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Cyprus Votes On First Measures For Bailout
The Cyprus Parliament has voted on first measures in relation to Corporate Income tax, Special Contribution for Defence Tax (SDC) and Special Tax on Credit Institutions, as part of the Memorandum for the bailout of Cyprus that will be discussed in Parliament on 26 April 2013. Taxand Cyprus takes a look at the new measures.
In particular, the Cyprus Parliament has voted and approved the below measures:
- Corporate tax rate will be increased from 10% to 12.5%
- SDC on interest will be increased from 15% to 30% where such interest does not derive in the ordinary course of business of the company nor is closely connected with the ordinary course of business of the company (in which case it is taxed under Corporate Income Tax)
- Special tax on credit institutions to be increased from 0.11% to 0.15%. This will be applied retrospectively from January 1 2013
Following the approved measures, even though the Corporate Income Tax has been increased to 12.5%, it will still be considered as one of the lowest within the EU. Other benefits for companies operating in Cyprus remain untouched, such as:
- The taxation of dividends, when paid to non-residents, remains at 0%
- No amendments have been made on capital gains tax, which remains 0% on securities and in cases where there is no immovable property situated in Cyprus
- The ability to pull profits from the country of the subsidiary with no or very low withholding tax
A number of measures and significant incentives were announced by the President of Cyprus for the revival of the Cyprus economy. Several of them are applicable to multinational companies, and therefore foreign entities with operations in Cyprus should ensure they are up to speed with the changes, in order to remain compliant.