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With the demise of Greece, the interwoven Cyprus economy has
taken a beating. Following the footsteps of other Euro members, the
Cypriot government has asked the EU for a bailout. Of course it
would be foolish for them not to try, since the European Commission
seems so keen in handing out billions of Euro's.
At the same time the Cyprus government has amended some tax laws,
not to raise revenue, but to make the EU member state with the
lowest tax rates even more business friendly.
The most important change is the 80% tax exemption on capital
gains arising from the sale of intellectual property after all
relevant costs have been deducted. Acquisition of IP rights can be
amortized over a period of 5 years. The amendment reaffirms
Cyprus' positions as top holding jurisdiction for intellectual
property. Where else can you find such a highly respected nation
that effectively taxes IP rights at 2%, has a vast tax treaty
network, and can access the entire European Union on the basis of
the EU royalty and interest directive?
Other tax incentives include an increased depreciation allowance
for capital goods including real estate. This change will
apply for the years 2012, 2013 and 2014 as follows:
Â" For all machinery and plant: 20% per annum
(previously being 10%)
Â" For industrial and hotel buildings: 7% per annum
(previously being 4%)
Interest expense relating to the direct or indirect acquisition of
shares in a 100% subsidiary (irrespective of its tax residency)
shall be tax deductible for the Cyprus parent company which suffers
the expense. This tax deduction is proportionally not available on
the cost of assets owned by the subsidiary which are not used in
the business.
And finally, the reduced VAT rate of 5% on the sale or
construction of residential real estate shall now apply to
non-residents as well.
Although Cyprus is going through some rough times, Cypriot
politicians still have their countries best interests in mind, and
understand what it takes to attract business.
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A discussion on the Court of Justice of the European Union ruling, that article 50 of Directive 2002/83/EC concerning life assurance is to be interpreted as meaning that a Member State's right to subject to an indirect insurance tax on life insurance premiums paid by the individual policyholder residing in this Member State overrides the Member State's taxing rights where the contract was concluded.
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