CONTENTS OF LAST ISSUE
Taxation in Cyprus. Last news
He that is warned afore is noght bygiled
We have already written about pending changes in the Cyprus tax environment. This article is an update of the pending changes as of 10/03/2023, so that you can rely thereon when planning your next steps.
Changes in the Cyprus tax environment since the last article (after 26/10/2022).
TAX RESIDENCE CRITERION
BEFORE:
A Cyprus company is a Cyprus tax resident ONLY IF it is managed and controlled from Cyprus. (so called “management and control test”).
NOW:
A Cyprus company will ALWAYS be a Cyprus tax resident, UNLESS such company is a tax resident in any other country. (The management and control test remains effective for foreign companies).
IMPORTANT TO:
Cyprus companies that have not previously been taxpayers in any countries (so called “stateless companies”).
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WITHHOLDING TAX
BEFORE:
No withholding tax is levied on dividends, interest and royalties (except for royalties from the rights used in Cyprus taxable at 5-10%).
NOW:
The withholding tax is levied on interest, dividends and royalties, if their recipient is a company from the EU blacklisted jurisdictions (which, since 14/02/2023, includes, among others, Russia and the British Virgin Islands)[1].
Withholding tax rates:
- Dividends 17% (except for the dividends paid by Cyprus listed companies)
- Interest 30% (except for the interest paid on marketable securities)
- Royalty 10%
IMPORTANT TO:
Cyprus companies transferring dividends, interest and royalties and the recipients thereof.
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REAL ESTATE TRANSACTION VAT
BEFORE:
Generally, sales of new real estate are subject to VAT, provided it is the first sale (i.e. the delivery is made before the first occupancy).
NOW:
In addition to the first sale starting from 18 November 2022, any subsequent sales within 5 years after construction are subject to VAT, if the real estate has NOT been used by any third party for 2 (or more) years.
IMPORTANT TO:
Sellers and buyers of real estate in Cyprus.
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PRIVILEGE REGARDING THE FINE FOR FAILURE TO PAY THE REAL ESTATE TRANSAСTION FEE
BEFORE:
The fee of 0.4% has been imposed on sales of real estate and shares of the companies holding the same (provided the controlling interest is purchased) in Cyprus since 22 February 2021.
NOW:
The Cyprus tax authorities have announced that due to clarifying a number of issues in the law on that fee, for real estate transactions made between 22 February 2021 till 18 November 2022, the tax authorities provide taxpayers with “reasonable time” to pay such fee (to taxpayers that failed to pay the fee due to any reasons whatsoever) and will not impose fines.
IMPORTANT TO:
Taxpayers that failed to pay the fee due to any reasons whatsoever.
[1] As of the date the article is written, EU blacklisted jurisdictions include the following countries: American Samoa, Anguilla, Bahamas, British Virgin Islands, Costa Rica, Fiji, Guam, Marshall Islands, Palau, Panama, Russia, Samoa, Trinidad and Tobago, Turks and Caicos Islands, US Virgin Islands, Vanuatu. Updated list: https://www.consilium.europa.eu/en/policies/eu-list-of-non-cooperative-jurisdictions/
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