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ARTICLE · 09 NOVEMBER 2016

Foreign Permanent Establishment Tax Provisions Amended

Costas Tsielepis & Co Ltd
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The Cyprus Parliament voted on 14 October 2016 amendments to the Cyprus Income Tax Law 118(Ι)/2002, as amended, relating to foreign Permanent Establishments (PEs).

CyprusTax
Nicolas Papapanayiotou
Nicolas Papapanayiotou

8 November 2016 - The Cyprus Parliament voted on 14 October 2016 amendments to the Cyprus Income Tax Law 118(Ι)/2002, as amended, relating to foreign Permanent Establishments (PEs).

More specifically as from 1 July 2016, Cyprus taxpayers have the option to elect to tax profits of foreign PEs and also be able to claim as credit any foreign taxes imposed on the foreign PE's profits. If this option is not elected, the exemption method will remain at the default position.

Prior to the above mentioned amendment, profits from a PE abroad of a Cyprus tax resident person were exempt from corporation tax in Cyprus unless both of the below applied:

  • the foreign PE was engaged, directly or indirectly, in more than 50% in activities that lead to investment income; and

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