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Every Cyprus tax resident company must declare, at least, the 70% of its accounting profits for the year 2018 by 31 December 2020 and pay the special contribution for defence of 17% and National Health Contribution of 2,65% by 31 January 2021.
Deemed Dividend Distribution (DDD) provisions
According to the DDD provisions, a Cyprus tax resident company should distribute at least 70% of its accounting profits to its Cyprus tax resident shareholders, as dividends, within two years from the end of the tax year to which such profits relate. Failure to distribute the aforesaid profits, then the relevant undistributed accounting profits would be considered as deemed distributed and the relevant Special Defence Contribution would need to be paid.
DDD provisions are applicable in cases that a Cyprus tax resident company has shareholders that are Cyprus tax residents and Cyprus domiciled and the Cyprus tax resident company has not distributed at least the 70% of its accounting profits for a specific tax year.
The DDD provisions also apply for National Health Contribution purposes in cases that a Cyprus tax resident company has ultimate shareholders Cyprus tax resident individuals (domicility is irrelevant).
Therefore, in the case that a Cyprus tax resident company has failed to distribute at least the 70% of its accounting profits for the year 2018 by 31 December 2020, then the DDD provisions of the Special Contribution for the Defence Law will come into force.
The deemed dividend distribution provisions on the accounting profits for the tax year 2018 will be triggered on 31 December 2020. The said provisions will come into force in case a Cyprus tax resident company does not distribute at least 70% of its 2018 accounting profits by 31 December 2020.
The National Health Contribution should also be paid by 31 January 2021 for the undistributed accounting profits.
Whereas a Cyprus tax resident company is ultimately owned by a non-Cyprus tax resident individual, the DDD provisions are not applicable.
The relevant form to be submitted by the end of the following month of the dividend declaration (actual or deemed) to the Tax Authorities is T.D. 603.
In the case of late payment of the special contribution for defence and national health contributions then there will be an imposition of interest at the rate of 1,75% per annum and to a 5% penalty of the tax due. It should also be noted that an additional 5% penalty may be imposed in the case that the special contribution for defence remains unsettled two months after the above due dates. Also, there is a penalty of €100 if the T.D. 603 form is not submitted within the deadlines.
We remain at your disposal for anything you may need.
Contact persons
Leonidas Papadopoulos
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+357 22 100 192
Head of Accounting
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Pavlos Tsiaklides
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+357 22 100 192
Head of Audit
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Andreas Odiatis
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+357 25 100 692
Audit Manager
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Cyprus introduced amendments as to the taxation of intangible assets
On 17 July 2020 the Cypriot House of Representatives has approved to amend the Section 9(1)(I) of the Income Tax Law with respect to the tax treatment of intangible assets. The amendment was published in the Government Gazette on 14 August 2020. The amendments relate to the termination of preparing balancing statement in case of disposal of the intangible asset and the tax treatment of the capital allowances.
No requirement to prepare balancing statement
Under the existing provisions a taxpayer was required to prepare a balancing statement in the case where an intangible asset was disposed. Under the new provision, there is no obligation to prepare a balancing statement on the disposal of an intangible asset. Therefore, no balancing addition or balancing deduction would be included in the taxpayer’s taxable income in the year of disposal.
Tax treatment of capital allowances
Under the existing provisions any expenditure incurred for the acquisition or development of an intangible asset, which is for capital nature, is allocated to the useful economic life of the intangible asset with a maximum period of 20 years. Under the new provision, the taxpayer has the option not to claim capital allowances each year. Moreover, any unclaimed capital allowances can be claimed in the forthcoming years over the remaining useful life of the intangible asset.
The above amendments are effective as from 1 January 2020.
We remain at your disposal for anything you may need.
Contact persons
Leonidas Papadopoulos
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+357 22 100 192
Head of Accounting
-
Pavlos Tsiaklides
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+357 22 100 192
Head of Audit
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We would like to inform you that the deadline for the electronic submission of the 2019 personal income tax returns and the payment of 2019 personal tax has been extended to 30 November 2020.
This extension and obligation for submission applies to:
- Employees and pensioners (TD1 - Employee) whose gross income exceeds €19.500, and
- Self-employed individuals (TD1 - Self-Employed) with a turnover that does not exceed the amount of €70.000 and who do not have obligation to prepare audited financial statements.
Prerequisite for the submission of the Return is the registration to the TaxisNet System - Direct Taxation.
If you require our assistance on the preparation and submission of your tax return, you may contact us by 30 October 2020.
Kindly note that our fees for the preparation and submission of a standard tax return amount to €70 plus VAT.
We remain at your disposal for anything you may need.
Contact persons
Leonidas Papadopoulos
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+357 22 100 192
Head of Accounting
-
Pavlos Tsiaklides
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+357 22 100 192
Head of Audit
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Annual Levy for Companies
Deadline 31/12/2020
With reference to the above subject, we would like to remind you that all companies incorporated in Cyprus, irrespective of whether they are active or not, or have assets or not, are subject to a €350 levy per annum.
The last day of payment of the annual levy for the year 2020 is the 31st of December 2020. For a late payment of the 2020 Annual Levy, a penalty will be imposed from the Registrar of Companies.
You can proceed with the payment of the annual levy online* through JCCsmart by clicking at:
https://www.jccsmart.com/e-bill/invoices/4260/pay
* (Registration to JCC is required)
Otherwise, we can take over the payment of the Annual Levy on your behalf. The procedure that you need to follow is the following:
- Transfer the amount of €380 (€350 for the levy payment + €30 to cover our fees and bank charges) to our Clients' Account found below, by 30/10/2020:
CosmoCo Services Ltd (Clients A/C)
Bank of Cyprus Public Ltd
Account Number: 357003572612
IBAN: CY18002001950000357003572612
SwiftCode: BCYPCY2N
2. On the bank transaction details, indicate "Annual Levy" and your Company Name.
3. Send us a confirmation e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it. requesting the annual levy payment along with an attachment of the bank transfer confirmation, by 30/10/2020.
For those of you that have already paid the Annual Levy, please ignore this email.
Thank you!
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On 8 September 2020, Cyprus and Russia signed a protocol amending the double taxation treaty following the conclusion of negotiations in August.
According to the agreement reached, the existing withholding tax (WHT) rates on dividend and interest payments made from Russia to Cyprus will increase to 15% subject to certain exceptions.
Exceptions from 15% WHT
The two countries have agreed that a 5% WHT should apply, where the recipient/beneficial owner of a dividend is:
- a regulated entity such as a pension fund or insurance undertaking;
- a company the shares of which are listed on a registered stock exchange (subject to conditions);
- the Government or a political subdivision or a local authority;
- the Central Bank.
Moreover, the two countries have agreed that no WHT shall apply on interest payments if the beneficial owner is:
- an insurance undertaking or a pension fund;
- the Government or a political subdivision or a local authority;
- the Central Bank;
- a banking institution.
Furthermore, no WHT shall apply in respect of interest earned on the following listed bonds:
- corporate bonds;
- government bonds;
- Eurobonds.
Finally, where the beneficial owner of the interest is a company whose shares are listed on a registered stock exchange (subject to conditions), the WHT shall not exceed 5%.
Nil WHT on royalty payments
The nil WHT on royalty payments from Russia to Cyprus will not change.
Local Withholding Tax Rates Remain at 0% for Non-Residents
Cyprus will continue to apply no withholding tax on dividend and interest payments to non-residents of Cyprus as per the local domestic legislation.
Effective date
The provisions of the amending protocol will come into force as from 1 January 2021.
The tax team of CosmoCo, monitoring all the ongoing developments, is able to provide you with professional tax advice on how you can incorporate this Double Tax Agreement in your tax planning strategy.
Contact persons
Leonidas Papadopoulos Pavlos Tsiaklides
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+357 22 100 192 +357 22 100 192
Head of Accounting Head of Audit