Cyprus Tax News

Cyprus Tax News

Recent tax news from Cyprus includes several important updates that reflect changes in tax regulations and deadlines, aimed at improving compliance and supporting taxpayers. Below are the key developments:

Extended Deadline for Income Tax Returns

The Cyprus Tax Department has officially extended the deadline for filing individual income tax returns for the year 2023. Taxpayers now have until October 31, 2024, to submit their returns and pay any associated taxes. This extension applies to employees, pensioners, and self-employed individuals whose gross total income exceeds €19,500. This measure is designed to provide additional time for taxpayers to prepare their submissions, particularly in light of the complexities involved in the current tax landscape.

Zero VAT Rate on Basic Items

In a move aimed at alleviating the financial burden on consumers, the Council of Ministers approved a decree (No. 231/2024) that extends the zero VAT rate on certain basic items. This temporary measure will be effective from July 1, 2024, to September 30, 2024. The items covered under this decree include essential goods, which are crucial for households, particularly during times of economic uncertainty. This extension reflects the government’s commitment to supporting citizens amid rising living cost.

Reduction in Special Defence Contribution (SDC)

Starting January 2024, the Special Defence Contribution (SDC) tax rate on interest income has been significantly reduced from 30% to 17%. This change is expected to benefit both Cypriot tax resident companies and individuals, making Cyprus a more attractive location for investment and savings. The reduction aligns with the government’s broader strategy to enhance the competitiveness of the Cypriot tax system and stimulate economic growth.

Global Minimum Tax Implementation

Cyprus is set to implement the EU directive on a 15% global minimum tax during 2024, with retroactive effect from December 31, 2023. This directive is aimed at multinational enterprise groups and large domestic groups with consolidated annual revenues of €750 million in at least two of the four preceding fiscal years. The introduction of this minimum effective tax rate is part of a global effort to curb tax avoidance and ensure fair taxation across jurisdiction.

Transfer Pricing Documentation Rules

The Cyprus Tax Department has clarified the rules and documentation requirements surrounding transfer pricing, which have been in effect since January 2022. Businesses engaged in intra-group transactions must ensure compliance with these regulations, which align with OECD guidelines. As of February 2024, the threshold for preparing a local file for transfer pricing documentation has been increased to €5 million for financing transactions and €1 million for other categories of related party transactions. This adjustment aims to simplify compliance for smaller businesses while maintaining oversight on larger transactions.

These recent tax updates from Cyprus reflect a proactive approach by the government to adapt to changing economic conditions and international standards. By extending deadlines, reducing tax rates, and implementing new regulations, Cyprus aims to create a more favorable tax environment for individuals and businesses alike. Taxpayers are encouraged to stay informed about these changes and consult with tax professionals to ensure compliance and optimize their tax positions.

This publication has been prepared as a general guide and for information purposes only. It is not a substitution for professional advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case. No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication. This article is for informational purposes only. For further advice, please contact us at the contacts listed on the site.