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Income Tax Law Amended
A new law has been published in Cyprus amending the various provisions of the Income Tax Law. Taxand Cyprus highlights the key tax areas the new law affects.
Deductibility of interest income
Before the amendments, interest incurred for the acquisition of shares in other companies was not treated as tax deductible expense. After the amendments, it now established that interest expense incurred by a Cyprus parent company on acquisition of shares (whether directly or indirectly) of a company that is 100% subsidiary of the parent company is tax deductible provided that the subsidiary does not own any assets that are not used in the business. In case if the subsidiary owns aforementioned assets, deduction will apply proportionally, and the interest expense corresponding to those assets will not be tax deductible.
The annual capital allowance (allowable deduction for depreciation) for purchasing of plant machinery in the tax years 2012, 2013 and 2014 has been increased from 10% to 20%. For industrial and hotel premises acquired in the above mentioned years, this has increased from 4% to 7%.
Group loss relief
According to the new amendments, if a parent company incorporates a new company during the year of assessment, the new company will be considered as part of the group. Effectively, this allows the company to utilise the group loss relief from the year of incorporation.
The new law's aim is to further enhance the competitiveness and status of Cyprus as a financial centre. The amendments have a retrospective effect from 1 January 2012.
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