In August 2011, the House of Representatives voted the first amendments in relation to tax law in Cyprus. The most significant are listed below for your information:

The Companies Law

A fixed annual levy has been introduced of Euro 350. This has to be paid by all the companies (except for companies that are dormant and companies that do not possess any property or assets not controlled by the Government).  If there is a group of companies involved, the total levy cannot exceed  EURO 20.000.

In the scenario that the fixed annual levy is not paid, the company is in danger of being strike-off from the Registrar of Companies. A company may be reinstated within a 2-year period after having been struck off by payment of Euro 500 per year. If reinstatement is sought after If the 2 year period passes, then the fixed annual levy increases to EURO 750 per year.

The fixed annual levy for the year 2011 must be paid by 31st of December 2011 and then for each subsequent year it has to be paid by 30th of June the latest.  The penalty fee for a 2 month delay is a 10% penalty and which increases up to 30% if the delay is from 2 to 5 months.

The Income Tax Law

Personal Income tax effective from tax year 2011: 35% for income above 60.000 EURO.
In an effort to attract foreign investments an incentive has been given for the employment of persons who are not Cyprus tax residents. For such persons who are employed in Cyprus and whose income exceeds Euro 100.000 per year there is a 50% tax exemption introduced, valid for a period of 5 years, starting from 1st of January 2012 onwards. This only applies to Cypriots and non-Cypriots. The criterion is whether they were or were not Cyprus tax residents prior to establishing in Cyprus.

The Special Defence Contribution on Interest and Dividends
(Defence of the Republic Law)

In relation to the interest on income taxable under the Law on Special Defence of the Republic Law, the rate is increased from 10% to 15% for Cyprus tax residents, physical persons and companies. This does not apply to companies whose normal business includes collecting interest (for example banks). In this case interest is subject to corporate tax. This contribution applies to interest earned either in Cyprus or abroad.

For the dividend income received by persons resident in Cyprus, the rate is increased from 15% to 17%. This applies only to physical persons. Companies are exempt from this contribution.

The increased rate will also apply in the event of deemed dividend distribution to non-Cyprus residents in the event that the Company does not distribute 70% of its profits as dividend within two years of the end of the fiscal year during which the profit was earned. The provision for deemed dividend does not apply to shareholders who are not Cyprus residents.


For more information please contact:
Melina Pyrgou
PYRGOU law firm
9 Lambousa street
P.O. Box 25307 1308 Nicosia Cyprus
Tel +35722466611 Fax. +35722466612
email: melina(at)pyrgou.com.cy
website: www.pyrgou.com.cy