Further, some treaties provide for tax sparing credits whereby the tax credit allowed is not only with respect to tax actually paid in the other treaty country but also from tax which would have been otherwise payable had it not been for incentive measures in that other country which result in exemption or reduction of tax.

Cyprus Parliament has enacted legislation providing for the partial write-off of interest and penalties on overdue tax, provided that the balance is settled by the 31 March 2012.

The newly enacted legislation applies to individuals and companies alike and affords a waiver of interest and penalties in excess of 5% of the principal amount owed. The law applies to income tax, SDC tax, immovable property tax, stamp duty and capital gains tax for periods up to 31 December 2008.

The law was enacted despite warnings from the office of the Attorney General`s office that it is unconstitutional. In a letter to the House Finance Committee, the Attorney General warned that the legislation contravenes articles 24 and 28 of the Cyprus Constitution, which provide that all persons are equal before the law and that every person is bound to contribute according to their means towards public burdens.

The Attorney General warned that the legislation would have the same effect as a similar law passed in December 2007, which was ruled as being discriminatory by the Supreme Court. In its May 2008 decision, the Supreme Court held that the 2007 law was unconstitutional since it discriminated against taxpayers who comply with their obligations in favour of those who refuse to assume and fulfil the same obligations.

Pekris & Theodorou LLC is a Cyprus law firm with Cyprus lawyers and other legal experts on legal matters involving Cyprus law, EU law and international law. The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Further Tax Law related information is available here.

The law also provided that purchasers who submit applications under the provisions of the Town Planning Amnesty will enjoy the same benefit.

Following the expiration of the 6 months it is expected that new legislation reforming the taxation of real estate in Cyprus will apply.

Pekris & Theodorou LLC is a Cyprus law firm with Cyprus lawyers and other legal experts on legal matters involving Cyprus law, EU law and international law. The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Further Property Law related information is available here.

The tax bands and rates are therefore now as follows:

Pekris & Theodorou LLC is a Cyprus law firm with Cyprus lawyers and other legal experts on legal matters involving Cyprus law, EU law and international law. The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Further Tax Law related information is available here.

The legislation passed provides that eligible persons will be subject to a lower VAT rate of 5% on the purchase or construction of a first residence. The rate will apply for the first 200 square meters of residences of total covered area of up to 300 square meters and takes force as of 1 November 2011.

Under the legislation an “eligible person” is defined as any individual who fulfills the following conditions:

(i) has completed 18 years of age at the time of submission of his application,

(ii) is a citizen of the Republic of Cyprus or any other Member State of the EU, and

(iii) does not own any other place of residence in Cyprus.

It should be noted that the reduced rate applies only for properties which are used as the primary and permanent place of residence.

The current VAT refund scheme will cease to apply once all pending applications are examined. Applications for VAT refund can be submitted up until the 1 November 2011.

Pekris & Theodorou LLC is a Cyprus law firm with Cyprus lawyers and other legal experts on legal matters involving Cyprus law, EU law and international law. The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Further Property Law related information is available here.

Update: Legislation rejected by President and not enacted. Amending Law 129(I)/2011 enacted, which can be can be viewed (Greek language) here.

On the 19th July 2011,  Luxembourg’s Finance Minister Luc Frieden conducted an official visit to Cyprus.

According to the Luxembourg government Mr Frieden exchanged views with his Cypriot counterpart Charilaos Stavrakis, on recent developments in their respective financial sectors and on European and national legislation in this area. Within this context, Cyprus and Luxembourg agreed to initiate negotiations seeking to conclude a bilateral double taxation agreement (DTA) between the two countries, in a bid to strengthen cooperation between the two financial centres.

Mr Frieden also met the governor of the central Bank of Cyprus, Athanasios Orphanides, as well as the president of the Cyprus Securities and Exchanges Commission, Mr Georgios Charalambous.

The European Commission has formally requested Cyprus to amend its legislation on depreciation scales for the calculation of excise duties on second-hand motorcycles because the current rules discriminate against imported motorcycles.

On the 18.02.2011, the Republic of Cyprus and the Federal Republic of Germany executed an updated agreement for the avoidance of double taxation on income and capital. The new agreement replaces the existing tax agreement of 1974.

The agreement was signed in Nicosia, by Cyprus Minister of Finance Charilaos Stavrakis and German AmbassadorGottfried Zeitz.

The Cypriot Minister stated that that the government of Cyprus is committed to continue efforts to maintain and further strengthen its position as an important regional center of attracting foreign companies and investments. The agreements for the avoidance of double taxation, he noted, “are a very important tool we give to the private sector in order to attract more foreign companies in Cyprus”.

The Minister noted that many important German shipping companies exercise their activities in Cyprus, adding that with this agreement doubts as regards the taxation regime of those companies are lifted.

In his statements, the German Ambassador said he was satisfied with “this new step” adding that the new agreement further strengthens the ”already excellent financial relations between the two states”.

Zeitz said that Cyprus has become ”an important EU partner for Germany”, and referred to the recent visits paid to Cyprus by German Chancellor Angela Merkel and German Foreign Minister Guido Westerwelle.

On the 14.01.2011 Cyprus and Armenia signed a protocol of cooperation which provides for the enhancement of their bilateral relations in many fields.

The protocol signed in Yerevan after the conclusion of the deliberations of the First Meeting of the Cyprus – Armenia Intergovernmental Committee, which was established on the basis of an economic agreement between the two states.

The protocol of cooperation provides for the further enhancement of their existing ties of friendship as well as the enhancement of their cooperation in the fields of commerce, industry, economy, tourism, investments, transport, agriculture and health.

A new double taxation agreement was also signed. Until the new agreement is ratified by both countries, the double taxation agreement dated 29.11.1982 between Cyprus and the USSR, which was adopted by Armenia on independence, will remain in effect.

The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Instead, a 5% V.A.T. rate will be applied to all food and beverage sales. Likewise a 5% rate will also apply to medicine and vaccine sales.

With regards to food and beverage deliveries, excluding alcoholic drinks, beer, wine and soft drinks, will attract a higher rate of 15% VAT.

The 15% rate still represents the lowest rate in the EU.

The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.