One of the primary advantages of establishing a company in Cyprus is the favorable tax regime. The country’s corporate tax rate is one of the lowest in the EU at 12.5%, making it an attractive destination for businesses looking to reduce their tax burden. Additionally, Cyprus has an extensive network of double taxation treaties with over 60 countries, which can help businesses avoid paying taxes twice on the same income.

Another advantage of setting up a company in Cyprus is the country’s well-developed legal system. Cyprus follows the common law system, which is based on English law, and has a modern and efficient legal system that is in line with EU standards. This can provide businesses with greater confidence in the legal system, making it easier to do business in the country.

Cyprus also offers a high-quality workforce, with a well-educated and multilingual workforce. Many people in Cyprus speak English, which is the language of international business, making communication with clients and suppliers easier.

Finally, Cyprus has a thriving business environment, with a wide range of industries and sectors to choose from. These include finance, shipping, tourism, and technology, among others. Cyprus has a well-developed infrastructure, including modern ports and airports, making it easy to transport goods and services to and from the country.

In conclusion, opening a company in Cyprus can be a beneficial decision for businesses looking to expand into the EU and beyond. With a favourable tax regime, a well-developed legal system, a high-quality workforce, and a thriving business environment, Cyprus offers an attractive destination for businesses of all types and sizes.

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Under the new provisions:

VAT is charged at a rate of 19% on the transfer of the ownership of undeveloped land, which is intended for the construction of one or more fixed structures and is carried out in furtherance of the business (the meaning of undeveloped land will be determined by regulations to be issued by the Council of Ministers).

The lease or rental of immovable property to a taxable person for furtherance of the business is considered as a taxable transaction and is taxed at a rate of 19%, unless the building is used as a dwelling (this applies provided that the commencement of the lease or rental agreement was on or after the coming into effect of the amending law). The lessor may opt for the exemption from VAT of the lease or rental of immovable property (subject to terms and conditions which will be determined by notification in the Official Gazette of the Republic), provided the lessor informs the Tax Commissioner of this decision (the lessor cannot subsequently change the decision for the exemption from VAT of the lease or rental).

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What the scheme allows

The overdue taxes will have to be settled in equal instalments, the number of which should not exceed:

-54 instalments for overdue taxes not exceeding €100.000, provided that each instalment is not less than €50
-60 instalments for overdue taxes exceeding €100.000, provided that each instalment is not less than €1.852

No new interest and/or penalties will be charged and no criminal proceedings will commence for overdue taxes which are regulated under the provisions of the Law.

Which taxes are within the scope of the scheme

The provisions of the Law apply to tax liabilities that relate to periods which come before the effective date of the Law and arise under the Income Tax Law, the Special Defence Contribution Law, the Immovable Property Tax Law the Capital Gains Tax Law, the Inheritance Tax Law, the Special Contribution Law, the Stamp Duty Law and the VAT Law.

Application process to enter the scheme

A taxpayer who wishes to enter the scheme, should file an application to the Tax Department within 3 months from the date the Law entered into force.

Details with regards to the payment process

The instalments will need to be paid to the Tax Department in the manner specified in the Commissioner’s decision.

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It will be compulsory for all VAT registered companies and individuals to make electronic submission of VAT returns as of 2nd of May 2017. The relevant Legislation was published in the Cyprus Gazette on 16 December 2016. To this extent, all taxable persons need to proceed with registration to the TAXISnet system, the online platform that enables the electronic submission of the VAT returns.

VAT rates in Cyprus

VAT is charged on every supply of goods or services at the standard rate of 19%.
The reduced rate of 5% is imposed on certain goods and services such as hair salon services, repair and maintenance of private households (based on specific conditions), bottled water, juices, pharmaceutical products, entry fees to theatres, cinemas at sports events, luna parks and similar cultural events, the supply of medicines and food (except the supply of food in the course of catering) services of writers, artists, the supply of fertilizers, foodstuff for animal, live animals, seeds, non bottled water, newspapers, books, periodicals as well as some other products and services.
The reduced VAT rate of 9% applies to transport of passengers and their accompanying luggage within Cyprus, with urban, suburban and rural taxis as well as with tour and suburban buses. This rate is also imposed on the services of restaurants and the supply of food in the course of catering as well as on the provision of accommodation in the hotel sector or in sectors with a similar character and the transport of passengers and their accompanying luggage by sea, within Cyprus.

Certain supplies of goods or services are zero-rated such as the supply, hiring and repair of sea-going vessels and aircrafts, the supply of services to meet the direct needs of sea-going vessels, the supply of goods entered into customs regime. In addition, a supply of goods is zero-rated if the VAT Commissioner is satisfied that the goods have been exported or supplied to a registered person in another member state.

No VAT is charged on supplies of goods or services which are exempted under the VAT legislation such as on leasing or letting of immovable property, the supply of immovable property with the exception of buildings or parts of buildings and the land on which they stand if the application for a building permit was submitted after the 1st May, 2004, financial services, lotteries, medical care, social welfare, education, sports, cultural services, insurance transactions etc.

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Defence tax is payable only by persons who are considered to be tax residents of Cyprus which effectively means an individual who spends at least 184 days in Cyprus every tax year. Defence tax is payable on dividends, interest and rental income. The law was amended so that individuals who are not considered to be “domiciled” in Cyprus would be exempt from payment of defence tax on dividends, interest and rents, even if they are considered as tax residents of Cyprus. In the law there are clear provisions on who is considered as non – domiciled in Cyprus for defence tax purposes.

Extending the available exemptions of personal income tax for those taking up residency in Cyprus

Under current law 50% of the income from employment in Cyprus of a person who was not a tax resident of Cyprus before the beginning of his employment, is exempt from taxation for a period of five years, provided the income from employment in Cyprus exceeds €100.000 per annum. The period of five years is now extended to ten years.

Capital Gains Tax relief

In an effort to boost the suffering construction business the Government has introduced some tax incentives in relation to immovable property. Specifically for Capital Gains Tax, the new law provides that there will be no Capital Gains Tax on the future sale of an immovable property situated in Cyprus that will be acquired until 31st of December 2016. In addition, except in some specific circumstances, the land transfer fees are reduced by 50% for the transfers that are taking place up until 31st December 2016.

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Cyprus incorporated Companies that have not yet paid the levy for 2015 can still do so without penalty until  31/07/2015.

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