INTERNAL DATA
OFFICIAL REGISTRY FOR PROPERTIES IN CYPRUS
USED FOR SHORT-TERM RENTALS
After a lot of pressure from organisations representing hotel owners and property owners renting properties for long term rentals, who were claiming unfair competition and tax-evasion. Now there is a new law to regulate this sector of the hospitality industry. All property owners in Cyprus who are renting accommodation for short-term rentals must register their details in the official Registry.
The Deputy Ministry of Tourism announced that all self-catering accommodations rented on online platforms such as AIRBNB, BOOKING.COM and others, should be registered in the relevant registry of the Deputy Ministry by 06/02/2023.
According to the relevant legislation, in order to be able to advertise and/or rent the self-catering accommodation, applicants must have a special mark and registration number from the Deputy Ministry which should be indicated on each platform where the accommodation is advertised. The registration fee for a self-catering accommodation is €222 for every three years.
Also note that all income from the rental of self-catering accommodation is subject to Income Tax, VAT and fees payable to the Local Authorities.
FInally note that officials of the Deputy Ministry of Tourism have the authority to check any self-catering accommodation, to verify the existence of a registration permit, as well as the compliance by the owner with the terms of registration of the accommodation.
For more information and registration go to the Deputy Ministry of Tourism page
DECISION BY EUROPEAN COURT OF JUSTICE DATED 22 NOVEMBER 2022
After the debate of whether AML regulations can come in conflict with GDPR regulations for EU citizens, the European Court of Justice issued a judgment dated 22/11/2022 that (quoted from the press release) “…the general public’s access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data…”
Therefore (quoted from the press release) “….. the provision of the anti-money-laundering (AML) Directive whereby Member States must ensure that the information on the beneficial ownership of corporate and other legal entities incorporated within their territory is accessible in all cases to any member of the general public is invalid”
The aforementioned ruling concludes that granting public access to UBO Registers of European companies is no longer valid, since it constitutes a serious intervention regarding fundamental rights of respect for privacy and the protection of personal data ( see Articles 7 and 8, Charter of Fundamental Rights of the European Union).
The relevant information shall be provided to the competent and supervisory authorities as well as to the obliged entities via the applicable procedure. It is imperative that obliged entities submit a solemn declaration to confirm that such information is requested for the purpose of due diligence.
Companies and partnerships are still obligated to submit updated Beneficial Owners information.
After this landmark decision, our Firm is waiting for further instructions and clarifications from the Cyprus Registrar of Companies before we inform our clients respectively on how to proceed regarding their personal data submitted to the Cyprus UBO Registry.
REPORTING DEADLINE FOR
DEEMED DIVIDEND DISTRIBUTION (DDD)
The Deemed Dividend Distribution (DDD) provisions apply to the profits of Cyprus tax resident companies, that are attributable directly or indirectly to Cyprus tax resident and domiciled shareholders.
The provisions do not apply to the portion of profits attributable directly or indirectly
to non-Cyprus tax resident and/or Cyprus tax resident non-domiciled shareholders,
although, there is an obligation to withhold GHS contributions on any DDD
attributable to Cyprus tax resident non-domiciled shareholders.
Companies are deemed to have distributed to their resident shareholders 70% of
their accounting profits, after taxes and certain adjustments, as at the end of two
years from the year to which the profits relate to. Therefore, the DDD provisions
apply where a Cyprus company has not distributed at least 70% of its after-tax
accounting profits (as adjusted for DDD purposes) within the two-year period. Any
actual dividends paid out of such profits within the two-year period reduce the profits subject to the deemed distribution rules.
According to the DDD provisions set above, companies with accounting
profits for the tax year 2020, which have not distributed at least 70% of their adjusted after-tax profits before the 31st of December 2022, are subject to the DDD provisions.The undistributed part of the profits after tax (as adjusted for DDD purposes), up to the 70% threshold, is subject to SDC at 17% for Cyprus tax resident domiciled shareholders.
GHS Contributions
In addition to the SDC, the distribution of a deemed dividend to shareholders which
are Cyprus tax resident individuals (irrespective of their domicile status) may be
subject to contributions to the General Healthcare Scheme (GHS) at the rate of 2,65%.
Payment deadlines
For SDC and GHS contributions on DDD as at 31st December 2022, the payment is
due by the 31st of January 2023. The payments are made through JCC smart or online banking. In case of late payments, these can be made only through online banking and are subject to interest at the current rate of 1,75% per annum and to a 5% penalty on the tax due. An additional penalty of 5% on the tax due may be imposed if the tax remains unpaid two months after the above due dates.
Tax return submission deadline
For DDD as at 31st of December 2022 with SDC and GHS liability, the “Declaration of withheld Special Contribution for Defence (SDC) and General Healthcare Scheme
(GHS) from Dividends” (i.e., form T.D.603) should be submitted through the Taxisnet
electronic system by the 31st of January 2023. Late submission carries a fixed penalty
Please contact us should you require further assistance with the above.
Cyprus Companies benefit from increased tax deduction for R & D expenses
On July 7th, the Cyprus Parliament voted for an extension of tax incentives (an action plan that was voted on in October 2021) in an attempt to attract new investments, boost entrepreneurship and support start-ups. This regards an incorporation of tax deduction on research and development expenses into Article 9(1)(d) of the Income Tax Law (ITL) and is effective as of July 20th 2022 when it was published in the Cyprus Gazette.
The existing article 9(1)(d) of the Income Tax Law states that: "Any expenditure for scientific research incurred by a person carrying on any business, as well as R&D expenses as recognized by international accounting standards carried out by small and medium-sized innovative companies as defined in Article 9A of the ITL, shall be deducted from taxable income if they were wholly and exclusively incurred for the production of income, so long as the Commissioner is satisfied that such expenditure has been incurred for the use and benefit of the business.
No deduction shall be granted for such expenses incurred for the acquisition of plant and machinery or buildings, including staff accommodation, in respect of which a deduction may be granted according to Article 10 of the ITL.
Any such expenditure of a capital nature, in respect of which deductions may not be granted under Article 10, shall be distributed equally between the tax year in which it was incurred and the five immediately following years."
According to the aforementioned amendments, an additional tax deduction of 20% is granted for R&D expenses that have incurred or will incur during 2022,2023 or 2024, including expenses of capital nature, for which deduction is granted under the provisions of article 9(1)(d) of ITL. Hence, 120% of the actual eligible R&D expenses are to be deducted from taxable income.
It is important to note that the additional deduction cannot be claimed in conjunction with the deduction provided under the Cyprus IP regime (article 9(1)(k) of the ITL).
Provisions include individuals carrying on a business who do have the economic ownership of the intangible asset that arises or is likely to arise from incurring such expenses.
Should the relevant expenses are of capital nature, the deduction is regulated by the provisions of Section 9(1)(l) of the ITL, which states that the expense is distributed over the expected life duration of the intangible asset, with a maximum period of 20 years, according to accepted accounting principles.
We are at your disposal should you require further assistance with the above.