 ta0 resent oan fro en noe fro onnete th the et to ersonal ta et to ersonal ta etanother to rs ororaton ta resent ta ornarrs ta attes resent of the 0 17 oan after the lase of snessoanes ears fro the en of the ear n hh the rofts hh ere strte as ens arose are set to 17. TAX UPDATE │ VOLUM 17 erson whose total annal income 0 inclding interest does he 0 oes not al an the not exceed €12.000 en ll e set to 17 who receives interest seal ontrton for ther interest income which has een sect efene f to secial contrition for defence has the a ore than 0 of the right to a refnd of attes of the foren effective secial oan an the contrition for en lea to nestent en noe fro defence ayale of noe an nonrs ta resent 0 17 the foren ta ren on oanes the noe of the foren oan an the en s sstantall loer than the ental income is also ental income is also sect ta ren of the rs ta sect to ersonal to resent oan. income tax cororation tax of rental income he a eartent has or yrs sorced rental incomeclarified where that “significantly the tenant is a yrs comany artnershilower” the means state or an local effective athority tax the secial contrition forrate defence of less shold than e withheld on the y the tenant and e aid tostrte the ax thorities rofts. y the end of the month following the month in which it was nterest noe arsn withheld fro the ornar 0 0 0 oreignattes tax or aidwithheld losel aroad can also e credited against the secial contrition for defence liaility rovidedonnete the th relevant the sortinget todocmentation ersonal ta iset in lace to ersonal ta et to ororaton ta ornar attes of the sness nmicilitin

s from ly individals are sect to secial contrition for defence if they are oth yrs tax residentTAX UPDATE and │yrs VOLUM domiciled 17

Taxccording Updates | toVolume the domicile10, Issue 2 concet nder the tax legislation every erson has at any given time eitherPAGE | 26

i the domicile received by him/her at birth (‘domicile of origin’), or ii the domicile not eing the same as the domicile of origin acired or retained y himher y hisher own act (‘domicile of choice’).

Under (i) above, the domicile of origin of a legitimate child is that of the father’s, or in the case of an illegitimate child that of the mother’s. nder ii aove a erson may acire a domicile of choice y estalishing hisher home at any lace in yrs with the intention of ermanent or indefinite residence

or tax roses however a nondomiciled individal will e deemed as domiciled in yrs if heshe has een a yriot tax resident for at least ot of the last years rior to the relevant tax year deemed domicile rle

n individal who has a domicile of origin in yrs may still alify as nondomiciled sect to certain conditions namely to have not een a yrs tax resident for a consective eriod of years

TAX UPDATE │ VOLUM erson whose total annal erson income whose total incldingannal income interest does notinclding exceed interest €12.000 does whonot exceed receives €12.000 interest ther interest income whichwho receives has een interest sect ther interest income towhich secial has contritioneen sect forto secial defence contrition has the rightfor defence to a refnd has theof effectiveright to a refndsecial of contritioneffective secial for defencecontrition ayale for of defence ayale of

ental income is also ental income is also sect sectental income to ersonal is also toental income is also sect to incomesect totax ersonal cororation tax of rental income income tax cororation tax of rental income or yrs sorced rental income where the tenant is a yrsor yrs comany sorced artnershi rental income the wherestate or the local tenant athority is a theyrs secial comany contrition artnershi for defence the state shold or local e withheld athority ythe the secial tenant contrition and e aid for to defence the ax sholdthorities e withheld y the endy the of tenantthe month and followinge aid to the the month ax thorities in which it y was the withheldend of the month following the month in which it was withheld SPECIAL CONTRIBUTION FOR DEFENCE oreign tax aidwithheld aroad can also e credited against the secial contrition for defence liaility rovidedoreign tax the aidwithheld relevant sorting aroad cadocmentationn also e credited is in againstlace the secial contrition for defence liaility rovided the relevant sorting docmentation is in lace nmicilitin nmicilitin s from ly individals are sect to secial contrition for defence if they are oth yrs taxs from resident ly and yrs individals domiciled are sect to secial contrition for defence if they are oth yrs tax resident and yrs domiciled ccording to the domicile concet nder the tax legislation every erson has at any given time either ccording to the domicile concet nder the tax legislation every erson has at any given time either i the domicile received by him/her at birth (‘domicile of origin’), or iii thethe domiciledomicile receivednot eing by the him/her same atas birththe domicile (‘domicile of originof origin’), acired or or retained y himher y hisher iiown the act domicile (‘domicile not of eing choice’). the same as the domicile of origin acired or retained y himher y hisher own act (‘domicile of choice’). Under (i) above, the domicile of origin of a legitimate child is that of the father’s, or in the case of an illegitimateUnder (i) above, child thethat domicile of the mother’s. of origin of a legitimate child is that of the father’s, or in the case of an nderillegitimate ii aove child athat erson of the may mother’s. acire a domicile of choice y estalishing hisher home at any lace in yrsnder iiwith aove the intention a erson of may ermanent acire a or domicile indefinite of choiceresidence y estalishi ng hisher home at any lace in yrs with the intention of ermanent or indefinite residence or tax roses however a nondomiciled individal will e deemed as domiciled in yrs if heshe orhas taxeen roses a yriot however tax resident a non fordomiciled at least individal ot of willthe elast deemed years as riordomiciled to the in relevant yrs iftax heshe year hasdeemed een domicilea yriot rle tax resident for at least ot of the last years rior to the relevant tax year deemed domicile rle n individal who has a domicile of origin in yrs may still alify as nondomiciled sect to certain nconditions individal namely who has to havea domicile not een of origin a yrs in yrs tax resident may still for alifya consective as non domicilederiod of sect years to certain conditions namely to have not een a yrs tax resident for a consective eriod of years TAX UPDATE │ VOLUM TAX UPDATE │ VOLUM eeme istritin

omanies are deemed to have distribted to their yrs tax resident shareholders 0 of their after tax acconting rofits, within two years from the end of the year in which the rofits were earned. n sch a deemed distribtion, secial contribtion for defence at the rate of 1 shold be withheld and aid over to the yrs ax thorities. he deemed distribtion rovisions do aly even to tax resident cororate shareholders bt do not aly to nonyrs tax resident shareholders.

or the rose of calclating the amont of the deemed distribution, the term “rofits” means the acconting rofits arrived at sing generally accetable acconting rinciles, after the dedction of any transfers to reserves as secified by any law. ny losses broght forward, gro losses as well as any amonts, inclding any additional dereciation, which emanate from the revalation of movable and immovable roerty are ignored.

The term “tax” includes:

 the cororation tax, which incldes the 10 additional tax  the secial contribtion for defence  the caital gains tax and  any tax aid abroad that has not been credited against income tax and/or secial defence tax ayable for the relevant year

n 1/0/2011 the ax eartment issed irclar o. 2011/10, having a retrosective effect from 200 Taxonwards, Updates | according Volume 10, to Issue which 2 the exemtion with regards to rofits attribtable to nonresident cororatePAGE | 27 shareholders, has now been extended to rofits attribtable to resident cororate shareholders of a yriot resident comany to the extent that sch rofits are indirectly attribtable to ltimate shareholders which are nonresidents of yrs.

rom 1//201 the deemed distribtion rovisions shold not aly to the extent that the ltimate direct/indirect shareholders of the comany are individals who are yrs tax residents bt non yrs domiciled.

he deemed distribtion rovisions do not aly to rofits arising either from a loan restrctring (sbect to conditions), or from an aroved reorganisation.

he amont of deemed dividend is redced by the amont of actal dividend distribted dring the year to which the rofits relate, or the following two years. n cases where an actal dividend is aid after the deemed dividend distribtion date, any deemed distribtion redces the actal dividend on which the defence contribtion is withheld.

pitl ectin

n case of a redction of share caital any amonts aid to the individal shareholders in excess of the amont of the share caital that was actally aid by the individal shareholders will be treated as a deemed dividend sbect to secial contribtion for defence rovided that the ltimate shareholders or yrs domiciled and tax residents.

irclar 200/ rovides that redemtion of redeemable reference shares, when the redemtion is done ot of distribtable rofits is also considered as caital redction.

TAX UPDATE │ VOLUM 1

eeme istritin

The term “tax” includes:

 the cororation tax, which incldes the 10 additional tax  the secial contribtion for defence SPECIAL CONTRIBUTION FOR DEFENCE  the caital gains tax and  any tax aid abroad that has not been credited against income tax and/or secial defence tax ayable for the relevant year

n 1/0/2011 the ax eartment issed irclar o. 2011/10, having a retrosective effect from 200 onwards, according to which the exemtion with regards to rofits attribtable to nonresident cororate shareholders, has now been extended to rofits attribtable to resident cororate shareholders of a yriot resident comany to the extent that sch rofits are indirectly attribtable to ltimate shareholders which are nonresidents of yrs.

rom 1//201 the deemed distribtion rovisions shold not aly to the extent that the ltimate direct/indirect shareholders of the comany are individals who are yrs tax residents bt non yrs domiciled.

he deemed distribtion rovisions do not aly to rofits arising either from a loan restrctring (sbect to conditions), or from an aroved reorganisation.

pitl ectin

irclar 200/ rovides that redemtion of redeemable reference shares, when the redemtion is done ot of distribtable rofits is also considered as caital redction.

The bu bac or redemtion o units or other onershi interests in an oenedended or closedended collectie inestment schemes is not considered a caital reduction and is not subect to secial contribution TAX UPDATE or deence│ VOLUM 1

ispsl ssets t shrehler t less thn mret le

hen a coman disoses an asset to its indiidual shareholder or to a relatie u to second deree or his souse or a alue hich is less than its maret alue, the dierence beteen the sales and the maret alue ill be deemed to hae been distributed as a diidend to the shareholder This roision, does not al or assets oriinall ited to the coman b an indiidual shareholder or a relatie o his u to second deree or his souse

mpn issltin

n case o liuidation o the coman, the total o the roits o the last ie ears beore the liuidation hich hae not been distributed or the hae not been deemed to hae been distributed shall be deemed on liuidation to be distributed and the shareholders shall be deemed to receie such diidends n such roits to be distributed or deemed to be distributed uon liuidation should be subect to secial Taxcontribution Updates | Volume or deence10, Issue 2 roided that the ultimate directindirect shareholders o the comanPAGE are | 28 indiiduals ho are rus taxresident and rus domiciled

This roision does not al in the case o dissolution under a reoranisation scheme

t is emhasied that here assets are distributed to a company’s shareholders upon the company’s liuidation, hich hae a maret alue that exceeds the cost o their acuisition b the coman, the deemed distribution roisions ill al The amount o the diidend that is deemed to be distributed to the shareholders ill be eual to the dierence beteen the maret alue o the assets and the costs o their acuisition b the coman

The deemed dividend distribution of profits that becomes realized upon the company’s dissolution or liuidation should not exceed the amount or the alue o the net assets distributed to the shareholders

n case the shareholders o a rus tax resident coman that is liuidated are not tax residents o rus or are tax residents o rus but nondomiciled, the liuidation distributions are not taxable in rus

TAX UPDATE │ VOLUM

ispsl ssets t shrehler t less thn mret le

hen a coman disoses an asset to its indiidual shareholder or to a relatie u to second deree or his souse or a alue hich is less than its maret SPECIALalue, the dierence CONTRIBUTION beteen the sales FOR and DEFENCE the maret alue ill be deemed to hae been distributed as a diidend to the shareholder This roision, does not al or assets oriinall ited to the coman b an indiidual shareholder or a relatie o his u to second deree or his souse

mpn issltin

n case o liuidation o the coman, the total o the roits o the last ie ears beore the liuidation hich hae not been distributed or the hae not been deemed to hae been distributed shall be deemed on liuidation to be distributed and the shareholders shall be deemed to receie such diidends n such roits to be distributed or deemed to be distributed uon liuidation should be subect to secial contribution or deence roided that the ultimate directindirect shareholders o the coman are indiiduals ho are rus taxresident and rus domiciled

This roision does not al in the case o dissolution under a reoranisation scheme

n case the shareholders o a rus tax resident coman that is liuidated are not tax residents o rus or are tax residents o rus but nondomiciled, the liuidation distributions are not taxable in rus

TAX UPDATE │ VOLUM

Tax Updates | Volume 10, Issue 2 PAGE | 29 SHIPPING PROFITS

Tax Updates | Volume 10, Issue 2 PAGE | 30 SHIPPING PROFITS

The following are exempt from any taxation in accordance with the provisions of the Merchant Shipping (Fees and Taxing Provisions) Law and may be subject to tonnage tax:

• The income of a qualifying ship-owner from the operation of a qualifying Cyprus, community and/or foreign (under conditions) vessel engaged in qualifying shipping activities. • The income of a qualifying charterer from the operation of a qualifying Cyprus, Community and/or foreign (under conditions) vessel, engaged in qualifying shipping activities. • The income of a qualifying ship manager from the provision of crew and/or technical administration services.

The below are also exempt from any taxation in Cyprus:

• Dividends paid directly or indirectly from the profits emanating from qualifying shipping activities. • Any interest income relating to the working capital of the company. • Salaries or other benefits paid to the masters, officers and the crew of a qualifying Cyprus vessel engaged in a qualifying shipping activity. • Income from the sale or transfer of a Cyprus-registered vessel or the shares of a ship owning company;

In addition:

• No stamp duty is payable on ship mortgage deeds or other security documents; • No estate duty or inheritance tax is levied following the death of a shareholder;

The legislation includes an “all or nothing” rule, meaning that if a ship-owner, charterer, ship manager of a group elects to be taxed under the tonnage tax system, then all ship-owners, charterers, ship managers of the group should elect also to be taxed under the tonnage tax system.

Qualifying ship-owners, qualifying charterers and qualifying ship managers, who also earn income from a non-qualifying shipping activity, shall maintain books and records so that it will be possible to determine the income subject to tonnage tax and the other income that is taxable under corporation tax and special contribution for defence.

The European Commission concluded in its decision dated 16 December 2019 that the Cyprus tonnage tax and seafarer scheme is in line with EU State aid rules, as it contributes to the competitiveness of the EU maritime sector and encourages ship registration in Europe while at the same time preserving Europe’s high social, environmental and safety standards and ensuring a level playing field.

A relevant amendment Bill, amending principal Law 44(I)/2010 has been prepared and it is anticipated that the Bill will be enacted into Law by the Cyprus Parliament within the coming weeks.

The amendment Bill provides inter alia for the extension of the validity period of the Merchant Shipping (Fees and Taxing Provisions) Law of 2010 (Law 44(I)/2010) until 31 December 2029, as well as for certain amendments which were deemed necessary in order to conform with the aforementioned approval Decision of the European Commission.

As of the date of this publication the amendment Bill has not been enacted into a Law.

Tax Updates | Volume 10, Issue 2 PAGE | 31 ALTERNATIVE INVESTMENT FUNDS

Tax Updates | Volume 10, Issue 2 PAGE | 32

ALTERNATIVE INVESTMENT FUNDS AA

The yprus lternative nvestment unds s and ndertains for ollective nvestment in Transferable ecurities T

An Alternative Investment Fund (“AIF”) is defined as a collective investment undertaking, raising external capital from a number of investors ith a vie to investin it in accordance ith a defined investment policy for the benefit of those investors and that has not been authorized as an ndertain for ollective Investments in Transferable Securities (“UCITS”).

The a allos for three types of s to be established in yprus hich are as follos

lternative nvestment unds ith imited umber of ersons in total s lternative nvestment unds ith nlimited umber of ersons s eistered s s

s can tae the folloin leal forms and may be established ith limited or unlimited duration

Variable Capital Investment Company (“VCIC”) Fixed Capital Investment Company (“FCIC”) Limited Partnership (“LP”)

s s

Variable Capital Investment Company (“VCIC”) Fixed Capital Investment Company (“FCIC”) Common Fund (“CF”)

The a defines T as undertains the sole obect of hich is the collective investment in transferable securities andor other liuid financial instruments as referred to the relevant section of the a of capital raised from the public hich operate on the principle of risspreadin and the units of hich are at the reuest of investors redeemed or repurchased directly or indirectly out of these undertakings’ assets

T can tae the folloin leal forms

ariable apital nvestment ompany (“VCIC”) Common Fund (“CF”)

tin ns

unds hich are not transparent for ta purposes and hich are manaed and controlled in yprus are ta resident in yprus and are subect to the eneral provisions of the yprus ta frameor

Tax Updates | Volume 10, Issue 2 PAGE | 33

TAX UPDATE │ VOLUM

The yprus lternative nvestment unds s and ndertains for ollective nvestment in Transferable ecurities T

The a allos for three types of s to be established in yprus hich are as follos

lternative nvestment unds ith imited umber of ersons in total s lternative nvestment unds ith nlimited umber of ersons s eistered s s

s can tae the folloin leal forms and may be established ith limited or unlimited duration

Variable Capital Investment Company (“VCIC”) Fixed Capital Investment Company (“FCIC”) Limited Partnership (“LP”)

s s

Variable Capital Investment Company (“VCIC”) Fixed Capital Investment Company (“FCIC”) Common Fund (“CF”)

T can tae the folloin leal forms ALTERNATIVE INVESTMENT FUNDS

ariable apital nvestment ompany (“VCIC”) Common Fund (“CF”)

tin ns

unds hich are not transparent for ta purposes and hich are manaed and controlled in yprus are ta resident in yprus and are subect to the eneral provisions of the yprus ta frameor In the case of funds hich have compartments, each compartment is assessed separately for tax purposes subect to the provisions of the Cyprus tax legislation

Under TAX circumstances UPDATE │ VOLUM and depending on the legal form of the fund, some funds may be transparent for tax purposes.

le n nits

There is no capital gains tax on the gains arising from the disposal or redemption of units in funds unless the fund ons immovable property in Cyprus.

oever, even if it ons immovable property in Cyprus, no capital gains tax arises if the Fund is listed on a recognied stock exchange.

tmp t

The subscription, redemption, conversion or transfer of a fund’s units are exempt from Cyprus stamp duty.

cretin permnent estlishment

o Cyprus permanent establishment ill be deemed to arise

(a) investment into Cyprus taxtransparent investment funds by nonCyprus tax resident investors, and (b) management from Cyprus of nonCyprus investment funds.

Tax Updates | Volume 10, Issue 2 PAGE | 34

TAX UPDATE │ VOLUM PA

SPECIAL MODES OF TAXATION

Tax Updates | Volume 10, Issue 2 PAGE | 35

SPECIAL MODES OF TAXATION

A AA

nsrnce cmpnies

nsurane oanies oe under te nora ororation ta reie ut te a enfores tat te iniu ta aae annot e oer tan of teir annua ross insurane reius ie in ases of o taae rofits or taae osses

rits pressinls entertiners etc

e fooin inoe is suet to itodin ta in rus

 e ross inoe deried an indiidua not resident in rus fro te eerise in rus of an rofession or oation  te reuneration of ui entertainers not resident in rus deried fro erforanes in rus  te ross reeits of an teatria or usia or oter rou of ui entertainers inudin foota us and oter ateti issions fro aroad deried fro erforanes in rus

ntellectl prpert rights etc

e ross inoe arisin fro inteetua roert rits oter eoitation rits oensations or oter siiar inoe arisin fro soures itin rus of a erson o is not resident in rus is suet to itodin ta at a rate of

its ranted for use outside rus are not suet to an itodin ta een if te roat is aid a rus ta resident erson

ilm rlties etc

e ross inoe deried a nonresident erson in reset of roaties arisin fro fi roetion in rus is suet to itodin ta at te rate of

ncme rm il s relte ctiities

e ross aount or oter inoe deried fro soures itin rus an erson o is not resident of rus i does not arise fro a eranent estaisent in rus as onsideration for series arried out in rus it reset to te etration eoration or eoitation of te ontinenta sef susoi or natura resoures as e as te instaation and eoitation of ieines and oter instaations on te round te seaed or aoe te surfae of te sea is suet to ta at te rate of

echnicl ssistnce

e ross inoe arisin fro soures itin rus as onsideration for tenia assistane roided an erson o is not resident of rus is suet to a itodin ta

ment t ithhel

a ited on aents to nonriot residents soud e aid to te a eartent te end of te fooin ont of te aent

Tax Updates | Volume 10, Issue 2 PAGE | 36 TAX UPDATE │ VOLUM

A AA

nsrnce cmpnies

nsurane oanies oe under te nora ororation ta reie ut te a enfores tat te iniu ta aae annot e oer tan of teir annua ross insurane reius ie in ases of o taae rofits or taae osses

rits pressinls entertiners etc

e fooin inoe is suet to itodin ta in rus

ntellectl prpert rights etc

e ross inoe arisin fro inteetua roert rits oter eoitation rits oensations or oter siiar inoe arisin fro soures itin rus of a erson o is not resident in rus is suet to itodin ta at a rate of

its ranted for use outside rus are not suet to an itodin ta een if te roat is aid a rus ta resident erson

ilm rlties etc

e ross inoe deried a nonresident erson in reset of roaties arisin fro fi roetion in rus is suet to itodin ta at te rate of

ncme rm il s relte ctiities

echnicl ssistnce SPECIAL MODES OF TAXATION

e ross inoe arisin fro soures itin rus as onsideration for tenia assistane roided an erson o is not resident of rus is suet to a itodin ta

ment t ithhel

a ited on aents to nonriot residents soud e aid to te a eartent te end of te fooin ont of te aent

ensin incme rm serices renere r TAX UPDATE │ VOLUM orein ensions of an rus ta resident ensioner a e taed under te nora inoe ta rates or at te flat rate of 5%, with an annual exemption of €3.420. The choice can be made by the tax payer on an annua asis

Widow’s pension

Cyprus source widow’s pension is taxed at the flat rate of 20% on amounts exceeding €19.500. The taaer an oeer on an annua asis eet to e taed at te nora ta rates and ands set out aoe

rile remnertin iniils emple in the ns instr

eifi eoeeseeuties of inestent fund anaeent oanies or interna anaed inestent funds a oose for a different ode of ersona taation

uet to onditions teir ariae eoent reuneration i is effetie onneted to te arried interest of te fund anain entit a e suet to rus ta at te fat rate of it a minimum tax liability of €10.000 per annum. This speia ode of taation is aaiae for a eriod of ears in tota suet to te annua eetion of te taaer

ilm prctin cmpnies

a inenties ere introdued in te ta eisation to enourae internationa roduers to oose rus as teir net fi destination

suar of te inenties is entioned eo

 as reate on eiie eenditures inurred in rus or  a eetion of inoe enerated fro te rodution of fi  a aoane on inestent in utura infrastruture and euient  refund on eenditure

i as reate

oanies an ai a as reate of u to of eiie eenditure inurred in rus

or a ore effetie use of te ee seifi utura riteria ae een estaised tat i sere as a asis for te eauation of te roosed rodutions

Taxe Updates reate | Volume i e 10, ien Issue 2one fiin is oeted on reeit of te audit reort and its reie PAGE te | 37 reeant oittee

ii a eetion

s an aternatie to as reate a oan inoed in fi rodution an enefit fro a ta eetion e eetion is iited to of te eiie eenses aroed te oetent autorit

TAX UPDATE │ VOLUM ensin incme rm serices renere r

orein ensions of an rus ta resident ensioner a e taed under te nora inoe ta rates or at te flat rate of 5%, with an annual exemption of €3.420. The choice can be made by the tax payer on an annua asis

Widow’s pension

Cyprus source widow’s pension is taxed at the flat rate of 20% on amounts exceeding €19.500. The taaer an oeer on an annua asis eet to e taed at te nora ta rates and ands set out aoe

rile remnertin iniils emple in the ns instr

eifi eoeeseeuties of inestent fund anaeent oanies or interna anaed inestent funds a oose for a different ode of ersona taation

ilm prctin cmpnies

a inenties ere introdued in te ta eisation to enourae internationa roduers to oose rus as teir net fi destination

suar of te inenties is entioned eo

 as reate on eiie eenditures inurred in rus or  a eetion of inoe enerated fro te rodution of fi  a aoane on inestent in utura infrastruture and euient  refund on eenditure SPECIAL MODES OF TAXATION i as reate

oanies an ai a as reate of u to of eiie eenditure inurred in rus

or a ore effetie use of te ee seifi utura riteria ae een estaised tat i sere as a asis for te eauation of te roosed rodutions

e reate i e ien one fiin is oeted on reeit of te audit reort and its reie te reeant oittee

ii a eetion

s an aternatie to as reate a oan inoed in fi rodution an enefit fro a ta eetion e eetion is iited to of te eiie eenses aroed te oetent autorit implementing the program. The sum of the tax credit against the taxable income shall not exceed 50% of the Applicants’ taxable income for the tax year within which the production is made. TAX UPDATE │ VOLUM iii Tax deduction

ndiiduals, small as well as medium sied enterprises inesting in film infrastructure and euipment are entitled to deduct the amount of the inestment from their taxable income in the year of the inestment. The tax deduction cannot exceed 20% of the eligible expenses for indiiduals and small enterprises and 10% for medium sied enterprises. n order to be eligible to enoy the deduction, the inestment in euipment would need to remain in Cyprus for at least 5 years.

i T refund

Companies and indiiduals from third countries incurring eligible expenses on film productions, are entitled to a T refund in the same way as those from ember tates in accordance with the releant irectie.

The refund shall arise within months from the end of the last deadline for submitting the T declaration for the period during which the expense occurred, or from the date on which the application for the T refund is filed.

ualifying production categories include, amongst others, feature ilms including animation, teleision eries or miniseries, documentaries for Theatrical or Teleision release, animation digital or analogue, teleision research programs and natural history.

Tax Updates | Volume 10, Issue 2 PAGE | 38

TAX UPDATE │ VOLUM 2

EU ANTI-TAX AVOIDANCE DIRECTIVE

Tax Updates | Volume 10, Issue 2 PAGE | 39 EU ANTI-TAX AVOIDANCE DIRECTIVE

he yprus tax leislation has included the releant proisions of the Antiax Aoidance irectie.

he amendments apply as of anuary

onoed oein opnies s

he nondistributable income of a ontrolled orein ompany or of a forein permanent establishment arisin from nonenuine arranements is added to the taxable income of the yprus tax resident controllin company subect to exceptions.

Any forein tax paid on the income of the is credited aainst income tax payable in yprus.

nees iiion e

A limit on deductible exceedin borrowin costs of of profit adusted for tax purposes before interest tax depreciation and amortiation commonly referred to as taxable A.

he interest limitation rule does not apply to wholly independent companies those which on a worldwide basis are not part of a roup and hae no associates and no permanent establishments or to financial institutions.

ene nise e

he new proisions allow the ommissioner of axation to disreard artificial arranements i.e. arranements not put into place for alid commercial reasons which reflect economic reality whose main purposes was to obtain a tax adantae that defeats the obect or purpose of the tax leislation.

i ion ppie o

n certain cases when a taxpayer moes assets e.. from head office to permanent establishment or ice ersa the taxpayer may be subect to tax on an amount eual to the maret alue of the transferred assets at the time of exit less their alue for tax purposes. he taxpayer has the riht to defer the payment of the exit tax by payin it in instalments oer fie years.

id ises ppie o

ybrid mismatches rules may apply to deny a deduction or tax an income in the epublic to the extent hybrid mismatches result in double deduction or deduction without inclusion or no taxation without inclusion.

Tax Updates | Volume 10, Issue 2 PAGE | 40 TAX UPDATE │ VOLUM A INTELLECTUAL PROPERTY (IP)

Tax Updates | Volume 10, Issue 2 PAGE | 41 INTELLECTUAL PROPERTY (IP)

he old ox reime proided for an exemption from taxation of of the ross royalty income followin the deduction of all direct costs such as amortiation oer years and interest expense. n the case of a tax loss only of the tax loss could be surrendered to other roup companies under the roup relief proisions or be carried forward to subseuent years subect to the years rule restriction.

he exemption applied also for any profit arisin from the disposal of the .

he aboe proisions related to intanible assets which were defined in the atents aw the rade ars aw and the ntellectual roperty ihts aw.

ransitional proisions hae been included for taxpayers who hae preiously entered the old ox reime. ore specifically those taxpayers shall be able to continue to benefit from the application of the old reime until une with respect to s which

a were acuired before anuary or b were acuired directly or indirectly from a related person durin the period from anuary until une and which assets at the time of their acuisition were benefitin under the ox reime or under a similar scheme for intanible assets in another state or c were acuired from an unrelated person or deeloped durin the period from anuary until une .

or intanible assets which were acuired directly or indirectly from a related person durin the period from anuary until une and which do not fall under the aboe proisions a transitional period until ecember will apply.

he income ualified for the application of the current ox reime now includes embedded income and income from intanible assets for which only economic ownership exists.

A nly intanible assets which as at une hae either enerated income or their deelopment has been completed will ualify for the transitional rules.

ew ps o eie

he new yprus box applies as from uly . An deduction is proided for ualifyin profits relatin to a ualifyin . Accordinly in effect only of the ualifyin profits will be taxed at the rate of . A taxpayer may elect not to claim all or part of the aailable deduction for a particular tax year. ualifyin tax losses in the new yprus box are restricted to of their amount.

iin sses

ualifyin intanible asset means an asset which was acuired deeloped or exploited by a person in furtherance of his business which is the result of research and deelopment actiities and includes intanible assets for which only economic ownership exists.

he new proisions restrict ualifyin assets to patents computer software as well as assets which are nonobious useful and noel and from which the income of a taxpayer does not exceed in a -year Taxperiod, Updates €7.500.000 | Volume 10, per Issue annum 2 (€50.000.000 for taxpayers forming part of a Group). he later shouldPAGE be | 42 certified by a competent ypriot or forein authority. TAX UPDATE │ VOLUM A

he exemption applied also for any profit arisin from the disposal of the .

he aboe proisions related to intanible assets which were defined in the atents aw the rade ars aw and the ntellectual roperty ihts aw.

he income ualified for the application of the current ox reime now includes embedded income and income from intanible assets for which only economic ownership exists.

A nly intanible assets which as at une hae either enerated income or their deelopment has been completed will ualify for the transitional rules.

ew ps o eie

iin sses

ualifyin intanible asset means an asset which was acuiredINTELLECTUAL deeloped or exploited PROPERTY by a person (IP) in furtherance of his business which is the result of research and deelopment actiities and includes intanible assets for which only economic ownership exists.

he new proisions restrict ualifyin assets to patents computer software as well as assets which are nonobious useful and noel and from which the income of a taxpayer does not exceed in a -year period, €7.500.000 per annum (€50.000.000 for taxpayers forming part of a Group). he later should be

certified by a competent ypriot or forein authority.

urther, TAX UPDATE qualifying │ VOLUM assets under the nexus approach do not cover tradears includingA brands, iage rights and other intellectual property rights used for the areting of products or services

iin inoe

ualifying profits are deterined under the Action nexus approach

ualifying incoe includes, but is not liited to the following

 royalties or other aounts in connection with the use or license of qualifying intangible assets  any aount received fro insurance or as copensation in relation to the qualifying intangible asset  gains relating to the disposal of qualifying intangible asset  ebedded incoe of qualifying intangible asset

e es ppo nd iin ependie

The “Nexus Approach” provides that there should be sufficient substance and an essential nexus between the expenses, the assets and the related incoe in order to benefit fro a new yprus patent box regie

The following forula has been introduced to deterine the qualifying profits that can benefit fro an regie relating to a qualifying asset

ualifying expenditure plift expenditureTotal expenditure x verall ncoe

ualifying expenditure include aong other expenses wages and salaries, general expenses relating to installations used for research and developent and expenses for supplies related to research and developent activities

ualifying expenditure, excludes though the costs of outsourcing to related parties, contrary to the cost of outsourcing to unrelated parties which are considered as part of ‘qualifying expenditure”, the cost of the acquisition of intangible assets and costs which cannot be directly connected to a specific qualified asset

n addition an uplift expenditure equal to the lower of

i of the eligible costs, or ii the total aount of the cost of acquisition and outsourcing to related parties for research and developent in relation to the eligible intangible asset

will be added to the qualifying expenses

d onin eods Tax Updates | Volume 10, Issue 2 PAGE | 43 roper boos of account and records of incoe and expenses ust be ept for each intangible asset for which a benefit is claied under the new regie

e oniin sses o e o eie

TAX UPDATE │ VOLUM A

urther, qualifying assets under the nexus approach do not cover tradears including brands, iage rights and other intellectual property rights used for the areting of products or services

iin inoe

ualifying profits are deterined under the Action nexus approach

ualifying incoe includes, but is not liited to the following

e es ppo nd iin ependie

The following forula has been introduced to deterine the qualifying profits that can benefit fro an regie relating to a qualifying asset

ualifying expenditure plift expenditureTotal expenditure x verall ncoe

n addition an uplift expenditure equal to the lower of

i of the eligible costs, or ii the total aount of the cost of acquisition and outsourcingINTELLECTUAL to related parties PROPERTY for research (IP)and developent in relation to the eligible intangible asset

will be added to the qualifying expenses

d onin eods

roper boos of account and records of incoe and expenses ust be ept for each intangible asset for which a benefit is claied under the new regie

e oniin sses o e o eie

xpenditure of acquiring a nonqualifying intangible asset in accordance with the new rules or which does not qualify for the transitional provisions and the asset is used in furtherance of the business of the taxpayer can be aortied over the period of its useful life axiu of years in accordance with the accepted accounting principles TAX UPDATE │ VOLUM A pon sale of this intangible asset, a balancing stateent ust be prepared This is the sae treatent as

when a fixed asset is sold

oodwill does not qualify for aortiation

Tax Updates | Volume 10, Issue 2 PAGE | 44

TAX UPDATE │ VOLUM A

CAPITAL GAINS TAX

Tax Updates | Volume 10, Issue 2 PAGE | 45

apital gains tax at is payable on gains derived fro the disposal of iovableCAPITAL property GAINS land TAX and buildings situated in yprus including shares of copanies not listed on a recognied toc xchange which directly own such iovable property

Also, gains derived fro the disposal of shares of copanies which, indirectly, own iovable property Capital gains tax at 20% is payable on gains derived from the disposal of immovable property (land and located in yprus and at least of the aret value of the said shares eanate fro such iovable buildings) situated in Cyprus including shares of companies not listed on a recognized Stock Exchange propertywhich directly are also own subect such immovable to capital gains property. tax

AountsAlso, gains received derived due from to thethe disposalcancelation of shares of the agreeentof companies relating which, to indirectly,the disposal own of iovableimmovable propertyproperty arelocated also insubect Cyprus to and capital at least gains 50% tax ofcertain the market conditions value apply of the said shares emanate from such immovable property are also subject to capital gains tax. The following disposals of iovable property are exept fro capital gains tax Amounts received due to the cancelation of the agreement relating to the disposal of immovable property are alsoovable subject to capitalproperty gains acquired tax (certain during conditions the period apply). uly to eceber is exept fro capital gains tax on any future disposal The followingTransfers disposals arising of on immovable death property are exempt from capital gains tax:  Transfers as a result of approved reorganiation schees • Immovable property acquired during the period 16 July 2015 to 31 December 2016 is exempt from  xchangecapital gains andor tax on sale any of future iovable disposal; property under the Agricultural and onsolidation aws •  onationsTransfers arising ade onfro death; parent to child or between husband and wife or up to rd degree relatives •  iftsTransfers to charities as a result, the of overnent approved reorganization and to a political schemes; party •  iftsExchange to a failyand/or company sale of immovable where the property company’s under shareholders the Agricultural are members Land (Consolidation) of the donor’s Laws; family • andDonations the shareholders made from continueparent to to child be ebersor between of husbandthe faily and for wife five or year up tos after3rd degreethe day relatives; of the • transferGifts to charities, the Government and to a political party; •  Giftsifts byto aa familyfaily companycopany towhere its shareholders,the company’s providedshareholders such are property members was of originally the donor’s acquired family byand the shareholders continue to be members of the family for five years after the day of the transfer; the copany by way of donation see above The property ust be ept by the donee for at least • Gifts by a family company to its shareholders, provided such property was originally acquired by threethe company years by way of donation (see above). The property must be kept by the donee for at least  xpropriationsthree years; •  xchangeExpropriations; of properties, provided that the whole of the gain ade on the exchange has been used • toExchange acquire of the properties, other property provided The that gain the that whole is not of thetax ablegain ismade deducted on the froexchange the costhas beenof the used new to property,acquire the ie other the property.payent Theof tax gain is deferredthat is not until taxable the is disposal deducted of fromthe new the costproperty of the new property,  Transferi.e. the payment of ownership of tax betweenis deferred spouses until the that disposal their arriage of the new has property;been dissolved by a court order • orTransfer in case of ofownership transfer betweenof ownershi spousesp between that their the marriage sae persons has been for dissolved the purpose by a ofcourt settling order their or in propertycase of transfer according of ownership to the ettleent between of the roperty same persons elationships for the betweenpurpose ofpouses settling aw their property according to the Settlement of Property Relationships between Spouses Law;  Transfer under a qualifying loan restructuring • Transfer under a qualifying loan restructuring

edionsDeductions

ndividualsIndividuals are entitled to to useuse thethe followingfollowing lifelife-timetie exeptions exemptions:

esipion €

isposal of principal private residence subect to conditions

isposal of agricultural land by a farer

ther disposals

ndividuals can only benefit once fro the above during their lifetime, up to the maximum amount of €85.430

TAX UPDATE │ VOLUM A Tax Updates | Volume 10, Issue 2 PAGE | 46 TRANSFER FEES

Tax Updates | Volume 10, Issue 2 PAGE | 47 TRANSFER FEES

and transfer fees are paid on the transfer of immoable property and are calculated on the maret alue of the property as estimated by and eistry epartment as follows

€ 0 85.000 3

85.000 0.000 5

0.000 and oer 8

o transfer fees are payable if the transaction is subect to . lso the below are exempt from transfer fees

ransfer under an approed reoraniation ransfer under a ualifyin loan restructurin ransfer executed in the context of banruptcy, liuidation or disposal of mortaed immoable property by the lender

he aboe transfer fees are reduced by 50 in case the purchase of immoable property is not subect to .

n the transfer of immoable property by donation between spouses, spouses and children or relaties up to third deree of indred, transfer fees are calculated on the alue of the property as at anuary 03 at the followin rates

ransfer to children 0

ransfer to spouse 0,

ransfer to relatie up to third deree 0,

n the case of a company reoraniation and ualifyin loan restructurin the transfer of immoable property is exempt from transfer fees.

Tax Updates | Volume 10, Issue 2 PAGE | 48

TAX UPDATE │ VOLUM 3

IMMOVABLE PROPERTY TAX

Tax Updates | Volume 10, Issue 2 PAGE | 49 IMMOVABLE PROPERTY TAX

mmoable property tax was abolished as from anuary 0.

mmoable property tax was imposed on all immoable property located in yprus, reardless of the tax residency of the property owner. he tax was imposed on an annual basis, on the alue of immoable property as at anuary 80 owned by each person as at anuary of each year.

he releant bands and rates that applied until 3 ecember 0 were as follows

// €1 €40.000 0, €240 €240

€40.001 €120.000 0,8 €640 €880

€120.001 €170.000 0, €450 €1.330

€170.001 €300.000 , €1.430 €2.760

€300.001 €500.000 ,3 €2.600 €5.360

€500.001 €800.000 ,5 €4.500 €9.860

€800.001 €3.000.000 , €37.400 €47.260

€3.000.001 ,

n case the total //80 alue of the immoable property situated in the epublic did not exceed the amount of €12.500, no immovable property tax was imposed.

he immoable property tax was payable on 30 eptember each year.

or preious years, taxpayers were entitled to specific discounts and extensions.

Tax Updates | Volume 10, Issue 2 PAGE | 50

TAX UPDATE │ VOLUM 33 VALUE ADDED TAX (VAT)

Tax Updates | Volume 10, Issue 2 PAGE | 51 VALUE ADDED TAX (VAT)

VAT is a transaction tax due on all taxable supplies which have a place of supply in Cyprus.

A taxable person is any person, who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.

Taxable transactions are the ones listed below, executed for a consideration within the territory of Cyprus by a taxable person acting as such:

• Supply of goods, • Intra-Community acquisition of goods, • Supply of services, and • Importation of goods.

VAT rates

Applicable VAT rates for 2020 are the below:

• Standard rate of 19%. Applicable for all taxable supplies not exempted or not subject to one of the reduced or zero rates. o As of 13 November 2017 the rental of immovable non-residential property property between two taxable persons is subject to VAT at 19%. o As of 02/01/2018 the sale of undeveloped land intended for development by a taxable person is subject to VAT at 19%. o As of 01/01/2019 the sale of new property under a long term lease is subject to VAT at 19%.

• Reduced rate of 9% (Twelfth Schedule of the Cyprus VAT Laws). Applicable for supplies such as accommodation by hotels and similar establishments, restaurant and catering services and local passenger transport services.

• Reduced rate of 5% (Fifth Schedule of the Cyprus VAT Laws). Applicable for supply of a permanent residence (after obtaining permission from the VAT Commissioner), renovation of private dwellings, supply of water, gas, medicine, newspapers, foods, books and admis- sion to performances among other things.

• Zero rate (0%) (Sixth Schedule of the Cyprus VAT Laws). Applicable for export of goods, supply of goods and related services provided to qualifying vessels and aircrafts.

• Exempt transactions (Seventh and Eighth Schedules of the Cyprus VAT Laws). Applicable for the sale of land and buildings after their first use, hospital and medical services, financial and insurance services.

The above lists are not exhaustive and only present the most common activities from each category.

Output tax is charged on taxable supplies made and input tax is paid on expenses incurred. Deduction of

Tax Updates | Volume 10, Issue 2 PAGE | 52 VALUE ADDED TAX (VAT)

the input tax is based on the business activities of the taxable person. Where the activities grant the right to deduct input VAT, this is effected via the quarterly VAT returns.

Registration

Taxable persons need to register when:

• Taxable turnover (i) exceeds €15.600 over the consecutive past twelve months or, (ii) is expected to exceed €15.600 over the next 30 days. Services received from providers that resident outside Cyprus that are subject to the reverse charge mechanism, are included in the taxable turnover. • Intra-community acquisitions of goods exceed €10.251,61 during any calendar year. • Supplying services subject to the reverse charge mechanism to a taxable person VAT registered and established in another Member State, with no threshold applicable. • A supplier that is VAT registered and resident in another Member State makes distance sales of goods to individuals resident in Cyprus with a threshold of €35.000 per calendar year. • Voluntary registration is allowed when engaged in taxable transactions but do not exceed the registration threshold.

VAT returns

A VAT return period covers three calendar months i.e. four quarterly periods in a year. Which quarters will apply will depend on the type of business carried out by the taxable person, i.e. all businesses involved in the construction industry will have the same VAT quarters, as will all businesses providing audit services. The applicable VAT periods are decided by the VAT Authorities and are communicated to the taxable person via the VAT registration certificate.

Payment of any VAT payable amounts and submission of the returns is due by the 10th day of the second month following the end of the relevant VAT period (i.e. for the VAT period ending 31/01/2020 submission and payment are due by 10/03/2020). Submission of VAT returns is electronic via the Taxisnet portal.

Refund of VAT

Where the input VAT incurred on expenses exceeds the output VAT on sales, the taxable person is in a VAT refundable position for the VAT period. This is either refunded or transferred against the VAT due amount for the next VAT period. In the cases where a refund is requested (via submission of the 4B form together with the VAT return), the VAT Authorities need to repay the amount within 4 months (extended to 8 months in case of investigation). If they fail to repay within the above time limits, interest will be due on the principal amount for every complete month the Authorities do not repay the VAT refundable amount. Payments are made electronically which requires informing the Authorities of the taxable person’s bank account details through the TF1900 form.

Tax Updates | Volume 10, Issue 2 PAGE | 53 VALUE ADDED TAX (VAT)

VAT Information Exchange System (VIES)

VIES (recapitulative return) is a system of exchange of information between the VAT Authorities of the EU Member States used to monitor intra-community supplies of goods and services and the VAT due. The VIES return is a monthly electronic return that needs to be submitted within 15 days from the end of the relevant month (i.e. VIES for December 2019 needs to be submitted by 15/01/2020).

axableTaxable personsperon are obligedoblied to report on the VIES return the upplysupply ofof oodgoods hichwhich leaveleave theirtheir emberMember tateState territory and upplysupply ofof erviceservices mmadeade toto taxabletaxable peronpersons VAT reiteredregistered andand reidentresident inin anotheranother emberMember tateState whichhich are subjectubect to the reverserevere chargechare mechanism.mechanim.

ate reitration €85 per month

ate dereitration €85 one off

ate ubmiion of return €51 per return

ate ubmiion of return €50 per return

ate ubmiion of ntratat return €15 per return

ate correction of mitae on return €15 per return

ailure to iue a laful receipt 20 of the value of the upply

10 of the due amount one off and interet ate payment of for any complete month for hich the amount remain due

nteret at the nified ublic nteret ate for on ettlement of amount every complete month for hich due remain unettled.

or ypru iue, you may alo conult our latet related publication titled ypru vervie by aociated company, helco td, by viitin ...

Tax Updates | Volume 10, Issue 2 PAGE | 54

TAX UPDATE │ VOLUM 10 2 36

MAINTENANCE OF BOOKS AND RECORDS

Tax Updates | Volume 10, Issue 2 PAGE | 55 MAINTENANCE OF BOOKS AND RECORDS

er te peron hn

 n une nome  en nteret or ount  n nome retn to nteetu propert  n rent nome  n nome retn to tre oo

oe for eer t er to

ue reept n noe pefe the reuton

noe hou e ue thn 0 from the te of the trnton une rtten ppro h een otne the eprtment for the purpoe of un the noe t ter te

In case where invoices are not issued within the prescribed deadline, a penalty of €100 per month m e mpoe

ntn oo n reor n prepre fnn ttement e on the epte ountn tnr hoe fnn ttement hou e ute n orne th epte utn tnr peron tht ee to t n utor

peron oe to upte oo n reor thn four month from the te of the trnton

n the e here oo n reor re not upte within the prescribed deadline, a penalty of €100 per urter m e mpoe

n nu eempt from the oton to mntn ountn oo n reor here the nnu turnoer oe not eee the threho nnu amount of €70.000.

oo n reor hou e ept for t et er n e re to e preente to the eprtment f reuete

n e une mntn to to te hou e rre out urn the er en n the reut of the to te hou e me e to the eprtment f reuete

Tax Updates | Volume 10, Issue 2 PAGE | 56

TAX UPDATE │ VOLUM 10 2

TRUSTS

Tax Updates | Volume 10, Issue 2 PAGE | 57 TRUSTS

rust refers to the leal relationship created by a settlor the instiator of the trust when assets have been placed under the control of a trustee for the benefit of a beneficiary or for a special purpose.

trust is essentially created when these assets are transferred from the settlor to the trustee. he trustee then becomes the leal owner and is responsible for manain those assets in accordance with the terms of a trust deed. he trustee is the leal owner, whilst the beneficiaries are the euitable owners.

here are a number of different types of trusts but usually they fall into one of the followin cateories

 are rusts, also nown as simple trusts  iscretionary rusts, which are the most widely used in yprus  Interest in ossession rusts  ccumulation and aintenance rusts  esultin and onstructive rusts

here are also fied, tradin, protective and charitable trusts.

In yprus there are two main inds of trusts, local trusts and the yprus International rusts hereinafter “I”

Is are the most popular and useful tool in the island’s trust services legislation.

he worldwide income and profits of the Is are subect to taation in yprus only to the etent that beneficiaries are yprus ta residents, subect to the various eemptions and deduction provided for in the yprus ta leislation see above.

If the beneficiaries are not yprus ta residents, only the yprussource income and profits of the I, is subect to taation in yprus.

Tax Updates | Volume 10, Issue 2 PAGE | 58

TAX UPDATE │ VOLUM 10 2

STAMP DUTIES

Tax Updates | Volume 10, Issue 2 PAGE | 59

STAMP DUTIES he tamp ut a provides that suect to certain eemptions ever instrument specified in the irst chedule of the a is chargeale ith stamp dut as specified therein and specificall applies to an Thepropert Stamp situated Duty Law in theprovides epulic that, or subject to an to matter certain or exemptions, thing to e everyperformed instrument or done specified in the epulicin the First Scheduleirrespective of the of theLaw place is chargeable here the with document stamp duty is drafted.as specified therein, and specifically applies to any property situated in the Republic or to any matter or thing to be performed or done in the Republic, irrespective of the place where the document is drafted. he rates of stamp duties on agreements the suect matter of hich relate to propert situated in prus Theor to rates matters of stamp or things duties to eon eecutedagreements in prusthe subject are as matterfollos of which relate to property situated in Cyprus or to matters or things to be executed in Cyprus are as follows:  no stamp duty is payable on the first €5.000 of consideration stated in the contract; • onno value stamp of dutyconsideration is payable of on between the first €5.001 €5.000 to of €170.000 consideration the rate stated is 0,15%; in the contract; • onon value value of of consideration consideration of ofmore between than €170.000€5.001 to the€170.000 rate is the0,2%; rate is 0,15%; • on value of consideration of more than €170.000 the rate is 0,2%;  on contracts without a fixed amount the stamp duty is €35. • on contracts without a fixed amount the stamp duty is €35.

TheThe maximummaximum amount amount of of stamp stamp duty duty payable payable is €20.000 is €20.000 per contact per contact which applieshich appliesto contracts to contracts with a consider ith a- ationconsideration value of value€10.046.250 of €10.046.250 or more. or more.

etters of guarantee €4

etter of credit €2

heues €0

Receipts for amounts over €4 €0,

ustoms documents €18 €35

ills of lading €4

ills of echange paale ithin three das on demand or at sight €1

hartering document €18

eneral poer of attorne €6

imited poer of attorne €2

ertified copies of contracts and documents €2

ill €18

state administration document €9

a residenc certificate €80

ertified copies of contracts and documents €2

ocuments relating to transactions that tae place in relation to a compan approved reorganiation or loan restructuring are eempt from stamp duties.

Tax Updates TAX UPDATE | Volume │ 10, VOLUM Issue 2 10 2 PAGE | 60

COMPANIES REGISTRAR FEES AND CAPITAL DUTIES

Tax Updates | Volume 10, Issue 2 PAGE | 61 COMPANIES REGISTRAR FEES AND CAPITAL DUTIES

Companies incorporated in Cyprus are obliged to pay an annual fee in the amount of €350.

For groups of companies, the total levy is capped at €20.000.

The annual levy is payable from the year of incorporation.

The annual levy is payable to the Reistrar of ompanies by 30 une of each year.

onpayment of the levy within the time limits set by the law may result in dereistration strieoff of a company from the reistry andor payment of the penalties mentioned below.

in case of up to a 2 month delay, a 10% penalty; in case of a delay between 2 and 5 months, a 30% penalty.

f a company is reinstated within a two years’ period from its strieoff, a fixed penalty of €500, in addition to the outstandin amount of the levy, is imposed. This fee is increased to €750 in case the company is re instated after the two years’ period.

apital duties and allotment fees are payable on the share capital of a yprus company.

Tax Updates | Volume 10, Issue 2 PAGE | 62

TAX UPDATE │ VOLUM 10 2 40

TAX DIARY

Tax Updates | Volume 10, Issue 2 PAGE | 63 TAX DIARY

PAYE for employees deducted from salaries relating to the previous month.

Payment of tax withheld on payments made to non-Cyprus tax residents during the previous month.

Social insurance and General Healthcare Contributions relating to salaries of the previous month.

Special Contribution for Defence to be withheld from Cyprus sourced dividends and interest for tax resident and domiciled individuals relating to previous End of each month. month General Health Contributions to be withheld from Cyprus sourced dividends and interest for tax resident individuals relating to previous month.

Special Contribution for Defence to be withheld from Cyprus sourced rent paid to tax resident and domiciled individuals (when tenant is a company, partnership, the state or local authority) relating to previous month.

General Healthcare Contributions to be withheld from Cyprus-sourced rent paid to tax resident individuals (when tenant is a company, partnership, the state or local authority) relating to previous month.

Within 30 days from the date of Payment of stamp duty and capital gains tax. the agreement

Registration with the Cyprus Tax Authorities and obtaining a tax identification Within 60 days code; Notification of changes of taxpayer’s details

Submission of the deemed distribution declaration (Form TD 623) for the year 31 January ended 31 December 2017.

Submission of objections relating to tax assessments issued during December 28 February 2019.

Electronic submission of the 2018 corporation income tax return (Form TD4). 31 March Electronic submission of the 2018 income tax return (Form TD1) for individuals preparing audited financial statements.

Tax Updates | Volume 10, Issue 2 PAGE | 64 TAX DIARY

The official interest rate, as set by the Ministry of Finance, for all amounts due after 1 January 2020 is 1,75% (2% for 2019, 3,5% for 2018 and 2017, 4% for 2016 and 2015, 4,5% for 2014, 4,75% for 2013, 5% for years 2012 and 2011, 5,35% for Interest and the year 2010, 8% for the years 2007-2009 and 9% up to 31 December 2006). Penalties In addition to the interest, a penalty of 5% is imposed on the unpaid tax. An additional penalty of 5% is imposed if the tax remains unpaid 2 months after the payment deadline.

(a) The personal income tax returns can only be submitted electronically. Manually submission is no longer permitted, except in cases of revised income tax returns.

(b) Individuals are required to submit personal tax returns only when their gross taxable income exceeds €19.500. An individual is obliged to submit audited financial statements if his/her annual income from trade/business, rents, dividends interest, royalties or income relating to trading goodwill exceeds €70.000.

(c) In cases where the deadline for the submission of a tax return or payment of a Notes tax or other liability falls on a Saturday or Sunday or Public holiday, the deadline for complying with these obligations is extended until the next business day.

(d) Any person who is fraudulently delaying or omitting to pay taxes or any person who delays payment of withheld taxes i.e. from salaries (such as PAYE and special contribution), payments to non-residents (such as films and royalties), as well as defence tax withheld from dividends, interest and rental income is guilty of a criminal offence and is liable to fines and imprisonment in the case of individuals. In the case of a company the directors, executive managers and accountants are also liable for penalties and imprisonment;

Tax Updates | Volume 10, Issue 2 PAGE | 65 TAX DIARY

0th of folloing ay

0th of folloing ugust

0th of folloing ovember

0th of folloing February

very employer or selfemployed individual ho fails to pay the contributions ithin the time limit, is obliged to pay an additional penalty in the range of 3 and 27, depending on the period of delay, calculated on the amount of contributions due for payment.

Tax Updates | Volume 10, Issue 2 PAGE | 66

TAX UPDATE │ VOLUM 10 2

irector, usiness evelopment irector, ead of axation

a.tsielepistsielepis.com.cy n.papapanayiotoutsielepis.com.cy

he information in this document is intended as a guide only and every reasonable effort as made to ensure the accuracy and timeliness of the information. n no circumstances shall e be legally bound by any information contained in this document, and shall accept no liability in respect of loss caused by reliance on such information.

anaging irector 205, 2th ctober tr., ouloupis Court g.tsielepistsielepis.com.cy st Floor, 3035 imassol, Cyprus .. ox 53, 3507 imassol, Cyprus 357 257000 F 357 25373737 irector, usiness evelopment infotsielepis.com.cy a.tsielepistsielepis.com.cy .tsielepis.com.cy

irector, udit ssurance a.christodoulidestsielepis.com.cy

irector, udit ssurance c.constantinoutsielepis.com.cy

irector, ead of axation n.papapanayiotoutsielepis.com.cy

TAX UPDATE │ VOLUM 10 2 5

Tax Updates | Volume 10, Issue 2 PAGE | 67