On July 1st 2015, a number of amendments to the current Tax Laws were proposed and approved by the Council of Ministers and submitted to the House of Representatives for approval. The House of Representatives enacted and placed in to effect the below laws on the 16th July 2015, in an attempt to modernise and improve the Cyprus Tax Framework and with an aim to attract future investment to Cyprus.

Corporation Tax Amendment

Notional Interest deduction on Equity

A deemed interest will be applied on ‘new equity’ injections, which will be tax deductible for Cyprus resident companies and non resident companies which maintain a permanent establishment in Cyprus. Equity will be considered as funds received by the Cypriot company, in order to carry on with its business operations. The interest will be calculated follows:

New equity used for the acquisition of taxable assets x Reference Interest Rate

 It should be noted that the deduction cannot exceed 80% of the taxable profit of the company (before the deduction has been calculated). In such a way, the introduction of the deduction cannot create, or increase, a tax loss.

The nature of such a deduction should be treated as interest and therefore the same tax rules on interest expense apply.

New Equity is defined as ‘Funds introduced into the business on or after the 1 January 2015’ and do not include the capitalisation of the revaluation reserve. Equity refers to share capital and share premium to the extent that these have actually been paid up.

Reference Interest Rate is defined as ‘10 year Government Bond rate at the end of the preceding year of the country in which the new equity relating to the acquisition of taxable assets is being invested in + 3%’. The minimum rate acceptable is the effective interest rate earned on 10 year government bonds of Cyprus at the end of the tax year in consideration, + 3%.

 Land Registry fees

 Fees were charged for the transfer of property between relatives.


  1. For the transfer of immovable property made up until the 31st December 2016, there will be a reduction in the transfer fees of 50%. That is, providing the transfer has not been made as a result of foreclosure procedures;
  2. Registrations of leases and sublease agreements until the 31st December 2016 will be made with a 50% reduced registration fee.

Special Contribution for Defence (SCD) Tax Amendment

Previously, SCD was payable on dividends, interest and rental income earned by persons considered to be tax residents of Cyprus. Non-tax residents of Cyprus do not pay tax (in Cyprus, although they may do in their country of residence) on interest income and dividend income earned in Cyprus.

The amendment in the law is applicable to individuals and not legal persons.

The Law is amended such that individuals not considered to be ‘domiciled’ in Cyprus are exempt from payment of SCD on dividends, interest and rental income, even if they are tax residents of Cyprus. Accordingly only those who are Cyprus tax residents and domiciled in Cyprus will pay SCD.

This is a significant change in the tax legislation and the term ‘domicile’ is defined as follows, for the purpose of the SCD Law:

‘An individual is considered to be ‘domiciled’ in Cyprus if they have an origin in Cyprus based on the provisions of the Wills and Succession Law (WSL), which outlines that the origin extends from the domicile of the father of that individual at their time of birth. The domicile of origin prevails a domicile of choice, which is acquired when an individual chooses to a place of permanent or indefinite residence to be somewhere other than the domicile of origin.’

Regardless of the domiciliation, any person who is considered resident in Cyprus (as defined in section 2 of the Income Tax Law) for at least 17 years (out of the last 20 years prior to the relevant tax year) will be deemed as domiciled in Cyprus for the purpose of this Law.

Capital Gains Tax Amendment

Sale of Immovable Property

Gains arising from the disposal of immovable property located in Cyprus, or of shares held in companies which hold immovable property in Cyprus, were previously taxed.

Going forward, gains arising from the disposal of immovable property acquired between the date the Law was put into effect (16th July 2015) and the 31 December 2016 will be exempt from capital gains tax, provided that the property was not purchased under foreclosure procedures. The following conditions apply:

  1. The property was purchased after the effective date of application of this Law;
  2. The property was purchased and not acquired through an exchange or donation, at market value and from a non-related party.


Tax and VAT Committee