Further to our previous publications, M. Target Group would like to inform that two draft Laws were submitted to the Cyprus Parliament with the purpose to amend provisions of the Income Tax Legislation and strengthen the Cyprus tax framework in terms of prevention of tax manipulation, tax evasion and tax avoidance.
The draft legislations, which are expected to enter into force within 2021, provide for the following:
- Withholding taxes (WHTs) for payments to companies in EU blacklisted jurisdictions
For payments made to companies which are tax residents of the jurisdictions included in the EU Blacklist, withholding taxes are expected to be introduced as follows:
- for payments of dividends, WHT at the rate of 17%
- for payments of passive interest, WHT at the rate of 30%
- for payments of royalties, WHT at the rate of 10%
- Corporate Tax Residency Test
Currently, the tax residency for Cyprus tax purposes is based on the ‘management and control’ test. As per the proposed amendment, the tax residency test will be expanded with the introduction of a test based on incorporation in Cyprus, for companies that do not have an official tax residency anywhere else in the world. Such Cypriot incorporated companies will be considered tax residents in Cyprus if they cannot prove that they are tax residents in any other jurisdiction.
We shall provide more details on the final provisions of the relevant laws once those are voted by the Parliament and published in the official Government Gazette.
M. Target Group remains at your disposal for any questions or clarifications.