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The island of Cyprus is the third biggest in the Mediterranean (9,250 sq km). For the ancients Cyprus was the home of Aphrodite, Goddess of Love, and was also beautiful in itself. Only some of the forest remains, but mountains and beaches combine to make Cyprus a favorite resort. Cyprus has a nearly ideal Mediterranean climate, with more than 300 warm, sunny days a year, and a brief, mild winter with occasional rain.

Cyprus has a population of 1.1m (July 2010 est), of whom the majority are ethnically Greek, living in the southern part of the island. More than 200,000 Turkish Cypriots and Turkish immigrants live in the northern part of the island, separated from the south by a UN-supervised buffer zone. The official languages in the two zones are Greek and Turkish, but most Cypriots speak English, which is extensively used in business and commerce.

The main cities are Nicosia (the capital and business centre), Limassol, Paphos and Larnaca, these last three being coastal cities around which the important tourist industry is concentrated.

The island’s location has ensured that it played a full part in Mediterranean history, and its essentially Greek culture is leavened with many other influences. Classical ruins abound, but the most important modern influence has probably been that of the British, whose stay has contributed substantially to the island’s Western business environment.

Cyprus successfully completed the EU accession process, and in May, 2004, the island joined the EU. After a referendum on the so-called ‘Annan’ plan to re-unify Cyprus saw a heavy vote against the plan in the Greek Cypriot zone (although the Turkish Cypriot north voted in favour) the EU’s ‘acquis communautaire’ is temporarily suspended in the north. Reunification is nonetheless likely to take place along with Turkey’s eventual entry to the EU, but the referendum has soured relationships between the parties, and the timing or terms of reunification are now very unclear.

Cyprus is an independent sovereign republic. The 1960 constitution established a unicameral presidential republic, as well as safeguarding human rights, political pluralism and private property. The country is a member of the UN, the Council of Europe and the Commonwealth.

Members of the House of Representatives are elected for a 5-year term by proportional representation. There is a multiparty system with right-wing, centrist, socialist and communist parties.

The last Parliamentary elections took place in May, 2006 (next in May, 2011), with the result that the top six parties contesting the election are represented in the new House of Representatives.

The top four parties were left-wing AKEL which captured the leading position (for the second time) with 31.1% of votes, followed closely by the previous ruling party, the Democratic Rally (DISY), with 30.3%. Centre-right DIKO acquired 17.9% and the Social Democrats (EDEK) won 7.9% of the votes.

The executive government is appointed by the President; presidential elections in March, 2003, saw Tassos Papadopoulos replace Glafcos Clerides as President.

In February 2008, Papadopoulos’s bid for a second five-year term as President of Cyprus came to an end.

It emerged after the first round of voting in the general election held that month that Ioannis Kassoulides, a former foreign minister and leader of the conservative Disy party, and Demetris Christofias, the leader of the communist Akel party, were the two leading candidates to take on the country’s presidency.

Voting in Cyprus is compulsory for all Greek Cypriots over 18, including those enclaved in the Turkish occupied north, Latins, Maronites, Armenians and others who are citizens of the Republic of Cyprus through naturalisation.

There is an independent judiciary, and the Cyprus Supreme Court is the final court of appeal, although of course now that Cyprus is a member of the EU, the European Court of Justice has jurisdiction in some areas of law.

Ongoing differences over the North, and Turkey’s putative EU entry dominate politics. In June, 2006, Cyprus avoided using its veto over the opening of the first chapter in Turkey’s EU accession talks, on science and research.

However, the Greek Cypriot government urged the EU to push first for action in areas such as the opening of Turkish ports and airports to Cypriot vessels, and the recognition by Turkey of the authorities in Nicosia.

According to reports, they argued that Turkey had made no progress in these areas, and only withdrew their veto, allowing the first of 35 chapters to be opened, once a version of the agreement text had been drawn up which warned Turkey that: “Failure to implement its obligations in full will affect the overall progress in the negotiations.”


The Greek Cypriot economy is reasonably stable, with a high proportion of GNP (around 40%) based on tourism. Around 3m visitors come to the island annually, 65% from the EU, although tourist revenue came under pressure as a result of 9/11 and sharp rises in Cyprus prices. More than half of the tourists are British. The Government’s successful encouragement of the offshore sector has led to the development of a European-standard commercial and financial infrastructure, although there is now no distinction between domestic and offshore companies. International links are particularly strong in the shipping and banking sectors.

Growth has averaged almost 4% in recent years, and Cyprus was expected to notch up growth of 3.9% in 2007 and

3.8% in 2008, although the global economic crisis which developed in 2008 impacted somewhat on these predictions. GDP contracted by an estimated 0.8% in 2009. GDP per capita at purchasing power parity was USD21,200 in 2009 (est).

Inflation and unemployment are both under control, at 0.9% and 5.3% respectively in 2009.

The cost of living is approximately 65% of the EU average. The low crime rate, good housing conditions, excellent climate and plentiful international air links make Cyprus a desirable place to live.

The currency, until January 1 2008, was the Cyprus Pound. In 2008, the country joined the Eurozone, alongside Malta. The island’s EU accession has of course led to the complete removal of exchange controls, and the Cyprus Central Bank allowed local residents to open foreign currency accounts from March 1, 2002.

The IMF said in July 2010 that Cyprus must act to cut the size of the public sector so that tax rates can remain low enough to attract foreign investment. The deficit was driven by rapid growth in public sector wages and employment as well as the expansion of social spending, much of which was not well targeted to help the poorest portions of the population. Meanwhile, the end of the real estate boom has caused an enduring loss of associated revenues, which, the IMF thinks, will not return to previous levels even as the economy resumes growth.

The IMF considers, however, that levels of public debt are moderate relative to many other Euro area countries as a result of past policies.

In September 2010, the IMF annonced its support for the application of the Excessive Deficit Procedure of the European Union in respect of Cyprus, which has prompted adoption of a program of fiscal consolidation aimed at reducing the fiscal deficit to 4.5% of Gross Domestic Product (GDP) in 2011 and below 3% in 2012.

The IMF says that Cyprus’s fiscal deficit widened sharply in 2009, mostly reflecting structural factors. In particular, expenditures rose sharply on the back of higher wages and salaries, social transfers, and investment spending.

The IMF welcomed the steps already taken to stabilize the deficit in 2010, but thinks that additional measures would be needed to reach the 2011 and 2012 fiscal targets.

However, in November 2010, Standard and Poor’s lowered Cyprus’s long-term credit rating to A, from A+, with a negative outlook, citing ‘credit risk’, exposure to Greek assets, and its dependence on the performance of its financial services centre.


Cyprus, unlike many other jurisdictions is not a “tax haven” and does not offer “brass plate” companies. Instead, Cyprus offers great tax incentives due to its favorable tax regime and its wide network of double tax treaties. These tax incentives together with so many other incentives offered by Cyprus, render Cyprus a unique international business centre, probably the most advantageous one to be found worldwide!

Cyprus is the third largest island in the Mediterranean Sea, situated at its eastern basin covering an area of 9.251 square kilometers with a population of approximately 800.000.

The capital of Cyprus is Nicosia. Limassol is the second largest city and the island’s biggest port. Other main towns are Paphos, Larnaca, Famagusta and Kyrenia (Note: At present Famagusta and Kyrenia are occupied by the Turkish Armed Forces). The island’s time zone is 7 hours ahead of New York and 7 hours behind Tokyo.

Cyprus is a member of the European Union (and adopted the Euro currency), the United Nations and its specialised agencies, the Council of Europe and the Commonwealth.

The legal system in Cyprus is based on the same principles as those of the United Kingdom and all statutes regulating business matters and procedures are based on English Law.

Due to favourable government policy and fiscal legislation offering advantages and incentives, Cyprus has developed into an important international business centre, whilst at the same time it continues to enjoy a steady pace of general economic growth. Latest international evaluations confirm the overall positive economic and investment climate prevailing in the country and the increasing confidence which foreign investors in general bestow on it.

Advantages of the Jurisdiction of Cyprus

International business entities established in Cyprus enjoy a great number of advantages. Briefly, the main ones are as 

a)  Resident companies pay the lowest taxation in Europe (10%) on their taxable net profits (some activities attract 0% tax) and at the same time has acquired the European “stamp of respectability”.

b)   Companies engaged in trading of titles, i.e. shares titles etc may be formed with 0% taxation on profits.

c)   Holding companies satisfying minimum requirements can be established with 0% tax rate on dividends received, making Cyprus the most competitive jurisdiction for holding companies.

d)   Trading companies engaged in global trading may be established with 0% taxation in all respects provided their management and control is outside Cyprus.

e)   Under the new “Cyprus Tonnage Tax System” under certain conditions Ship Owning and Ship Management Companies pay no income tax but only “Tonnage Tax”.

f)   A resident company is not taxed on profits of an overseas permanent establishment subject to certain conditions.

g)   There are no withholding taxes on dividends, interest and royalties to non-residents.

h) Re-organisations, mergers, de-mergers, exchange of shares, transfers of shares transfer of as sets are made without any taxation.

i)  No capital gains or income tax on the liquidation of participations or the liquidation of the Cypriot Holding Company 

j)   Tax losses are carried forward indefinitely and can also be surrendered as group relief.

k)   Unilateral tax-relief is granted to all Cyprus Companies for foreign tax suffered irrespective of the absence of a double tax treaty.

l)   No thin capitalization rules.

m)  Royalties exemption Income from industrial or intellectual property rights which are granted for use outside Cyprus are not subject to tax.

n)   Extensive network of double tax treaties with over 40 countries.

o)   Full capital gains tax exemption on capital gains, except on sale of immovable property situated in Cyprus.

p)   Freely transferable currency accounts (in any currency) can be kept both in Cyprus and abroad.

q)   No exchange control restrictions.

r)  Residence and employment permits for foreign employees and residence permits for their families can be obtained.

Placing an order for the formation of a company

The establishment and operation of companies in Cyprus is regulated under the Companies Act c113.   This law consolidated a number of earlier laws with regard to companies and their operation in Cyprus.   In general the principles contained in the Cyprus legislation are based on English company law.

The formation of a Cyprus International Business Company can take place by using an order form which can be provided by the Registry Agent.

Off-the-shelf companies are also available.

The Registry Agent will check the name availability of the company (whether there is no company under such name already). In Cyprus the law requires that all financial service providers know the identity of their client so the actual contact details must be indicated at the Registry Agent.   This information remains confidential.

Requirements for the Registration of an IBC

  • Director: The minimum number of directors is one; they must be natural persons. If a company has a sole director, the sole director cannot be the company secretary. The director may be of any nationality and need not be resident in Cyprus.
  • Secretary: A company secretary is required. Secretary can be a natural person or body corporate. Can be of any nationality and need not be resident in Cyprus.
  • Shareholder: The minimum number of shareholders is normally one. Nominees are permitted.
  • Shares & Capital: Shares issued by a company may be denominated in any currency and different classes of shares may be denominated in different currencies. The normal authorised share capital is EURO 1000. All shares issued do not need to be paid up full in cash.
  • Name of the Company: Names of Companies with limited liability must have the suffix Limited or Ltd.
  • Company must have a registered office and a registered agent in Cyprus.

Required Documents to register the company:

  • Notarized copy of your Passport.
  • Notarized Copy of utility bill for address verification less than 3 months old
  • Application documents.

When all the details are confirmed and the payment for the relevant fees received, the Registry Agent will prepare the Memorandum and the Article of Association of the new International Business Company. These will be filed with the Registry of International Business Companies in Cyprus.

There is no need to sign any statutory info, the initial company formation documents are prepared and signed on your behalf by the Registered Agent always under the procedures set by the Company Act c113. The Registered agent will file the corporate documents of the company, will pay the applicable registration fees and arrange for the documents to be submitted to the Cyprus Registrar of companies for registration. All the relevant documents will be kept in the Registered Agents office.

Corporate documents of an IBC

Upon registration completion, you will receive a company kit including the following:

  • Original certification of incorporation of IBC
  • Memorandum and article of Association
  • First minutes and Corporate Resolutions containing the appointment of directors, allocation of shares, share certificates, copies of the Registry of Directors and the Registry of shareholders if they need them.
  • Share transfer forms, trust declarations, appointments of representative (power of attorney) and the Corporate Seal.

Cyprus is an independent democratic republic, and a member of the Commonwealth. It is prosperous: GDP US$21,200 (2009) per head. The economy is dominated by services, with tourism particularly important. Unemployment is low.

The Cyprus Government worked hard to create a favorable offshore tax regime while at the same time maintaining a normal-looking domestic economy, albeit with rates of taxation that are low by international standards. The success of this programme is attested by the tens of thousands of offshore companies registered in Cyprus since 1975. However, the island’s entry to the EU in 2004 meant a restructuring of the tax regime, which took place on 1st January 2003. Domestic and offshore companies alike now pay 10% tax.

Cyprus has double-tax treaties with more than 40 other countries, including most major Western ‘high-tax’ countries, and most Central and Eastern European states. This is unusual for an international offshore financial center and the effect is that Cyprus is a very effective location for holding and investment companies aimed at emerging markets.

Cyprus has a good, European-standard business infrastructure, and English is widely spoken. However, it is a relatively expensive jurisdiction for offshore operations, and many documents need to be filed in Greek.

The legal system is predominantly based on English law, and provides for various types of trust.

The division of the island into Greek Cypriot and Turkish Cypriot zones separated by a UN buffer zone following the Turkish invasion of 1974 does not seem to impede normal commercial or offshore operations which take place in the Greek zone.

In November, 2002, the United Nations presented a plan for a 2-state federation under a common government intended to resolve the problem before Cyprus’s admission to the EU. Even after the Copenhagen summit in December which confirmed the island’s admission to the EU in 2004, negotiations between north and south continued; but they broke down in early 2003 and the island signed its EU accession treaty in April. The European Commission and the US strenuously supported the United Nations’ Annan Plan for reunification, but it was rejected by a Greek Cypriot referendum in April, 2004. Reunification, it if takes place, may form part of Turkey’s negotiation to join the EU.

The island’s listing by the FATF in June, 2000, as one of 15 offshore jurisdictions said to have inadequate defences against money-laundering hastened a process of adjustment to international standards of banking supervision and information exchange.

After the EU finally agreed its Tax Directive in June, 2003, Cyprus announced that it would implement the ‘information sharing’ provision of the Directive on entry to the Union in 2004. This means that information about savings returns received in Cyprus by nationals of other EU countries is now being passed to the tax authorities in the individuals’ home countries.

In late 2003 the government also announced plans to weaken previously tight banking confidentiality, although these were strongly resisted by the banks.

In April 2009, Cyprus was placed on the OECD’s ‘white list’ of jurisdictions which have ‘substantially implemented’ the internationally-agreed standards for tax cooperation.




Cyprus is an island in the eastern Mediterranean Sea.

Time zone

GMT + 2 hours.






Larnaca Airport and Paphos Airport.


Greek and Turkish are the official languages but English is widely spoken.


Euro € as of 1 January 2008.

Political system

Democratic Republic member of the EU.

International dialling code


Legal system

Based on Common Law and harmonised to Acquis Communautaire. Presidential system.

Centre’s expertise

Financial centre, double tax treaties, tax incentives, lowest tax in EU.


Personal income tax

Depending on income. Maximum 30%.

Corporate income tax

10% on profits.

Exchange restrictions


Tax treaties

Double taxation treaty access.


Permitted currencies


Minimum authorised capital

No minimum.

Minimum share issue

Usually € 1,000 (one thousand Euro).


Shelf companies


Timescale for new entities

5 to 10 days with accelaration fee, subject to name approval. 2 to 3 weeks with acceleration fee, subject to name approval. (Depends on the work of the Registrar of Companies).

Incorporation fees

Depends on the share capital of the company, at the rate 0.6%.

Annual fees

Annual return filing fee (€17) plus €350 annual levy.


Minimum number


Residency requirements

Local not required but advisable for tax purposes.

Corporate directors



Obligations for annual meeting.



Names of the shareholders disclosed. Use of nominees possible.

Bearer shares


Minimum number


Public share registry

Publicly accessible records.

Meetings / frequency

Written decisions signed by all directors possible. Obligations for annual meeting.


Annual return


Audit requirements

Yes, small companies - as defined - are exempt.


Registered office


Domicile issues


Company naming restrictions

Any word that the Registrar considers undesirable or that is similar or identical to an existing com­pany name, or that others, which include 'asset management', 'assurance', 'bank', 'credit', 'dealer' etc. implies legal activity or royal or government patronage.

Cyprus Companies

• All annual license fee of €350 is due on the 31st of December, of each year for Cyprus Companies.

• 10% penalty will be imposed by the 30th of June.

• 30% penalty will be imposed if within five months after the date of 30th of June the amount is still due.

• Failure to meet the above deadline will result in the Registrar striking of the company and an amount of €500 will be needed to reinstate the company.

• If the company remains two years struck off, an amount of €750 will be needed to re-register the company again in the Registrar of Cyprus.


Additional Changes to Tax Legislation of Cyprus Enacted 10th December 2015

The House of Representatives voted on 10 December 2015 the remaining changes to the tax laws, which the Government of Cyprus have agreed with the private sector over the last few months.

In an effort to improve the tax system of Cyprus, eliminate provisions which create issues on the day to day application of the law and make it more attractive to both the local and international business community, the House of Representatives voted on 10 December 2015 the remaining changes to the tax laws, which the Government of Cyprus have agreed with the private sector over the last few months.

These changes relate to the income tax and the capital gains tax law and are summarized below.


1.    Offshore activities 
(i) The law has been amended so that the definition of the term “Republic of Cyprus” now includes specifically and clearly the territorial sea, the contiguous zone, the exclusive economic zone and the continental shelf of Cyprus.
(ii) The law has also been amended to include in the definition of the term “permanent establishment” all activities for the exploration and exploitation of the seabed in the exclusive economic zone, as well as services related to such exploration or exploitation activities.
(iii) The gross income which is earned from sources within Cyprus (including those mentioned above) by a person who is not tax resident of Cyprus or who does not have a permanent establishment in Cyprus in consideration for providing services listed in subparagraph (ii) above would be subject to tax at the rate of 5%.

In case such payments are made by persons who are not tax residents of Cyprus or who do not have a permanent establishment in Cyprus, but such services are born by an associated person in Cyprus, the obligation to withhold and pay this tax (by the end of the following month) to the Cypriot tax authorities is with such an associated person.  

This provision applies as from 1 January 2016.

2.    Amendments to income exempt from tax
(i) Local authorities will no longer be exempt from taxation on rental income from property.
(ii) Exchange differences, both gains and losses, and irrespective of whether they are realized or unrealized will no longer be taxable/tax deductible, irrespective of the purpose for which the funds in a foreign currency have been used for.
This will not apply in the case of companies trading in foreign currencies and related products.  Such companies may irrevocable elect not to be taxed on unrealized gains or losses, but instead be taxed only when such gains or losses are realized.
(iii) The above provisions apply as from the tax year 2015.

3.    Anti-avoidance provisions for hybrid instruments and artificial transactions for dividends

(i) Under current law, dividends are exempt from income tax, but for individuals and, in a number of cases for companies, are subject to defence tax.
(ii) In a number of cases, dividends received by a Cypriot company from a company located outside Cyprus, whereas in the case of Cyprus these amounts received are considered as dividends, in the country where the company paying the dividend is located these payments are not treated as dividends paid, but instead are treated as tax deductible expense. These are called “hybrid instruments”.

An example of such hybrid instruments are dividends paid on preference shares, which in the case of Cyprus are considered as dividend income, whereas in the case of the country of the dividend paying company, such as Luxembourg, these payments may be considered as interest paid and allowable as a tax deductible expense.

(iii) The EU Parent / Subsidiary Directive has been amended last year to exclude such payments from benefiting under the directive and the member states must introduce legislation in order to avoid the double non taxation of these dividends.

(iv) The tax laws are amended, so that dividends received by a Cypriot tax resident company which fall under the above provisions will no longer be exempt from income tax, but instead will be taxed as normal business income subject to income tax and will be exempt from defence tax

(v) In addition, the EU Parent / Subsidiary Directive has been amended so that it does not apply in cases where between the dividend paying company and the dividend receiving company there is an arrangement or a series of arrangements, which, having been put into place for the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of the Directive, are not genuine, having regard to all relevant facts and circumstances.

An arrangement or a series of arrangements shall be regarded as not genuine to the extent that they are not put into place for valid commercial reasons, which reflect economic reality.

The tax law has been amended to incorporate the above changes into the Cypriot tax legislation.

(vi) The change will apply as from 1 January 2016.

4.    Exemptions of income from first employment in Cyprus

(i) Under current law, 20% of the income from employment in Cyprus of a person who was not tax resident of Cyprus during the previous tax year is exempt from taxation for a period of three years.  The maximum amount of the exemption is €8.550 per annum.

This exemption is now extended for the first five years, but the exemption can only be claimed until the year 2020.

The change applies as from the tax year 2015.

(ii) Under current law, 50% of the income from employment in Cyprus which commences after 1 January 2012 of a person who was not tax resident of Cyprus during the previous tax year is exempt from taxation for a period of five years, provided the income from employment in Cyprus exceeds €100.000 per annum.

The period of five years is now extended to ten years.

For employments which start after 1 January 2015, an individual will be entitled to this benefit, only if he was not tax resident of Cyprus for any three out of the last five tax years prior to the commencement of his employment in Cyprus and at the same time he was not tax resident of Cyprus the previous tax year.

The exemption is granted in any tax year that his income from employment exceeds €100.000 per annum, irrespective of whether the income drops below €100.000 in any year, provided that when the employment started the income exceeded €100.000 and provided the Commissioner is satisfied that the increase/decrease in the annual income is not made for the purpose of obtaining this tax benefit.

(iii) It should be noted that it will no longer be possible to obtain benefit under both exemptions, ie the 20% exemption and the 50% exemption, an issue which has been in dispute for the last few years.

5.    Loss because of using the IP Box regime

In cases where a person is claiming relief under the special provisions for the taxation of income from intellectual property (where a notional deduction is granted, which is equal to 80% of the gross profit from the exploitation or the disposal of such intangible asset) and because of this claim there is a loss, only 20% of such losses can be offset against income from other sources or be carried forward to be offset against income of following tax years.

 This provision has a retroactive effect as from the tax year 2012, when the IP Box regime has been introduced in Cyprus.

6.    Increased annual allowances for capital expenditure

(i) Under the existing law, increased annual allowances are granted for new expenditure incurred in the years 2012, 2013 and 2014 for plant and machinery (20% instead of 10%) and for new industrial buildings and hotels (7% instead of 4%).
(ii) The period during which the expenditure can be made is now extended to cover expenditure incurred in the years 2015 and 2016.

7.    Group loss relief

(i) Under the current provisions of the law, group loss relief can only be given for losses incurred by Cyprus tax resident companies. This means that losses incurred by a member of a group of companies can only be surrendered to another member of the same group, provided that both companies are tax residents of Cyprus.
(ii) In order to align the Cypriot tax laws with a European Court of Justice’s decision in the Marks & Spencer case, the law is amended so that a subsidiary company which is tax resident in another EU member state can surrender its taxable losses to another group member company tax resident in Cyprus, provided the subsidiary has exhausted all the means of surrendering or carrying forward the losses in the member state of residence of the subsidiary or to any intermediary holding company.
(iii) In case of surrendering tax losses as above, taxable losses must be calculated on the basis of the Cypriot tax laws.
(iv) The law has also been amended to allow, for the purposes of considering whether two companies are members of the same group, the interposition of holding companies established in (a) another EU member state, (b) in a state with which Cyprus has concluded a double tax treaty or (c) in a state which has signed the OECD multilateral convention for exchange of information.
(v) These provisions apply as from the tax year 2015.

8.    Anti-avoidance provisions for re-organizations

(i) A number of anti-avoidance provisions are introduced, which will give the right to the Tax Commissioner to refuse to accept tax free- reorganizations, if the Commissioner is not satisfied that there were real commercial or financial reasons for such reorganization and he can determine that the main purpose or one of the main purposes of the reorganisation is the reduction, avoidance or deferment of payment of taxes.
(ii) The Commissioner will also have the right to impose conditions on the number of shares which can be issued as part of the re-organization and the period for which such shares should be held (not more than three years).

However such restrictions cannot apply in the case of publicly listed companies and transfers of shares as a result of succession.
(iii) These provisions apply as from 1 January 2016.

9.    Related party transactions
(i) Under current legislation, the Commissioner has the right to adjust the value of transactions between related parties, if such transactions are not carried out on an arm’s length basis.  Based on current practice, the Commissioner in the case of transactions between two Cyprus tax resident companies does not grant a corresponding deduction to the other party for income adjusted in the hands of the first party to the transaction, thus there was a mismatch.
(ii) The law is amended so this anomaly is corrected and in case of an adjustment in the income of the one party, a corresponding deduction should be given to the other party to the transaction.
(iii) This provision applies as from 1 January 2015.

10. Fees for issuing certificates/rulings

The Council of Ministers may issue administrative orders to fix the amount of fees to be paid to the Tax Commissioner for the issuing of tax residency certificates (currently levied at €80) and for issuing tax rulings (no fees charged currently)


1.    Capital gains from sale of shares in property companies
(i) Currently, capital gains tax is charged on disposal of immovable property located in Cyprus or on disposal of shares of companies, which directly own immovable property located in Cyprus.
(ii) Under the new legislation, gains from the sale of shares in companies which indirectly own immovable property in Cyprus by holding directly or indirectly shares in a company, which owns immovable property located in Cyprus, will also be subject to capital gains tax.

This will apply only in case the value of the immovable property represents more than 50% of the value of the assets of the company whose shares are sold.

(iii) The change in the legislation can be illustrated as follows:

(a) Company A owns the shares of Company B, which owns the shares of Company C, which in turn owns immovable property located in Cyprus.
(b)  Currently, capital gains tax will arise if:
       1.  Company C sells the immovable property or
       2.  If Company B sells the shares of Company C

(c)  Under the new legislation capital gains tax will arise also if Company A sells the shares Company B.

(iv) In the case of sale of shares of a company owning immovable property, the gain to be taxed will be calculated only based on the market value of the immovable property, which is held directly or indirectly.

2.    Trading gains from sale of shares of property companies
Currently, if a company is selling shares of companies which would be considered as transactions of a trading nature and thus falling under the provisions of the income tax laws, any gains from the sale of such shares are exempt from income tax. Since these gains would not fall under the capital gains tax law, then the gains are tax free, even if the company whose shares are sold owns immovable property located in Cyprus.
Under the new legislation, such gains which are exempt from income tax would now be subject to capital gains tax.

3.    Transactions between related parties

In case there is sale of property between related persons, the Tax Commissioner will have the right to replace the sale price declared by the parties concerned with the market value of the property sold, if, in his opinion, the selling price declared is lower than the market value.

4.    Date of entry into force
The above provisions will come into effect as soon as the new law is published in the Official Gazette, which is expected to be done before the end of December 2015.