Introduction

On 17 July 2020, the Cypriot House of Representatives passed a bill amending Section 9(1)(l) of the Income Tax Law which introduced changes with respect to the tax treatment of intangible assets.

These changes affect the claim of capital allowances and the preparation of a balancing statement in respect of intangibles from 1 January 2020 and their objective is to assist the taxpayers by simplifying the existing regulation.

Balancing Statement

Until 31 December 2019 and under the existing provisions, a taxpayer has an obligation to prepare a balancing statement in the event of a transfer/disposal of an intangible asset, consisting of the tax written down value of the asset and the disposal proceeds, to identify any balancing addition or balancing deduction in relation to that asset. Effectively any cumulative deductions claimed in accordance with the existing provisions in the form of tax depreciation may be clawed back and taxed in the year of disposal through a balancing addition made to the taxable profit of the year.

From 1 January 2020, the obligation to prepare a balancing statement upon a transfer/disposal of an intangible asset is abolished

Capital Allowances

Similarly, up to 31 December 2019 and under the existing provisions, any capital nature expense for the acquisition or the development of an intangible asset can be claimed as amortization over the useful life of this asset with a maximum period of 20 years.

From 1 January 2020, the taxpayer has the option not to claim capital allowances in a particular tax year any capital allowances that have not been claimed in a year are allowable for claim over the remaining useful life of the asset.