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You are here: Home arrow News arrow Cyprus: Tax Amendments and V.A.T. Developments
Cyprus: Tax Amendments and V.A.T. Developments
Written by Marios Hadjihannas, HLB Cyprus

On 14 December 2011, the Cyprus Parliament voted on a number of new amendments to the tax and V.A.T. legislation in Cyprus.
The main amendments are summarised as follows:


Income Tax
  1. Should a company provide a loan or other financial assistance to its physical directors and/or physical shareholders or to their spouses or other relatives up to the second degree, the Inland Revenue will assume that that person has a benefit in kind equal to 9% annually of the balance of the loan or financial assistance.
  2. Companies will only be able to claim tax benefits for salaries paid to the employees for which the contributions to Social Security and/or other related contributions have been paid to the relevant Authorities.
  3. The above amendments are effective from the tax year 2012.

Special Contribution for Defence
  1. The withholding tax on the dividends paid to Cyprus resident individual shareholders has been increased from 17% to 20% for the tax years 2012 and 2013.
  2. There is no withholding tax on the dividends paid by a Cyprus resident company to another Cyprus resident company. If, however, the dividend is paid more than four years from the end of the year during which the profits were generated, then the withholding tax applies.
  3. The above amendments are effective from 1 January 2012.

Value Added Tax
  1. As from 1 March 2012, the basic V.A.T. rate will increase from 15% to 17%.
  2. All taxable persons providing taxable services, both goods and services, to non-taxable persons are obliged to issue legal receipts. This provision came into effect on 16 January 2012.