2010 Tax Amendments
On 14 December 2010, the House of Representatives enacted various laws (the “Amendments”) in order to enhance its collections of taxes. The most important changes effected by the Amendments are the following:-
(I) Amendments to the Assessment and Collection of Taxes Law:
(1) Following the Amendments and following the entry into force of the specific amendment to the Assessment and Collection of Taxes Law (i.e. 30th June 2011) every Cyprus company must register with the Inland Revenue Department and obtain a Taxpayer Identification Number within 60 days of its incorporation. Such obligation also applies to companies not registered in Cyprus, from the moment such companies are considered as tax residents of Cyprus.
(2) It is noted that for companies that have been registered prior to the enforcement of the Ascertainment and Collection Amendment, the notification for registration with the Inland Revenue Department should be sent not later than 30th June 2011.
(3) In addition, a company which is registered with the tax register is also required to notify the Inland Revenue Department of any changes to the information kept in the tax register for such company within 60 days from the date the change was brought about.
(4) Following the Amendments, various administrative penalties ranging from €100 - €200 are levied in the event of failure to timely submit a return or notification or submit evidence requested by the Director of the Inland Revenue Department. Further, there is a 5% additional penalty on the tax due for the non punctual settlement of the taxes due as stipulated by the law.
(II) Amendments to Special Contribution for Defense Law:
Following the Amendments any interest or dividend income received from sources outside Cyprus which is subject to special contribution tax is payable bi-annually.
(III) Amendments to the Income Tax Law:
(1) Prior to the Amendments, section 39 of the Income Tax Law provided for a deemed interest of 9% on loans or any other financial facilities to any of its directors or shareholders (or to their relatives up to the second degree of kindred in case they are natural persons).
(2) Following the Amendments, the deemed interest referred to in paragraph (1) above will be imposed only in case of natural persons. (Since the Amendments, L.197(I)/2011 has been passed abolishing section 39. In this respect, the position is as follows: in the case of a company director, or an individual shareholder, or his/her spouse, or any relative up to second degree, receiving a loan or financial assistance from the company, then that person is deemed to have obtained a monthly benefit in kind equal to 9% per year on the above facility. This amount will be included in the individual’s income and will be taxed in accordance with the Income Tax Law.)