Business Insights: Dec 2023 & Jan 2024

1.????? Reduction of Special Defence Contribution rate on interest

On 20 December 2023 the Special Defence Contribution (“SDC”) Law has been amended, reducing the SDC rate on passive interest income earned by Cypriot tax residents (individuals and companies) from 30% to 17%.

The new law is effective from 1 January 2024, affecting positively the Cypriot taxpayers as it relaxes their tax burden.

It is noteworthy to mention that active interest income from ordinary business activities or closely related to the ordinary activities is not subject to SDC provisions and in such cases, the provisions of income tax law apply. Additionally, Cyprus tax resident individuals who are considered as “non-domiciled” in Cyprus for tax reasons, are completely exempt from SDC on their passive income.

Official source: CY Law

2.????? Increase of social insurance fund contribution rates

In accordance with the Cyprus Social Insurance Law of 59(I)/2010, as amended, the contribution rates to the Social Insurance Fund are increased as follows, effective from 1 January 2024:

??????? For employed persons: the contribution rates to the Social Insurance Fund by both the employer and the employee will increase from 8,3% to 8,8% on insurable earnings.

??????? For self-employed persons: the contribution rate to the Social Insurance Fund will increase from 15,6% to 16,6% on insurable earnings.

Following an announcement issued on 29 November 2023 by the Social Insurance Services Department, the maximum amount of insurable earnings for 2024 has been revised upwards from the previous year to €1.209 per week, €5.239 per month and €62.868 per year. It is noted that contributions to the Social Cohesion Fund are calculated on actual earnings, not subject to the above caps.

The table for the minimum insurable earnings by occupational category can be accessed here and the table for the amounts of social insurance contributions due for 2024 can be accessed here.

Official source: Social Insurance Services Department

3.????? Updated Double Tax Treaty between Cyprus and France

On 11 of December 2023, Cyprus and France signed a Double Tax Treaty (“DTT”) which will soon replace the existing treaty between the two countries and reflect the latest international tax developments. The new treaty will contribute in further enhancing the economic collaboration between the two countries, while ensuring equality, transparency and certainty to companies, organisations and individuals with regards to their tax treatment.

The main provisions of the new treaty are as follows:

·??????? Dividends: 0% withholding tax if the beneficial owner of the dividend is a company holding directly at least 5% of the capital of the dividend-paying company throughout a 365-day period that includes the day of the payment, and 10% in all other cases.

·??????? Interest: 0% withholding tax

·??????? Royalties: 5% withholding tax

·??????? Capital gains derived by a resident of a Contracting State from the alienation of shares (or comparable interests) in property-rich companies may be taxed in the other Contracting State if, at any time during the 365 days preceding the alienation, such shares (or comparable interests) derive more than 50% of their value directly or indirectly from immovable property situated in that other State.

The DTT will be enforced once the ratification procedures are completed and the provisions will be applicable from the 1st of January of the year following its enforcement.

Official source: Ministry of Finance

4.????? Extended deadline of submission of beneficial ownership data

The Department of the Registrar of Companies and Intellectual Property announced on 30 January 2024, that the deadline of registration of the data of Beneficial Owners in the register of Beneficial Owners of Companies and other legal entities is extended to 31 March 2024, without any charge. This applies to all companies registered with the Registrar of Companies, including Public Companies and Trusts.

Furthermore, the competent ministry is authorized to reimburse the financial charges imposed on those businesses that delayed the registration of their data.

Official source:?Cyprus Chamber of Commerce & Industry

5.????? Registration in the Tax Register through the TFA Taxpayer Portal

The submission of a request for registration in the Tax Register will only be done online through the Taxpayer Portal TAX FOR ALL (TFA) with effect from 8 January 2024. A prerequisite for submitting such a request is to first create an account on the Portal. Instructions for this procedure are provided on the Tax Department’s website.

Once the registration request is approved, the account on the TFA Taxpayer Portal is activated and connected automatically, with the Tax Identification Code (TIC) for which individuals will be informed via message to the email address they provided during the registration process.

It is noted that after registration in the Tax Department register and the activation of their TFA account, individuals will automatically receive their access codes to the TAXISnet system within three working days, through which Direct Tax Returns are still submitted.

Official source: Tax Department

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