Cyprus raises the tax rates actively.

22.04.2013

After recent events, the Cyprus economy was in danger. Cyprus took the emergency measures, accepting the terms of the Euro group, which includes imposing a tax on deposits in exchange for substantial financial assistance from the EU in the amount of $ 10 billion. However, the Government of Cyprus still has the same goal - to find some 13 billion euros in order to finally stabilize the ailing economy.

Therefore, on April 18 the House of Representatives of the Government of Cyprus has approved a number of innovations in the tax laws which concerned mostly increasing tax rates.

In particular:

• The corporate tax rate

Raising the corporate tax rate in Cyprus has been planned long time ago. (http://hbcomp.ru/about/news_and_mailings/news_jurisdictions/3649/)

After the Government`s voting this increase was accepted, and the corporate tax rate, as it was planned, increased from a minimum of 10% to 12.5%. In addition, the effect of this rule is retrospective: the rate in force since January 1, 2013.

•Tax on defense

Tax on defense is also greatly increased: now the tax residents of Cyprus are obliged to pay 15% instead of earlier, 30%. This provision will become law immediately after the publication in the Official Gazette - Government Gazette (it is expected in the shortest time).

• Special gathering for credit institutions

Special gathering, imposed by the government of Cyprus on the total amounts of deposits(local and foreign) of credit agencies, increased from 0.11% up to 0.15%. It happened with the retrospective effect from 1 January 2013.

Based on: http://www.cyprus.gov.cy/portal/portal.nsf/citizen_en?OpenForm&access=0&SectionId=citizen&CategoryId=none&SelectionId=home&print=0&lang=en

Expert’s opinion

It's the early bird that gets the worm. Cyprus tax changes are expected and could be understood. But it is a big surprise, that even the tax went up by only 2.5%, not up to a half or not even tripled.

Registration of Cypriot companies declined considerably. Before the "Cyprus Spring", according to our partners information, one hundred companies were being registered per one month but in March no more than a dozen was registered…

Cases in such condition are naturally reflected in the register of companies. They are already working slowly, even under the heavy load. Now there is only a bit of work.

Indeed, the register of companies works very slowly now. However, everybody tend to think that it is because of the current instability, which should disappear in a few weeks.

Certainly it will take time, but Cyprus will rise up and will operate, even if not as much as before, with some modifications, but it will.

Perhaps, for the large holding companies, it makes sense to think about changing their domicile of the company and transfer it from Cyprus to other, more stable jurisdiction.

Yaroslav Lomakin ( Managing partner of “Honest&Bright” company)