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Editorial

Press releases and law firm thought leadership

This page is dedicated to keeping readers informed of the latest news and thought leadership articles from law firms across the globe.

If your firm wishes to publish press releases or articles, please contact Shehab Khurshid on +44 (0) 207 396 5689 or shehab.khurshid@legalease.co.uk

 

ECJ CASE C-28/26 - RECOVERABILITY OF INPUT VAT OF A HOLDING COMPANY

March 2017 - Tax & Private Client. Legal Developments by Kinanis LLC.

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Case C-28/26 - Examines the right of a holding company to deduct input VAT on services acquired in the interest of its subsidiaries where those services are offered to its subsidiaries with no consideration.

On 12 January 2017, the European Court of Justice delivered its judgment in the case of MVM (C-28/16), concerning the right of MVM to deduct input value added tax (VAT) paid in relation to services procured in the interest of its subsidiaries.

European Commission proposes new VAT rules to support e-commerce and online businesses in the EU

March 2017 - Tax & Private Client. Legal Developments by Kinanis LLC.

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On 1 December 2016, the European Commission has published proposals to improve the Value Added Tax (VAT) environment for e-commerce businesses in the EU. Particularly, the proposed changes, aiming to allow start-ups and SMEs, to buy and sell goods and services more easily online.

CYPRUS : WARRANT OF SEARCH ISSUED AGAINST A LAWYER CANCELLED DUE TO VIOLATION OF LEGAL PROFESSIONAL

In the recent case RE: ANTONAKIS ANDREOU & CO LLC, a Supreme Court Judge, in Certiorari proceedings, cancelled a warrant issued against a lawyer and his law firm, for the search of the lawyer’s premises, on the ground that the law firm withheld certain important documents, relating to the alleged commission of serious crimes, by a client of the law firm.

OBTAINING THE TAX RESIDENCY STATUS IN CYPRUS

September 2016 - Tax & Private Client. Legal Developments by Michael Kyprianou & Co.

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According to the Income Tax Law of 2002 (“the Law”) an individual is resident in Cyprus, if he/she resides therein for a period which in aggregate exceeds 183 days.  Consequently, if an individual is physically present in Cyprus for more than 183 days in a tax year, he/she will be considered tax resident of Cyprus in that tax year.  On the other hand, if an individual is physically present in Cyprus for less than 183 days in a tax year, then he/she will be regarded to be non-tax resident of Cyprus in a tax year.

RELOCATING TO CYPRUS – OBTAINING CYPRUS TAX RESIDENCY

Introduction

Cyprus’ recent tax law amendments has made the island even more attractive destination for someone to relocate to. Cyprus’ location, European Union Membership, culture, network of double tax treaties and advanced infrastructure were already known, but with the recent tax amendments it is possible to relocate to Cyprus and minimise if not nullify tax on your income.

This coupled with the low corporate tax rate of 12.5% for Cyprus tax resident companies, makes Cyprus an ideal place to move.

CYPRUS ENACTS PROPOSED 2015 TAX REFORMS: INTERNATIONAL BUSINESS CENTER CREDENTIALS REAFFIRMED

Following our previous newsletter on the matter the Cyprus Parliament has enacted the below mention tax reforms into law and were subsequently published in the Government gazette on Thursday 16th July 2015.

The key amendments are described below in more detail:

CYPRUS AND RUSSIA : TAX AMENDMENTS – NEW OPPORTUNITIES

Newsletter Nicosia July 2015

In view of the new de-offshorisation regulations of Russia and the new tax amendments of the Cyprus Tax Laws new opportunities can arise for the effective use of Tax structures with Cyprus companies. Even though Russia is used as an example the below structures apply to other jurisdictions as well. Further to the classic back to back schemes of financing and Intellectual property rights we describe below the examples of the new structures that can be used for financing and Intellectual property rights or the so called boxed IP rights scheme.

Obtaining Cyprus Permanent Residency

The Cyprus government has put in place a number of programmes entitling owners of property in Cyprus who are third country nationals and their families to obtain permanent residence permits on an accelerated basis provided they satisfy certain criteria.

New double taxation agreement between Cyprus and Bahrain

On 9 March 2015 Cyprus and Bahrain signed a new double taxation agreement. Like all of Cyprus’s recent DTAs it closely follows the 2010 OECD Model Tax Convention. Its main provisions are summarised below.

Cyprus's Economic Citizenship Programme

The Civil Registry Law, 141(I) of 2002 provides for non-Cypriots of full age and capacity to acquire citizenship by naturalisation. Applicants are generally required to have lived in Cyprus for seven years prior to submitting an application. However, in 2013 the Cyprus government introduced a fast-track procedure which allows qualifying persons to obtain Cypriot citizenship by naturalisation on an accelerated basis. Applicants must own a permanent residence in Cyprus with a value of €500,000 or more excluding VAT and have no criminal record and no asset freezing orders outstanding against them. Further details are as follows:

CYPRUS: CORPORATE TAXATION - IMPORTANT PRACTICAL QUIDELINES IN ASCERTAINING THE PLACE OF EFFECTIVE..

CYPRUS: CORPORATE TAXATION - IMPORTANT PRACTICAL QUIDELINES IN ASCERTAINING THE PLACE OF EFFECTIVE MANAGEMENT OR PLACE OF MANAGEMENT AND CONTROL OF A CYPRUS COMPANY

YACHT SCHEME FOR CYPRUS COMPANIES WITH SIGNIFICANTLY REDUCED VAT UP TO 80%

YACHT SCHEME FOR CYPRUS COMPANIES WITH SIGNIFICANTLY REDUCED VAT UP TO 80%

 

As per the previous VAT regulations in Cyprus yacht purchase and yacht leasing was subject to full rate of VAT at 19%.  A lot of questions were raised justifiably when the yacht was not actually used within Cyprus and EU territorial waters. In this case certain part of the VAT should not have been payable. So all sorts of complications and disputes would arise as to the usage or not of a yacht within EU territorial waters. 

In order to simplify procedures and avoid bureaucratic complications the Cyprus VAT department has issued a Circular on the 13 March 2012 as well as an update version on 30 January 2014(encompassing the new VAT regulations) establishing the procedures and policy concerning yacht leasing which can include yacht purchasing as well. 

More specifically it has issued two tables (one for motor yachts and the other for sailing yachts) whereby depending on the length of the yacht a percentage of use within the EU territorial waters is specified. 

Table A: Motor yachts  

Table B: Sailing Yachts  

 

ALL the following conditions MUST also apply

  • The financial leasing agreement shall be between a Cyprus company and any person or company irrespective of origin. 
  • From 1st January 2013  the place of supply of pleasure yachts (except short term leases) is the country where the yacht is made available to the recipient-lessee. The yacht mustcome to Cyprus, within a month from the commencement of the leasing agreement. Any postponement in relation to the above can only be granted by the VAT Commissioner. The postponement cannot be longer than the lease period whereby the right of  purchase can be exercised 
  • An initial contribution shall be paid by the lessee to the lessor amounting to 40% (forty) of the value of the yacht. 
  • The Lease instalments shall be payable every month and the lease agreement shall not be less that 3 months (90 days) –new provison as per amendement- and cannot  exceed 48 (forty eight) months.  
  • The lessor shall be expected to make a profit which cannot be less than 8%  (10% before amendment) of the value of the boat. At the beginning of the lease agreement the total lease payments where the VAT is calculated is increased by half of that profit i.e. 4% (5% before amendment)
  • The final payment at the end of the lease agreement, whereby the yacht is effectively transferred in the ownership of the lessee, cannot be less than 4% (5% before amendment) of the yachts value, and represents part of the profit of the agreement. The last payment is subject to full VAT rate applicable on the date of payment which is currently 19% VAT. 
  • Prior approval shall be sought in writing from the Commissioner of VAT who is to confirm the rate applicable according to the use in EU territorial waters (depending on the size of the yacht), as well as the acceptability of the value of the yacht as declared.  For this purpose a valuation certificate of the yacht shall be submitted with the leasing agreement and application for approval. 
  • If the lessee opts to purchase the yacht at the end of the lease, a VAT paid certificate will be issued to the lessee provided that all VAT due has been paid. 

 

Working example

Facts: New yacht over 24metres long with value €5,800,000. In normal circumstances the VAT on the yacht would have been 19% i.e. €1,102,000 euro. With the leasing scheme VAT payable will be € 282,108 euro with the saving amounting to € 819,892. As per the scheme: 

  • Cyprus Company buys the yacht from a UK supplier. Because the Cyprus company it is registered for VAT in Cyprus it will not be charged for VAT on purchase. 
  • Upon purchase it may be leased to a person or a company. It can be for instance another Cyprus company.   40% of the value of the boat is payable as first lease payment.  The yacht is subject to 20% reduced EU territorial waters reduced rate for VAT. 
  • The lease agreement will be for 12 months and will leave a profit of 10% for the Cyprus Company. 
  • Total VAT on the scheme €282,108 
  • Corporate taxation of profit of €464,000 is 12.50% after deduction of business related expenses and financing costs.

 

Please contact a member of our staff for further information and/or clarifications.

 

Please contact a member of our staff for further information and/or clarifications.

 

 

 


Length

% of use within EU

VAT calculation

Over 24 meters

20%

20% of x19%

20.01 to 24 meters

30%

30% of 19%

10.01 to 20 meters

50%

50% of 19%

Less than 10 meters

60%

60% of 19%

 

 

REFERENCE

PERCENTAGES AS PER CYPRUS VAT CIRCULAR

 

PERCENTAGE OF USAGE IN EU TERRITORIAL WATERS

CYPRUS VAT RATE

VAT PAYABLE

1

YACHT PURCHASE VALUE

 

 

5,800,000

 

 

 

 

 

 

 

 

 

 

 

2

INITIAL DOWN PAYMENT

 

40%

2,320,000

20%

19%

88,160

 

 

 

 

 

 

 

 

3

EXPECTED PROFIT

 

8%

464,000

 

 

 

 

 

 

 

 

 

 

 

4

FINAL LEASE PAYMENT FOR  BUY OUT

 

4%

232,000

 

19%

44,080

 

 

 

 

 

 

 

 

5

REMAINING LEASE PAYMENTS

1+3-2-4

 

3,944,000

 

 

 

 

 

 

 

 

 

 

 

6

MONTHLY LEASE PAYMENT (12)

 

 

328,667

20%

19%

12,489

 

 

 

 

 

 

 

 

7

TOTAL MONTLHY LEASE PAYMENT AND VAT

 

 

3,944,000

 

 

149,868

 

 

 

 

 

 

 

 

8

TOTAL VAT PAYABLE ON LEASE SCHEME

2+4+7

 

 

 

 

282,108

Length

% of use within EU

VAT calculation

Over 24 meters

20%

20% of x19%

14.01 to 24 meters

30%

30% of 19%

8.01 to 14 meters

50%

50% of 19%

Up to 8 meters

60%

60% of 19%

Yacht that is only licensed to be used within Cyprus waters

100%

100%

Money Laundering

Money laundering is an international problem and requires the active assistance of a number of professionals and institutions to address it and suppress it.

Cyprus and Ukraine signed the Double Tax Treaty

On the 8th of November 2012, the representatives of Cyprus and Ukraine signed the Double Tax Treaty in order to replace the existing one which dates back to the 1982 and was concluded with the USSR.

New Double Tax Treaty Between Cyprus & Ukraine

November 2012 - Tax & Private Client. Legal Developments by Kinanis LLC.

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On the 8th of November 2012, the governments of the Republic of Cyprus and the Ukrainian People's Republic concluded a new double tax treaty replacing the 30 year old USSR - Cyprus treaty. The new treaty aims to put an end to the long standing uncertainty that existed in the future investment relationship between the two countries and to create a new framework that will ensure that a stable tax environment will exist in the years to come.

Recent amendments to the Tax legislation

Further amendments were introduced and approved by the Cyprus Parliament on May 24th which are effective retrospectively from 1st January 2012.

Cyprus – The Ultimate Royalty and Holding Structure Jurisdiction

May 2012 - Tax & Private Client. Legal Developments by Kinanis LLC.

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In May 2012 the Cypriot House of Representatives voted on certain amendments to various tax laws aiming to establish Cyprus as the ultimate royalty and holding structure jurisdiction.

The most important change in the law is the creation of a specific tax regime for companies owning any kind of intellectual property right out of which royalty income is generated, making “The Cyprus Royalty Company” the best vehicle for holding intangible assets

- Kinanis LLC

May 2012 – Tax Department of Kinanis LLC

Cyprus yacht registration- New Preferable VAT Treatment

May 2012 - Tax & Private Client. Legal Developments by Kinanis LLC.

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In March 2012 the Cyprus VAT Authority launched a special scheme making Cyprus as one of the most attractive EU jurisdictions for yacht registration.

This new favorable VAT scheme requires a Cyprus company to enter into a lease agreement of a yacht with a third party, paying VAT only on a predetermined percentage of the time that the yacht is deemed to sail within EU waters, hence reducing the effective VAT rate down to only 4,42% when taking into account as well the required profit condition.

- Kinanis LLC

May 2012 – Accounting & VAT Division of Kinanis LLC

New Tax Measures voted in December 2011 by the House of Representatives of Cyprus

January 2012 - Tax & Private Client. Legal Developments by Kinanis LLC.

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In December 2011 the Parliament of Cyprus voted on certain amendments to various Tax Laws aimed at increasing the revenues of the government as well as reducing government expenditure. Most of the amendments affect residents of Cyprus and were designed in such a way so not to affect Cyprus’ position as an international business center.

- Kinanis LLC

January 2012 – Tax Department of Kinanis LLC

Intra Group Loans (back-to back loans) through Cyprus

Cyprus Companies are in wide use as major vehicles in international tax structuring mainly due to the broad range of legal and tax related benefits they can offer because of the flexible tax system and the extended network of double tax treaties between Cyprus and other countries. In this respect, there are certain advantages that have made Cyprus also a favorable financing company jurisdiction.

NEW TAX LEGISLATION-FIXED ANNUAL CHARGE ON COMPANIES

September 2011 - Tax & Private Client. Legal Developments by Kinanis LLC.

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In August 2011 the Parliament of Cyprus voted certain amendments to the Companies’ Law as well as various Tax Laws aimed at increasing the revenues of the Government as well as reducing government expenditure. The amendments include the imposition of a fixed annual charge for all Cyprus registered companies as well as the increase in applicable tax rates of Special Defence Contribution Tax on interest and dividends.

- Kinanis LLC

Accelerated depreciation of fixed assets for Sakhalin Region companies

August 2011 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Companies that operate in Sakhalin Region and a number of other regions are entitled to use accelerated depreciation of fixed assets and deduct larger amounts as expenses for tax purposes

On 5 July 2011, the Federal arbitration Court for the Far Eastern Circuit issued its precedent forming resolution No. F03-2566/2011 which states that companies operating in Sakhalin Region are entitled to apply a special coefficient for their fixed assets depreciation (but not more than 2). The court’s conclusions may also apply to companies operating in other regions of the Far North and areas equivalent to the Far North.

What makes Cyprus so ‘special’?

August 2011 - Tax & Private Client. Legal Developments by Pamboridis LLC .

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Cyprus offers a substantial number of incentives and advantages to businesses looking for a favorable jurisdiction through which to structure and conduct their business.

BACK TO BACK LOANS BETWEEN RELATED PARTIES

July 2011 - Tax & Private Client. Legal Developments by Kinanis LLC.

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In July 2011 the Commissioner of Inland Revenue Office provided guidance on the minimum acceptable profit margins on back to back loans between related companies. Much of the guidance provided was already applied in practice before, but nevertheless this is the first time that an official confirmation in given. In addition, the guidance clears some grey areas of the Income Tax law that existed in the past.

-Kinanis LLC

July 2011 – Tax Department of Kinanis LLC

Recent amendments in Tax Legislation in Cyprus

February 2011 - Tax & Private Client. Legal Developments by Kinanis LLC.

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The House of Representatives of Cyprus has voted in December 2010 several amendments to the current tax legislation for the prevention of tax evasion and tax avoidance.

Cyprus/ Russia Double Tax Treaty – Update

I have set out the matters below in order to update you on the relevant tax matters following the signing of the long awaited Protocol in relation to the Double Tax Treaty between Cyprus and Russia to the effect that the same may be of interest to the activities of a company.

Recent Developments on the Double Tax Treaty between Cyprus & Russia – Protocol signed on the 7th

October 2010 - Tax & Private Client. Legal Developments by Kinanis LLC.

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On the 7th of October 2010, officials representing the Republic of Cyprus and the Russian Federation concluded and signed a Protocol to the 1998 Double Tax Treaty between the two countries. The Protocol amends 10 existing articles of the Double Tax Treaty and introduces one new. With the new Protocol, Cyprus still remains the most favourable route for investments into Russia and ensures that Cyprus is removed from the Russian black list of “Offshore Jurisdictions”.

CORPORATE NEWS

September 2010 - Tax & Private Client. Legal Developments by George Y Yiangou & Co .

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EIB and Central Cooperative Bank sign Convention aiming to boost Cyprus economy   -   Cyprus presidency of the Council of the European Union   -   EU APPROVES NEW CYPRUS TONNAGE TAX LEGISLATION   -   more...

NEW Tax Legislation on Shipping Activities – The Tonnage Tax System

August 2010 - Tax & Private Client. Legal Developments by Kinanis LLC.

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Cyprus has recently introduced new tax legislation regulating the taxation of income from shipping activities which will have a retrospective applicability as from 1 January 2010. The Law introduces the Tonnage Tax System (“TTS”) which imposes taxation according to the tonnage of the ships owned, managed or chartered and not according to the profit on shipping activities. Certain conditions must be met in order for a ship-owner / ship manager or a charterer to be qualified to be taxed under the tonnage tax system.

- Kinanis LLC

ZYPRISCHES STEUERRECHT FÜR UNTERNEHMEN (VORGEHENSWEISE AUSLÄNDISCHER INVESTOREN)

August 2010 - Tax & Private Client. Legal Developments by Kinanis LLC.

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Mit dem vereinfachten und modernisierten Steuersystem verfügt Zypern über ein hochgradig wettbewerbsfähiges Steuersystem und fördert dieses. Es sollte von internationalen Investoren bei jedem Schritt im Hinblick auf internationale Steuerplanungsstrukturen genau berücksichtigt werden.

Value Added Tax (VAT) and Cyprus Companies (The International Investors’ Approach)

July 2010 - Tax & Private Client. Legal Developments by Kinanis LLC.

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The report covers in detail the Cyprus VAT Law and its practical implementation with Cyprus companies viewed from the International Investors' angle.

It is a very good manual for those interested to elaborate this delicate matter and especially it will be helpful to those who constantly are faced with VAT issues involving Cyprus companies and EU VAT rules. 

- Kinanis LLC

THE CYPRUS PUBLIC COMPANY (The vehicle for IPOs and Listings in Stock Exchanges)

May 2010 - Tax & Private Client. Legal Developments by Kinanis LLC.

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The favorable tax regime of Cyprus in conjunction with the numerous double tax treaties Cyprus has signed and its flexible management and corporate procedures, has created a unique environment for Cyprus public companies giving to the international investor a suitable vehicle for public offerings and listings of their securities, debentures or other titles in European and international markets. - Kinanis LLC

 

International comparative guides

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International comparative guides

Giving the in-house community greater insight to the law and regulations in different jurisdictions.

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GC Powerlist -
Europe