In December 2012, a number of amendments and new laws were voted by the House of Representatives based on the Memorandum of Understanding between Troika and the Republic of Cyprus. The new laws and amendments, which are summarized below, intend to strengthen the state financials:

Tax losses
Tax losses can be carried forward to offset future taxable profits for a period of five years. Prior to the amendment tax losses could be carried forward indefinitely.

Income tax law on winnings from games of OPAP and Cyprus lottery
Winnings exceeding €5.000 from OPAP gambling games and from the Cyprus national lottery are now taxed at 20%.

Company not tax resident in the Republic
Companies incorporated in the Republic, but are not Cyprus tax residents, are obliged to submit their tax returns by December 31 of the year following the tax year the relate to (three months extension in case the return is submitted electronically).

Penalty for omission or delay in tax payments
A person convicted for fraudulent omission or delay in tax payments may be subject to imprisonment for at least one year (previously the jail term could not exceed 6 months).

Income from dividends and interest
Persons, including trusts, who receive interest and / or dividend income, whether from Cyprus or abroad, must keep proper accounting records.

Value Added Tax (VAT)
For the period from 14 January 2013 until 12 January 2014 the standard VAT rate increases to 18 % (from 17 %) and from 13 January 2014 increases to 19%.
Additionally, the Reduced VAT rate, which mainly concerns services offered by hotels and restaurants, increases to 9% (from 8%) from 13 January 2014.

Social Insurance Contributions – Private Sector
For the years 2014 to 2018 the rate of Social Insurance Contributions (“SIC”) is increased by 1% for both employers and employees (to 7.8% each). The 1% increase applies for the self-employed who will contribute a total of 13.6%.

Accounting records for six years
Companies should keep their accounting records for six years after the end of the calendar year to which they relate to.

Special Contribution on Salaries of Employees in the Private Sector
Employees, pensioners and self-employed in the private sector are required to contribute a percentage of their gross monthly salaries/pensions until the 31st of December 2016. The special contribution is paid in half by the employer and the employee. The special contribution rates are shown in the table below:

Annual Levy of €350
Payment of the €350 annual levy becomes compulsory for all companies registered in the Cyprus Registrar of Companies starting from 2013. Previous exemptions relating to dormant companies or companies with property in the Turkish occupied area or companies with no assets are now abolished. In addition, the maximum total levy of €20.000 for groups of companies is now eliminated. The annual fee is payable from the first year the Company is registered.

Bank Levy payable by Financial Institutions “FI”
According to the Law introduced in 2011, FI operating in Cyprus for 2011 and 2012 were liable to a levy of 0,095% of their total deposits (both domestic and foreign but excluding interbank deposits). However, should this amount exceed 20% of their total taxable income for the two years, the excess would be refundable. With retrospective effect from 2011 the provision relating to the maximum of 20% of total taxable income and the refund for any excess paid, are abolished. Furthermore, from 2013 the levy rate increases from 0,095% to 0,11% and the law provisions are extended indefinitely.

Regulations for the Provision of Fiduciary and other Corporate Services
All eligible persons providing such services to or from the Republic of Cyprus are now regulated by the Cyprus Securities and Exchange Commission. Lawyers and auditors that are already regulated by their respective regulatory bodies are outside the scope of this legislation.

Money Laundering
Money laundering regulations are further enhanced and more clarity is given to the powers of the Unit Combating Money Laundering. In addition, the regulating bodies of lawyers and auditors are assigned supervisory responsibilities over their members offering trust services to third parties.

Exchange of information
New and more comprehensive rules relating to the exchange of information with EU member states are now implemented, which cover for all natural and legal persons.

Other Law Amendments

• Extension of the special contribution from government employees’ salaries until 2016
• Changes in the government pension and Social Insurance contribution plans
• Reduction in government employee starting salaries and suspension of the automatic salary increases
• Changes in the working hours of the government employees
• Introduction of stricter income criteria and reduced amounts for a number of subsidies and allowances
• Increased excise duties on tobacco, alcohol and petrol
• Gradual increase of the official retirement age from 63 to 65
• Church will pay immovable property tax for properties under its possession at 14 March 2012 and properties acquired thereafter.