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You are here: Home arrow News arrow Amendment to the Tax Law for supporting further development and growth and the extension of the Law
Amendment to the Tax Law for supporting further development and growth and the extension of the Law
On 24 May 2012, the Council of Representatives voted in favour of the amendment of the regulations regarding Income tax, Special Contribution for Defence and V.A.T., including measures which would encourage further economic growth.



The extension of the Law for the termination/reduction of property transfer fees up to the end of December 2012

No transfer fees shall be applied in any situation in which the immovable property of which ownership is being transferred is subject to V.A.T.

In the case of the transfer of title of land or buildings in whole or in part, which are sold for the first time since the date of the issuance of the building permit or in which the date of the conclusion of the relevant Purchase and Sale Contract and submission to the Land Registry Office is prior to the end of December 2012, the transfer fees shall be reduced by 50%.


Intellectual Property Rights

The meaning of patent rights and intellectual property (IP) rights has been amended to coincide with the definition in the Patent Rights Law of 1998, the Intellectual Property Law of 1976 and the Law regarding Trademarks. This ensures that all types of IPs will be covered by this new regime avoiding any uncertainty.
The new law provides for an 80% exemption on the net profit from the exploitation of such intangibles.

The net profit is calculated after deducting from the licensing of the intangibles all direct expenses associated with the production of this income.

The rate of capital allowances on such intangibles has been set at 20% of the cost of acquisition.

Any profit arising from the disposal of such intangibles will also benefit from the 80% exemption.


Interest deductibility

No interest expense restriction will apply in cases where shares are acquired directly or indirectly in a wholly owned subsidiary provided that this subsidiary does not own any assets which are not used in the business.

If this subsidiary does own assets that are not used in the business, the restriction of interest will only correspond to the percentage of assets not used in the business.


Group Relief Provisions

Under the current provisions of group relief a company is considered to belong to the same group for group relief purposes if it is part of that group for a whole tax year.

With the amended legislation, in cases where a company has been incorporated by its parent company during the tax year, this company will be deemed to be a member of this group for group relief purposes for that tax year.


Related Party Transactions

The transfer pricing provisions of section 33 will not apply for transactions between parent and wholly owned subsidiary companies for which the group relief provisions of section 13 apply.

Capital Allowances

The rate of capital allowances for any plant and machinery purchased in the tax years 2012, 2013 and 2014 has been set at 20%, unless the rate of capital allowances on such assets is higher.

For industrial and hotel buildings purchased in the tax years 2012, 2013 and 2014, the capital allowances rate will be increased from 4% to 7%.


Special Contribution for Defence Law

In calculating the profits subject to deemed distribution under this law a deduction will be given for the acquisition of any plant and machinery purchased in tax years 2012, 2013 and 2014.

The definition of plant and machinery is the same as that in the Income Tax Law and it excludes any saloon cars purchased for private use.

This provision will apply for the profits earned in the tax years 2012, 2013 and 2014.


Application of reduced V.A.T. fees to 5% for the purchase of a residence in Cyprus

The law has increased the scope of the reduced V.A.T. to include purchases of buildings by foreign nationals provided that these are used as main permanent places of residence in Cyprus.


Special Regulation for Private Aircrafts

In accordance with new regulations which were legislated, the payment of V.A.T. is no longer required during the importation of private aircraft into Cyprus but shall be made with the submission of the tax declaration.



Your contacts at HLB Cyprus Limited
Tel. 00357 22002700

Costas Afxentiou - Chief Executive Officer/Managing Partner
Polyvios Polyviou - Member of the Board/Partner
Stelios Prodromitis - Member of the Board/Partner
Marios Hadjihannas - Member of the Board/Partner in charge of Tax Services