On the 26th of August 2011 the Cyprus parliament has voted amendments to the Companies Law as well as to the various Tax Laws aimed at increasing the revenues of the government as well as reducing government expenditure. The main amendments that affect international investors doing business through Cyprus are explained below.

As from 2011 all registered Cyprus companies are obliged to pay an annual change of Euro 350 in order for the companies to be in good standing and to remain on the register of Cyprus companies at the Registrar of Companies.

For Cyprus companies which belong to a group of companies the total amount of annual changes of such companies cannot exceed Euro 20.000, therefore for the cap of Euro 20.000 to apply there must be over 57 Cyprus companies in a group.

Time limits for payment of the charge

The Companies have an obligation to pay the annual charge by 30th June of each year. For the year 2011 the deadline for the payment of the annual charge is set for 31st December 2011.

Who is obliged to pay

Companies registered in 2010 or earlier are obliged to pay the charge of Euro 350 for the year 2011 by 31st December 2011 and thereafter must pay Euro 350 by 30th June of each subsequent year. For example, a company registered on 25th April 2009 has an obligation to pay the charge of Euro 350 by 31st December 2011 and then Euro 350 by 30th June 2012 and thereafter Euro 350 by the 30th June for each subsequent year.

The obligation for payment commences on the year subsequent to the year of incorporation.

Companies registered in 2011 and after are obliged to pay the charge of Euro 350 annually by 30th June of the following year. For example, a company registered on 20th February 2011 shall be obliged to pay Euro 350 by 30th June 2012 and thereafter Euro 350 by 30th June of each subsequent year.

A company registered on 12th January 2012 shall be obliged to pay the annual charge by 30th June 2013 and thereafter Euro 350 by 30th June of each subsequent year.

Penalties for late payment

If a company does not comply with the obligation for the payment of the change within the above-mentioned time limits, the Registrar of Companies shall proceed with striking off the company from the register of companies. This means that after the fifth month of delay, the Registrar of Companies may refuse to issue any certificates (including certificates of good standing) or to proceed with any applications for changes at the Registrar of Companies.

A company may be re-instated within two years from the date of strike off from the register automatically provided a fee of Euro 500 (in addition to the outstanding amounts of the change) is paid.

A company may be re-instated after two years from the date of the strike off from the register provided a fee of Euro 750 (in addition to the outstanding amounts of the change) is paid.

Exemptions to the obligation for payment of the annual charge

Subject to the discretion of the Registrar of Companies , the annual change of Euro 350 shall not apply to the following companies:

It is our opinion that it is unlikely that this exemption will be used broadly.

C. AMENDMENTS TO THE SPECIAL DEFENCE CONTRIBUTION TAX LAW

Interest Income

The rate of taxation on passive interest income which is taxable under the Special Defence Contribution Tax is increased from 10% to 15%. Interest income which is acquired from ordinary activities or activities closely connected with the ordinary activities of the company will continue to be taxed at 10% corporation tax.

Dividend Income

The rate of taxation on dividend income under the Special Defence Contribution Tax is increased from 15% to 17% for the situations that was previously applicable.

The above mentioned amendments of the Special Defence Contribution Tax will be applicable from the first day of its publication in the official gazette of the Republic.

Incentive for employment of high salary non Cyprus tax residents in the Republic

Non tax resident persons who are taking up residency in Cyprus for employment are entitled to an exemption of 50% of their annual salary earned from Income Tax. This exemption is granted to employees with salaries exceeding Euro 100.000 annually and it is valid for a period of five years from the year of commencement of employment.

This provision is applicable from 1 st January 2012.

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.

Our Firm

Kinanis LLC, a law and consulting firm, is one of the leading business law firms in Cyprus and advises the international investor and private clients on all aspects of law and accounting.

Kinanis LLC continues the business of Kinanis & Co established in 1983. The firm started its operation as a traditional law firm. Experience and practice over the years brought forward the need for transformation from a traditional law firm to a more innovative multidisciplinary firm providing a full range of services combining law and accounting with the extensive expertise in corporate and tax advice to ensure that our clients will obtain the best possible spherical advice.

Our involvement and participation in international transactions over the years, have established our firm as one of the key players in the field.

The firm is staffed with over 80 young, energetic and ambitious professionals, including lawyers, accountants and administrators who provide prompt, efficient and high quality services and who are capable of meeting the current demanding challenges of the local and international business environment.

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