The government of Cyprus has spearheaded a number of economic reforms in an effort to boost the economic impact and business viability of the country. The reforms are being enacted over a number of years across various categories to influence both individual and corporations to invest in Cyprus to secure a more empowering future. The recent Brexit vote to leave the European Union has already put the spotlight on Cyprus to allow British citizens to retain their EU membership by investing a substantial amount of money – €2.5 million.
However, some of the most important reforms come in the shape of significant tax incentives and exemptions that provide lucrative opportunities for foreign investors to establish their businesses and receive other benefits. Cyprus highly competitive corporate tax rate of 12.5 percent, trained workforce, and business-friendly environment has played a crucial role in encouraging many international companies to establish their offices in Cyprus.
The recent bill passes on tax incentives pave the way for further economic opportunities. These are as follows:
Recent Changes
In July 2015, the Cyprus House of Representatives enacted a set of tax measured aimed at incentivizing individuals and corporations to invest in Cyprus. Among the first is the capital gains tax exemption that has been put into effect for the sale of properties that either have been or will be purchased between the date on which the law has been enacted and the expiry date of 31st of December 2016. The standard capital gains tax on the sale of properties was 20 percent. The recently enacted law will provide a substantial boost for the Construction industry.
Another change part of the set of reforms is the reduction of land registry duties by half which will ease the process of real estate transfers before the 31 December 2016expiry date. In lieu of these amendments, any amount of VAT levied on the purchase of a property will cause transfer fees to be cancelled, which will also apply in the case of a transfer of property from a parent to a child.
Additionally, the Special Defense Contribution tax has also been revised. The authorities have introduced what is referred to as a non-domiciled individual. Based on this concept, a Cypriot resident who pays tax based on the 183 day rule will not be obliged to make a Special Defense Contribution tax payment if there is sufficient evidence to show that he or she has not been domiciled in the country.
This revision of legislation makes it extremely favorable for high-income individuals. Upon evidence of non-domiciliation, they will be exempt from paying any kind of Special Defense Contribution tax payment whether it is on bank deposit interest, dividends, or rental income tax.
Additional Tax Exemptions
Other tax exemptions introduced by the government of Cyprus include tax exemption from any retirement gratuity or any kind of pension income earned abroad. This is in addition to the rule that includes a flat 5 percent tax rate on all pension income earned from services offered abroad that exceed €3.420 every year.
Furthermore, remuneration earned from offering services abroad to a non-Cypriot employment or an organization belonging to a resident employer over a time period exceeding 90 days in a year is also exempt from tax.
