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Fiscal success for Cyprus

Fiscal Success for Cyprus

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Fiscal Success for Cyprus: 2nd-Highest Surplus in EU and Lower Public Debt

According to Eurostat data published on April 22, Cyprus recorded a budget surplus of 4.3% of its GDP in 2024, ranking second among EU member states — tied with Ireland and just behind Denmark at 4.5%. This is a standout achievement, as 21 of the 27 EU countries reported budget deficits during the same period.

Cyprus also significantly reduced its public debt. By the end of 2024, the debt-to-GDP ratio fell to 65%, down from 73.6% in 2023 — a drop from €23.08 billion to €21.83 billion. This stands out as the eurozone average debt slightly increased to 87.4%, and the EU average reached 81%.

Cyprus’ fiscal success reflects strong economic governance and bolsters its position as a credible business destination. With continued reforms and responsible policy, the country remains on a path of resilience and sustainable growth. Looking ahead, the Cyprus Government aims to further reduce public debt and is committed to maintaining a competitive, stable, and investor-friendly environment that supports business growth, headquartering, and global relocation.

Official source: CNA

Cyprus Start up Visa

Upgrades to the Cyprus Startup Visa

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Upgrades to the Cyprus Startup Visa: A Gateway for Global Entrepreneurs & Investors

Cyprus has updated its Startup Visa Scheme, effective January 7, 2025, after Cabinet approval on December 18, 2024. The changes aim to attract global entrepreneurs, foster innovation, and drive economic growth, particularly in the technology sector.

The Scheme allows skilled entrepreneurs from non-EU countries to enter, live, and work in Cyprus to establish a new startup or relocate an existing one. The Scheme is valid until December 2026, with a cap of 150 visas.

The updated Scheme offers more flexibility and support for startups at different stages by easing financial and operational requirements. Cyprus aims to position itself as a top destination for global talent while strengthening its appeal for investment-based residency and citizenship programs.

Key Changes Include:

  • Longer Residence Permits: Now valid for three years instead of two, with the renewal extended from one year to two years.
  • Lower Ownership Requirement: Applicants now need to own at least 25% of the company’s share capital, reduced from 50%.
  • Increased Foreign Hiring: Companies can now employ up to 50% foreign staff, compared to the previous 30% limit.
  • Additional Hiring for Investors: Companies investing €150,000 or more in Cyprus can hire additional foreign employees.

Renewal Criteria:

To renew the Visa after three years, Startups should meet at least one of the below criteria:

  • Achieve a 15% increase in revenue.
  • Secure €150,000 in investments.
  • Create at least three new jobs in Cyprus.
  • Participate in local innovation support programs.
  • Launch at least one product or service.

Digital Literacy and Investment Migration at the Heart of Cyprus Startup Visa Scheme

The updated Scheme places a strong emphasis on building a tech-savvy workforce by encouraging all employees to enhance their digital skills, while driving creativity and modernization. This enhances Cyprus’ position as a hub for technology-driven entrepreneurship and sustainable growth.

At the same time, the recent changes offer entrepreneurs and investors a compelling opportunity to establish themselves in Cyprus while working towards long-term residency or even citizenship, all within a supportive and welcoming environment. Not only can they diversify their portfolios, but they also contribute to the local economy by creating jobs, implementing innovative ideas, and attracting additional foreign investment.

A Promising Future

As the Cyprus Startup Visa Scheme evolves, with 21 startups already approved, it presents exciting opportunities for global entrepreneurial talent who seek to align their business goals with residency solutions. The Scheme offers a unique pathway to establish a presence in Cyprus, with a variety of financial and qualitative incentives for both individuals and companies.

Foreign talent and investors will benefit from Cyprus’s strategic location, favorable tax policies, strong legal framework, and access to mentorship, resources, funding, and networking opportunities.

The investment migration landscape is constantly evolving, and the Scheme is adapting to meet the changing needs of global startups and talent, ensuring long-term prosperity.

Our dedicated team can assist you in navigating the complexities of the Scheme and residency requirements so you can fully enjoy the benefits Cyprus has to offer. For a tailored consultation, feel free to reach out to us here.

new tax landscape in Cyprus

The New Tax Landscape in Cyprus: Key Changes for Businesses and Individuals

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The New Tax Landscape in Cyprus:

Key Changes for Businesses and Individuals

On February 27, 2025, the Center for Economic Research of the University of Cyprus presented the proposed new tax landscape for Cypriot legal entities and individuals, following the Government’s initiative.

NEW CORPORATE TAXATION

  • Corporate tax increase from 12.5% to 15% .bringing Cyprus into line with European Union requirements.
  • Complete abolition of deemed dividend distribution.
  • Reduction of withholding tax on actual dividend distribution from 17% to 5%.

Maintaining Existing Tax Benefits

  • Taxation of worldwide income with applicable exemptions.
  • Deduction of expenses for generating taxable income.
  • Strengthened tax residency criteria for companies and enhancement of the intellectual property tax regime (IP Box).
  • Maintenance of non-dom status, with an extension through an annual fee.
  • Notional interest deduction (NID).
  • Shipping regime remains unchanged.
  • 50% discount for first employment in the Republic.

Additional Tax Incentives

  • Anti-abuse clauses including higher tax rates on concealed dividend distributions.
  • Measures for “close-structured companies” allowing for the possibility of lifting the corporate veil and taxing shareholders as natural persons conducting business.
  • Enhanced deductions for expenses related to the green transition and digital transformation and accelerated depreciation and training discounts with related losses carried forward without restrictions.

Other proposed changes

  • Stamp duty abolition. Fixed amounts, to be imposed only on agreements relating to immovable property and banking and insurance transactions.
  • Tax losses are to be carried-forward to 10 years from 5 years, subject to restrictions.
  • Employee stock options possibly to be taxed at a lower rate upon exercise (subject to conditions).
  • Ex-gratia payments to employees to be tax-exempt up to a certain amount at the level of the employee. The employer will have the right to claim the full amount as tax deductible.
  • Insurance premium tax of 1.5% to be abolished.

This tax reform aims to strengthen the local economy and enhance the competitiveness of Cypriot businesses while investing in the country’s innovation, quality, and credibility.

PROPOSED TAX SCALES FOR INDIVIDUALS

  • Up to €20,500 → 0%
  • €20,501 – €30,000 → 20%
  • €30,001 – €40,000 → 25%
  • €40,001 – €80,000 → 30%
  • Above €80,001 → 35%

It is worth noting that the maximum tax rate of 35% now applies to incomes above €80,000, compared to the current threshold of €60,000.

Tax free income increases with the following tax deductions:

For households with a total gross income of up to €80,000 and two working spouses, the proposed deductions include:

  • €1,000 for each spouse for each child up to 19 years of age (female) or 21 years of age (male).
  • €1,000 for each spouse for each student up to 23 years of age (female) or 24 years of age (male).
  • Deduction of up to €1,500 for installments of a serviced first home loan or rent, for each spouse/partner.
  • Discounts for green upgrades to households, up to €1,000 for each spouse/partner, in the year the upgrade is made (e.g. up to five years). Eligible upgrades include energy-efficient home improvements, installation of photovoltaic systems, heat pumps, and even the purchase of an electric car.
  • Single-parent families to be taxed under the most favorable category, similar to two-parent working households.

The primary objective of the tax reform is to ease the tax burden on individuals and households while supporting families and the new generation, addressing housing challenges and low birth rates, encouraging women to participate in the labour market, and promoting the green and digital transition.

The Cyprus government aims for the reform to be fully implemented in 2026. Our firm will keep you informed about all upcoming changes and can be your trusted partner in navigating and adapting to the new regulations. Contact us for more information.

Next Steps procedure for Cyprus bank deposit haircut in 2013

Next Steps in the Compensation Process for the 2013 Cyprus Bank Deposit Haircut

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Next Steps in the Compensation Process for the 2013 Cyprus Bank Deposit Haircut

On 15 January 2025, Finance Minister Mr. Makis Keravnos stated, following a meeting with President Christodoulides and representatives of the Laiki Bank Depositors Association (SYKALA), that compensation disbursements to “haircut” depositors and security holders are expected to commence in May 2025.

Examination of Applications

A total of 13,000 applications have been submitted through the relevant electronic platform. The evaluation process is already underway and is anticipated to conclude by the end of January. Once the evaluation is completed, a detailed plan will be formulated. This plan will require approval from both the Board of Directors of the Solidarity Fund and the Council of Ministers and upon receiving the necessary approvals, the repayment process will begin in May 2025.

Compensation procedure

The President of SYKALA explained that the compensation process would be gradual due to the Solidarity Fund’s limited financial resources, which prevent the immediate full reimbursement of the amounts lost. Payments are expected to be made annually, with the Government supplementing the Fund through allocations from the state budget. Approved beneficiaries, as verified by the Ministry of Finance, will be required to submit their bank account details to receive payments. Beneficiaries for compensation will initially be the haircut depositors and, in a second phase, the security holders. The total amount to be disbursed has not yet been determined. This figure will be clarified following the completion of the application evaluation process.

The commencement of compensation payments marks a significant step towards addressing the financial losses experienced by depositors and security holders due to the 2013 haircut. While the process will be gradual and dependent on available resources, the government’s commitment to fairness and transparency provides hope for those affected. The forthcoming months will be critical in finalizing evaluations, securing approvals, and ensuring the timely disbursement of funds.

Read more: Partial compensation of the 2013 haircut on Cyprus banks’ deposits (Previous article April 2024)

UBO Registry: updates - Cyprus Dec 2024

Significant updates to UBO Registry

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Significant updates to UBO Registry

On 16 December 2024, the Department of the Registrar of Companies and Intellectual Property announced key amendments to the Prevention and Combating of Money Laundering from Illegal Activities (Amendment) (No. 2) Law of 2024, N.141(I)/2024, published on 6 December 2024. The main changes are summarized as follows:

  1. Imposition of Financial Charges: Financial charges will apply exclusively to the company or legal entity that fails, neglects, or refuses to comply with its obligations to submit information on beneficial owners, as mandated by Law 188(I)/2007 and associated Directives. Directors and secretaries are exempt from direct financial penalties.
  2. Liability for Non-Compliance: Directors or managing directors who fail to ensure compliance with beneficial owner information submission requirements will be jointly and/or severally liable with the company for covering the financial penalties imposed on the company.
  3. Revised Financial Charges:
    – A fixed charge of €100 will be imposed on the first day of the violation.
    – An additional charge of €50 will accrue for each subsequent day the violation persists.
    – The maximum total charge is capped at €5,000 per company or legal entity.
  4. Additional Powers Granted to the Registrar of Companies:
    – The Registrar may issue Directives to establish administrative review procedures and/or facilitate the submission and examination of objections against financial penalties.
    – The Registrar has the authority to remove from the business entity register any company or legal entity that fails, neglects, or refuses to update beneficial owner information.
    – The Registrar can apply to the Court for an injunction compelling compliance with obligations.

Extension and Withdrawal of Financial Charges

The deadline for submitting beneficial owner information for all Companies and Legal Entities has been extended to 31 January 2025. This initiative addresses practical implementation challenges and financial burdens on Small and Medium Enterprises (SMEs) while recognizing the high compliance rate achieved. Additionally, the deadline for completing the data confirmation procedure for 2024 has been extended to 31 March 2025.

In addition, the Registrar is withdrawing the financial charges imposed since 1 April 2024 and will issue refunds to affected companies. From 1 February 2025, however, failure to submit beneficial owner information will result in administrative and other sanctions in line with the provisions of the law.
These amendments aim to strengthen compliance with beneficial ownership reporting requirements and enhance enforcement measures by ensuring transparency and accountability while promoting a more secure and trustworthy business environment.

Our dedicated compliance team is here to provide expert assistance and guidance on your reporting obligations. For more information, feel free to reach out to us at [email protected]

Official source: Cyprus Registrar of Companies

Pillar Two - Amended legislation in the Cyprus tax system

Pillar Two: EU Directive rules on 15% Minimum tax on MNE & Large Scale Domestic Groups applicable in Cyprus law

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Pillar Two: Global Minimum Tax on MNE and Large-Scale Domestic Groups – Cyprus officially transposes the EU Directive in the local law  

On 12 December 2024, the Cyprus House of Representatives approved the transposition of the EU Directive 2022/2523 in the Cyprus national law, regarding the legislation on the Global Minimum Level of Taxation for Multinational Enterprise Groups and Large-Scale Domestic Groups.

This legislation ensures the application of a minimum tax rate of 15% for these groups with annual consolidated revenues of at least €750 million. The new provisions introduce a “top-up tax” which will be imposed on the applicable parties, whenever the effective tax rate in a specific jurisdiction falls below 15%.

Below is a summary of the law’s provisions, its applicable parties, and the effective application date:

Provisions introduced Application Effective Application Date 
Qualified Income Inclusion Rule (QIIR) Applies to the results of the local Parent and its local subsidiaries Fiscal years beginning on or after January 2024  
Qualified Undertaxed Profits Rule (QUTPR)Imposes an additional top-up tax, not charged under CIT Fiscal years beginning on or after 1 January 2025 
Domestic Minimum Top-Up Tax (DMTT) Applies to constituent entities and joint venture entities located in Cyprus. It takes priority over QIIR and QUTPR. Fiscal years beginning on or after 1 January 2025 

Given the immediate implementation of the new provisions and the penalties for non-compliance, we recognize the urgency of taking swift action. Our team of experts is here to guide you through the complexities of Pillar Two regulations.

Contact us for more information. 

Author’s comment: The long-awaited increase in the minimum tax rate to 15% across the EU has eventually been implemented in the Cyprus’ local law. However, its applicability is restricted to large international groups with significant size, activity, and revenue. 

Transfer Pricing: Cyprus tax system, by Nobel Trust

Transfer Pricing: Amended Legislation in the Cyprus Tax System

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Transfer Pricing: Amended Legislation in the Cyprus Tax System

Cyprus tax resident companies engaging in intercompany transactions with related parties fall within the amended Transfer Pricing (TP) regulations which aim to ensure that transactions are conducted at arm’s length. By aligning the Cyprus tax system with the OECD Transfer Pricing Guidelines, the updated regulations establish a solid framework for managing cross-border transactions.

Therefore, if you own or operate a business in Cyprus, it is time to get familiar with the new TP laws and the several important obligations they bring, as they are effective from 1 January 2022.  

Key Definitions

  • Cyprus Tax Residents: Cyprus tax-resident entities and Permanent Establishments (PEs) of non-resident entities engaged in transactions with related parties.
  • Related Parties: Companies or individuals are deemed related if they (a) directly or indirectly hold at least 25% of the voting rights or share capital, or (b) have the right to at least 25% of the profits of a company.
  • Arm’s length principle: Pricing for goods, services, royalties, and loans between related parties must be in line with market conditions.

Reporting Obligations

Entities engaging in such transactions have an obligation to submit a Summary Information table (SIT) regardless of the value of the transactions.

SIT

  • The SIT must be filed together with the annual Income Tax Return.
  • It includes high-level details of intercompany transactions, such as the counterparties involved, categories of transactions, and their value.
  • A €500 penalty is imposed for late or non-submission of the SIT.

In addition, they are required to prepare and keep a record of the relevant TP documentation, being a Local File and Master File, in case they exceed the specified thresholds.

Thresholds

  • Any type of intercompany transaction (i.e., goods, services, intellectual property) exceeding €1.000.000 per category.
  • Financing transactions (i.e., loans) exceeding €5.000.000.

Local File

  • It must be prepared before the tax return filing deadline.
  • It includes a transfer pricing study that demonstrates compliance with the arm’s length principle.
  • It must be submitted to the Cyprus Tax Department (CTD) within 60 days upon request. The penalties for late submission vary from €5.000 to €20.000.

Master File

  • It is required for multinational enterprise groups where Cyprus acts as the Ultimate Parent Entity (UPE) or Surrogate Parent Entity (SPE), and the group meets the Country-by-Country Reporting requirements (with consolidated revenues exceeding €750 million).
  • It provides an overview of the group’s global business operations, organizational structure, and overall transfer pricing policies.
  • It must be submitted within 60 days upon request from the CTD.
  • The penalties for late submission vary from €5.000 to €20.000.

Advance Pricing Arrangement (APA)

An APA provides certainty for taxpayers regarding the application of transfer pricing rules to specific transactions. Businesses can apply for an APA with the Tax Commissioner, where it can pre-approve the TP methods used or the pricing of cross-border transactions.

  • The Tax Commissioner issues a decision within 10 months.
  • The APA is valid for a maximum of four years from the application date.

We understand that the penalties for non-compliance can be significant, therefore it is of high importance to take appropriate action in advance. Our team of experts is here to help you navigate the complexities of the transfer pricing changes. Whether you need assistance in understanding your reporting obligations or preparing the required documentation for your local entity or multinational group, we are ready to support you every step of the way.

Contact us here for more information.

The Council of the EU adopts AML package

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Anti-Money Laundering: The Council of EU adopts the AML package.

AMLA HQ in Frankfurt

The adoption of the new anti-money-laundering (AML) rules aims to protect EU citizens and the EU’s financial system against money laundering and the financing of terrorism.

The new legislative package transfers all private sector anti-money laundering and counter-terrorism financing (AML/CFT) rules to a directly applicable regulation, while a directive will handle the organization of national authorities fighting these crimes.

The regulation uniformly harmonizes AML rules across the EU, closing fraud loopholes. It extends AML obligations to new entities, including most of the crypto sector, luxury goods traders, and football clubs/agents. It also imposes stricter due diligence, beneficial ownership regulations, and a €10k limit on cash payments.

The directive enhances national AML system organization, specifying clear cooperation rules for financial intelligence units (FIUs) and supervisors.

Additionally, the new legislative package establishes the European Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA), which will have direct and indirect supervisory powers over high-risk entities in the financial sector. AMLA aims to enhance the AML/CFT framework’s efficiency by integrating national supervisors and ensuring compliance. It will also support non-financial sectors and coordinate with financial intelligence units (FIUs).

AMLA can impose financial penalties for serious, systematic, or repeated breaches of AML/CFT requirements. The directive mandates EU member states to provide centralized bank account register information via a single access point for FIUs. A separate directive ensures national law enforcement authorities have access to these registers and harmonizes bank statement formats. This access is crucial for fighting crime and tracing criminal proceeds.

The new AML directive also prescribes that EU member states make information from centralised bank account registers – containing data on who has which bank account and where – available through a single access point.

This is the final step of the adoption procedure. The texts will now be published in the EU’s Official Journal and enter into force.

The AML regulation will apply three years after the entry into force. Member states will have two years to transpose some parts of the AML directive and three years for others.

AMLA will be based in Frankfurt and start operations in mid-2025.

Official source:

Council of the EU / Press release / 30 May 2024
Anti-money laundering: Council adopts package of rules

Click here to check out our related article: 24 Jan 2024.

Application deadline extended: 2013 Cyprus banks' haircut

Application deadline extended: Partial compensation of the 2013 haircut on Cyprus banks’ deposits

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Application deadline extended: Partial compensation of the 2013 haircut on Cyprus banks’ deposits

In its announcement on 14/05/2024, the Cyprus Ministry of Finance informs of the reopening of the electronic service for submitting applications by affected natural and legal persons regarding their participation in the Replenishment Scheme of the National Solidarity Fund. Applications are accepted via the Ministry’s online service from 14 May 2024 until 25 May 2024.

It is pointed out that the affected Natural and Legal Persons should have the characteristics of a “private client” and their deposits and securities have been reduced during 2013 due to the implementation of consolidation measures in the two systemic Banks (Bank of Cyprus and Laiki Bank).

Please note that access to the electronic service for submitting an electronic Application for participation is made through the CY Login Profile as follows:
• For Natural Persons with a Cypriot identity card or residence permit in Cyprus (ARC) as well as Legal Persons with a registration number in Cyprus –> Registration and identification on the CY Login Government Portal (formerly Ariadne) is required.

• For Natural Persons who do not have a Cypriot identity card and are not residents of Cyprus as well as Legal Persons who do not have a registration number in Cyprus –> They are required to be registered on the Government Portal CY Login, and they will be identified when submitting their Application through the provision of certain additional items and documents.

Participation in the Replenishment Scheme of the National Solidarity Fund is done only via the submission of an electronic application and applicants are invited to submit their application no later than 25 May 2024, as the Ministry notes that it will not be possible to submit electronic applications after that date.

Our team is at your disposal for any support and guidance you might need regarding the Replenishment Scheme applications. Contact us here.