New Amendments Levy On Cyprus Companies

Amendment Levy 2013: – The annual levy of €350 is obligatory for all the Cyprus Companies regardless as to whether they are active or dormant. Prior to this amendment, the dormant Companies and the Companies not having any assets were exempted from payment.  The annual levy is payable from the year of incorporation. Prior to the amendment, the Companies were exempted from annual levy in the year of their incorporation.  If the levy is not paid until 30th of June 2013, it will result in automatic penalties.

Specifics:

  • There will be a penalty of 10% if the levy is paid within two months after due date.
  • If the levy is not paid within five months of due date the penalty will be 30%.
  • If the levy is not paid within five months passed due date, the Registrar of Companies will remove the company from the Registrar.
  • If a return of the company to the Registrar is effected within two years after the removal, a government fee of €500 is payable.
  • Re-registration after two years carries a government fee of €750.

Amendment Levy 2012 –The second amendment, which passed earlier this month, stipulates that Cyprus companies that were exempted from the €350 levy in 2012 are now also liable to pay.  Payment for previously exempted 2012 companies is due 29 March 2013.

Specifically, the new amendments to the relevant law remove the conditions that had previously exempted certain companies. The exemptions had applied for the year of incorporation, dormant companies and companies with no assets.  Failure to pay this levy on time results in automatic penalties by the Registrar, while in the event of non-payment within a certain timeframe, the company is automatically stricken off from the Registry. Reinstatement is then possible at a fee.

Specifics:

  • Companies that stated dormant in 2012 have to pay €350 until 29/03/2013
  • Companies being registered in 2012 have to pay €350 until 29/03/2013
  • Companies that have not informed about dormant status in 2012 or pay the levy have to pay now €500.

 

Important Note:  Cyprus Companies that are registered in the Cyprus Company Registrar before the year 2011 pay levy of 350 Euro for the year 2011.  Any companies that have been registered during the year 2011 at the Cyprus Company Registrar do not have to pay levy for the year 2011, this exemption is also for the companies that have stated dormant.

New Double Tax Treaty between Cyprus & Ukraine

During an official visit of the President of Ukraine Viktor Yanukovych in Cyprus on 8 November 2012 the two countries signed a new Double Tax Treaty (“DTT”).  The new agreement is to replace the 1982 treaty for the avoidance of double taxation as concluded between Cyprus and the USSR.

The new DTT replaces the old USSR treaty and will enter into effect on the 1st of January following the year in which the two States exchange notices of ratification.  This is expected to take place in 2013 and therefore the DTT will be in effect as from January 2014.

The most important provisions of the new DTT are the following:

Dividend Income

With regards to dividend income, the withholding tax rate will be 5%, with the beneficial owner holding at least 20% of the capital of the dividend paying company or invested at least €100.000 in the share capital or other rights of the dividend paying company.

Interest Income

Any profits received by way interest payments shall bear a withholding tax of 2%.

Royalty Income

The withholding tax rate for Royalty income will be 5% on royalties arising from the use of any copyright of scientific work, trade mark, patent, secret formula, process or information concerns industrial, commercial or scientific experience. For all other cases the withholding tax rate will be 12.5%.

Capital Gains

The taxing rights for Capital Gains in respect to a disposal of shares in property companies or other movable property is granted to the State in which the person making the disposal is tax resident. This means that real estate holding groups will still benefit as with the current DTT, and have zero tax obligation.

Permanent Establishment

A building site or construction or installation project or any supervisory activities in connection with such site or project constitutes a permanent establishment only if it exceeds a period of 12 months.

Eliminating Double Taxation

Elimination of double taxation is achieved through Article 21 of the new DTT which adopts the credit method of eliminating double taxation on income.

Conclusion

Cyprus remains a preferred jurisdiction for international investments into Ukraine, as the new rates are considered attractive and the benefit for real estate holding is still applicable. The new DTT basically eliminates the doubt that existed around the old DTT and therefore simplifies and boosts new business.

 

Cyprus Fiduciary Law – protection to the clients and strengthening the professional sector