Cyprus March On December 10th, , the Cyprus House of Representatives voted into law numerous anticipated tax law amendments, which were published in the Government Gazette on December 17th, As guidance to the amendments, we hereby present the following: Amendments made to the Income Tax Law A. Tax neutrality of foreign exchange gains and losses As per the amended Income Tax Law ITL , realised as well as unrealised foreign exchange FX differences whether resulting to gains or losses, and irrespective of whether their nature might be revenue or capital, will be neither taxable nor deductible for Cyprus tax purposes.

In such cases of entities trading in foreign currencies, the amended tax law introduces an option for an irrevocable election to be made, according to which such entities will be taxed only on realised FX differences. If such an election is made, the relevant entity will have to submit a form approved by the Registrar indicating this election together with the immediate next annual tax return to be submitted.

Further, if this option is elected, any unrealised FX differences being a result of trading in currencies or currency derivatives will be treated as taxable or tax deductible within the year that they are realised.

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Overall, this recent development makes the tax treatment of FX differences a simpler task, and an entity, which is not dealing in FX trading, will be able to make profit and other economic performance projections more precisely, as the currency rates fluctuations factor is now eliminated as a tax-element. Moreover, it provides taxpayers with clearance and certainty that any FX differences resulting either from trading or capital nature, can be ignored for tax purposes.

On this subject, the relevant law has now been amended in order to provide clarification to companies and permanent establishments qualifying under the Cyprus IP regime on the tax treatment in the scenario where IP activities are loss making. Date applicable: The above amendments are effective as from 1 January The amendments of both definitions are in line with the discovery of hydrocarbons offshore Cyprus.

It is clear therefore that this change in the law offers an effective way towards the taxing of Oil and Gas related activities carried out by non-CY tax -residents, within the Republic of Cyprus, who may not be captured through a P. Nevertheless, if a DTT is in effect between Cyprus and the state of residence of the party providing these services, the corresponding double tax treaty provisions apply. Date applicable: This amended law is effective as of January 1st, As per the introduced amendment, in the situation where a Cyprus tax-resident entity or a Cyprus located P.

Subsequently, when the dividend CIT exemption is no longer available due to the above, it should be subject to CIT at the rate of In this situation though, the dividend will not be liable to the Special Defense Contribution SDC taxation scheme, and will not be considered dividend for SDC purposes. When will claims of unilateral tax relief for underlying tax on dividend income paid by another EU member state — resident Company to a Cyprus company will not be acceptable?


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The Cyprus tax office obtained this go-ahead to proceed to such considerations again as per the amended law that now grants the right to the tax authorities to deny the availability of underlying tax relief on dividends subject to Cyprus CIT, in such cases where: an arrangement or a series of arrangements have been enacted for the main purpose, or one of the main purposes, of obtaining tax benefits without valid commercial reasons which can genuinely reflect economic reality.

Group loss relief: enrichment and extension of the scope of application Before this amendment came to place, the group loss relief was applicable only between Cyprus tax resident companies, which were ultimately owned by non-CY tax residents. However, this condition could be regarded as irreconcilable to the EU freedom of establishment and consequently the Cyprus ITL law has been amended in order to be aligned with the jurisprudence of recent decisions of the European Court of Justice ECJ.

The amended law now provides that the group loss relief provisions are extended to scenarios where the surrendering entity is registered in and is a tax resident of another EU Member State. Yet, this will be on the condition that this surrendering entity has exhausted all other possibilities available to it towards carrying forward or surrendering its losses in its resident state or in another EU Member State where its intermediary holding company is based and has legal seat. Additionally it is important to note that in such circumstances, the tax losses need be calculated based on the Cyprus tax law provisions.

Before any fx broker in Cyprus can accept forex and CFD traders as clients, they must become authorised by the Cyprus Securities and Exchange Commission CySEC , which is the financial regulatory body in Cyprus Aspiring forex traders might want to consider tax implications before getting started.

Significant Tax Law Amendments

This also was an incentive for companies to establish offices in the country. Your Cyprus broker provides a margin rate of 2. I know in some countries trading for a living, i. Clique em um de nossos representantes abaixo para conversar no WhatsApp.

Comercial Luiz Victor. Foreign exchange differences, both gains and losses irrespective of whether they are realised or unrealised, will be completely tax neutralised i.

Attractive tax system

This is a significant development since it simplifies the tax treatment of FX differences. A Company not dealing in FX trading would be in a position to estimate its taxable profit more accurately, without any influence from FX fluctuations. Under the current provisions, dividends are exempt from income tax but may be subject to taxation under special contribution for defence tax. However, as from 1st January onwards, and in order to comply with the requirements of the EU Parent-Subsidiary Directive PSD , dividends will only be exempt from income tax to the extent these are not tax deductible by the paying company.

More specifically, if the dividends received by a Cypriot company from a foreign tax resident company are not considered as dividends by the latter but instead are treated as tax deductible expenses i. In addition, the provisions of the EU Parent-Subsidiary Directive have been amended so that it does not apply in cases that there is an artificial arrangement having as a main purpose to obtain a tax advantage. The Cyprus income tax law has been amended to incorporate this change in its provisions.

It is also clarified that the notional deduction afforded in accordance with the newly introduced rules on Notional Interest Deduction NID , which corresponds to qualifying IPs will be treated as a direct expense in the determination of the taxable profit from the IP. Previously group loss relief was available only for losses incurred by Cyprus tax resident companies.

The amount of taxable losses must be calculated on the basis of the Cyprus tax laws.

Important amendments to the Cyprus tax laws - Eurofast

In order to determine whether two companies are members of a group the law has also been amended to allow the interposition of holding companies established in another EU member state, in a state with which Cyprus has concluded a double tax treaty or in a state which has signed the OECD multilateral convention for exchange of information.

The introduction of these amendments aligns the Cyprus tax laws with recent ECJ decisions and enhance even further the group relief provisions of the ITL. The Income Tax Law has now been amended by adding a new article 29A, allowing the Tax Authorities to withhold the exemption if they have sufficient reason to conclude that the reorganisation is not based on valid commercial or financial considerations and that the main purpose or one of the main purposes of the reorganisation is the reduction, avoidance or deferment of payment of taxes.

Any such decision is open to objection and appeal in accordance with the provisions of articles 20 and 20A of the Assessment and Collection of Taxes Law. The Tax Authorities will also have the right to impose conditions in relation to:. These restrictions do not apply in the case of publicly listed companies and transfers of shares on death. Introduction of a Notional Interest deduction NID regime on new equity Companies including permanent establishments of foreign companies will be entitled to a NID on equity.

The NID regime is effective as of 1st January


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