The Cyprus government has recently introduced new tax incentives such as a 50% exemption on investment in start-up businesses and a 50% reduction on land transfer fees.
START-UP COMPANIES INVESTMENT
The new incentives proposed by the government provide that individual investors who invest in start-up/innovative companies, either directly or through an investment fund, shall be afforded a tax exemption of 50% on the taxable income of the investor. The maximum annual amount to be exempted from the investor’s annual income is €150,000 and the investor shall be able to allocate the amount invested for a period of five years following the year of the investment.
Companies may qualify as start-ups/innovative enterprises following an application to the Ministry of Finance. The criteria for such qualification is that the company must have spent at least 10% of its operating expenses on research and development in at least one of the last three years. This shall be confirmed by an independent auditor in the case of already established companies while in the case of new companies this should be based on a business plan.
The definition of innovative enterprise will be expanded to include a wide spectrum of research and development sectors.
PROPERTY TRANSFER FEES
In an effort to boost the immovable property market in Cyprus, the Lands and Surveys Department Law has been amended to allow for an indefinite 50% reduction on transfer fees payable on transfers of immovable property in Cyprus.
CYPRUS – INDIA DOUBLE TAX TREATY
The conclusion of an amending Double Tax Treaty (‘DTT’) has been agreed between Cyprus and the Indian government on 29 June 2016. The enforcement of the amending DTT is expected to result in the retrospective removal of Cyprus from the Notified Jurisdictional Area list as from 1 November 2013.
The amending DTT shall provide for the taxation of capital gains from the disposal of shares at the source country. This means that if a Cyprus company disposes of the shares of an Indian company any profits shall be taxable in India. However, the new provision shall only apply for investments which have been undertaken after 1 April 2017. Prior to this date, the current provisions should apply.