The new tax legislation is as follows:
Law 59(I)/2015 on Capital Gains tax
100% exemption from capital gains tax in Cyprus for the disposal of real estate located in Cyprus provided that the real estate has been purchased from the effective date of this lawand 31t December 2016. This amendment is very important as the prior applicable regime imposed a 20% capital gains tax on the seller of real estate located in Cyprus.
Law 90(I)/2015 on land registry duties and enhancement of procedures
A 50% discount has been introduced on the duties for the transfer of real estate from the effective date of this law up until the 31st December 2016. Furthermore new procedures have been introduced in order to protect investors purchasing Cyprus real estate subjected to a prior mortgage.
Law 29(I)/2013 on special defence contribution tax (SDC)
A radical amendment introducing the concept of the non-domiciled individual. Prior obligations to SDC for individuals who could qualify as tax resident of Cyprus (183 days rule) will now be no longer applicable, if it can be proved that the said individual is not domiciled in Cyprus.
Law 170(I)/2015 on notional interest
As of 1 of January 2015 “new equity capitals” for a period of 1 year are to be given a notional interest deduction. The notional interest deduction shall apply on 80% of the taxable profit of a Cypriot Entity or permanent establishment of a non-Cypriot Entity. It should be noted that the deduction shall not be applicable in loss making scenarios.
The notional interest will be equal with the interest yield of a 10 year Cyprus government bond increased by 3% with a lowest interest of the 10 year government bond on the last day of the year preceding the said tax year increased by 3%.
It should be noted that the interest of a Republic of Cyprus 10 year bond for 2014/2015 was 5.02%.
Careful consideration has gone into these tax amendments, with the aim of increasing investment in Cypriot real estate and allowing fresh capital into the country following new rules on notional interest. These tax laws will be finalised within the next few weeks.