On 26 February 2025, the Economics Research Center of the University of Cyprus and the Tax Authorities presented a set of proposed amendments as part of a comprehensive tax reform plan. These proposals, which aim to modernize the Cypriot tax system while aligning it with European standards, are currently under review by the Ministry of Finance. Following this assessment, they will be submitted to the Council of Ministers and eventually to the House of Representatives for voting. As such, these measures are not yet finalized and may be subject to further modifications.
Key Proposed Changes
Personal Income Tax
Increase in Tax-Free Allowance: The tax-free annual income threshold is proposed to rise from €19,500 to €20,500.
Adjustments to Tax Brackets: The 35% tax rate will now apply to incomes exceeding €80,000, an increase from the previous threshold of €60,000.
New Deductions for Families and Individuals:
Additional tax-free allowance of €1,000 per dependent.
€1,500 tax-free allowance for parents purchasing their first home or paying rent.
€1,000 tax-free allowance for green household upgrades.
Single parents may benefit from double these allowances.
Corporate Income Tax
Increase in Corporate Tax Rate: The standard corporate tax rate is set to rise from 12.5% to 15%.
Abolition of Deemed Dividend Distribution Rules: The existing deemed dividend distribution mechanism is to be eliminated.
Reduction in Special Defence Contribution (SDC) on Dividends: The SDC rate applicable to dividends received by Cyprus-domiciled and tax-resident individuals will be reduced from 17% to 5%.
Stamp Duty and Other Adjustments
Stamp Duty Limitations: Stamp duty will only apply to agreements related to real estate transactions, banking, and insurance contracts.
Extended Tax Loss Carryforward: The period for carrying forward tax losses will increase from 5 years to 10 years, subject to conditions.
Green & Digital Investment Incentives: Companies investing in environmentally friendly initiatives or digital transformation may qualify for super deductions or accelerated depreciation, with no restrictions on carrying forward related tax losses.
Next Steps
As these are only proposals, they are still undergoing review. The Ministry of Finance will further assess their potential impact before submission to the Council of Ministers and, subsequently, the House of Representatives for approval. Some provisions may take effect as early as 2025, with full implementation expected by 2026.
What This Means for Businesses and Individuals
The proposed reforms reflect a shift towards a more competitive, equitable, and modern tax system. Businesses should assess how the changes might impact their tax liabilities and strategic planning. Individuals, especially those benefiting from the new personal tax deductions, should stay informed about how these reforms may affect their financial planning.
At Asterisk Corporate Services, we closely monitor legislative developments and are available to help businesses and individuals navigate these changes. If you have any questions about the potential implications of the proposed tax reforms, feel free to contact our team for further guidance. Please also note that the above is for reference only and does not constitute any form of tax advise.
Stay tuned for updates as the legislative process unfolds.
Relevant article in the local press can be found here.
In line with global efforts to ensure fair taxation, Cyprus has introduced a new tax framework targeting large multinational and domestic groups. This initiative aligns with the OECD’s Pillar Two rules, establishing a global minimum corporate tax rate of 15% for multinational enterprises (MNEs) with annual revenues exceeding €750 million.
Key Components of the New Tax Framework:
Income Inclusion Rule (IIR): Effective for accounting periods beginning on or after December 31, 2023, the IIR mandates that parent entities pay a top-up tax if their subsidiaries are taxed below the 15% minimum rate.
Undertaxed Profits Rule (UTPR): Serving as a safeguard to the IIR, the UTPR will be implemented for accounting periods starting on or after December 31, 2024. It ensures that profits not adequately taxed under the IIR are subject to taxation in other jurisdictions where the MNE operates.
Qualified Domestic Minimum Top-Up Tax (QDMTT): To retain tax revenues within Cyprus, the QDMTT will be effective from January 1, 2025. This measure allows Cyprus to collect the top-up tax domestically, preventing foreign jurisdictions from taxing these profits.
Implications for Affected Groups:
Entities falling within the scope of these rules should:
Assess Impact: Evaluate how the new regulations affect their tax obligations and overall financial strategies.
Enhance Compliance: Ensure that internal systems and processes are updated to meet the new reporting and documentation requirements.
Seek Professional Advice: Consult with tax professionals to navigate the complexities of the new tax landscape effectively.
These measures underscore Cyprus’s commitment to international tax standards, promoting transparency and fairness in the global tax environment. Businesses operating within or through Cyprus should stay informed and prepared for these changes to ensure compliance and optimize their tax positions.
If you need assistance to complying with such requirements do not hesitate to contact us at contact@asterisk.cy .
The above is for informational purposes only and does not constitute any form of advise. If you need advise contact us or your professional tax advisor.
The UK’s non-domicile (non-dom) tax regime has long been an attractive option for high-net-worth individuals seeking favorable tax treatment. However, with the recent announcement by the UK government that this regime will be abolished effective 6 April 2025, individuals currently benefiting from it or considering relocating are now searching for alternative solutions that meet their tax and financial planning needs.
The cancellation of the UK’s non-dom tax regime marks a significant shift in the global tax landscape, impacting thousands of non-domiciled residents who have relied on this system to minimize their tax obligations. This change is part of the government’s broader efforts to address economic and fiscal challenges and is expected to have substantial implications for high-net-worth individuals. For more details on the official announcement and its implications, visit UK Government Non-Dom Announcement.
Why Consider Cyprus for Your New Tax Residency?
Cyprus has emerged as a top destination for individuals (both EU and non-EU nationals) looking for an effective and efficient tax residency solution. The Cyprus non-dom tax regime offers significant benefits and provides an ideal environment for those needing a new base for both personal and business activities.
Key Features of the Cyprus Non-Dom Regime
Automatic Eligibility: Foreign individuals who become tax residents in Cyprus automatically qualify for the non-dom tax regime, which can be utilized for up to 17 years.
Flexible 60-Day Rule: Individuals can establish tax residency in Cyprus quickly through the convenient 60-day rule, providing a seamless transition for those needing to relocate their tax base promptly. More information on tax residency and 60-day rule requirements can be found here.
Tax Exemptions: Cyprus non-dom residents enjoy full exemption from taxation on dividends and interest, irrespective of the source and whether these funds are remitted to Cyprus or not.
Capital Gains: Complete tax exemption on profits from the sale of shares and qualifying securities, as well as on capital gains not related to immovable property in Cyprus.
No Inheritance Tax: Cyprus does not impose inheritance tax, offering peace of mind for estate planning.
Why High-Net-Worth Individuals Choose Cyprus
For individuals with substantial incomes derived from dividends, interest, and capital gains, the Cyprus tax regime is particularly beneficial. The island’s business-friendly environment also provides a competitive edge, featuring:
Low Corporate Tax Rates: Cyprus boasts one of the lowest corporate tax rates in the EU at 12.5%. You can read more about our tax system here.
Business Infrastructure: The well-established infrastructure supports the development of operational substance for companies.
Legal and Business Framework: The legal system is based on English common law, ensuring clarity and reliability for business operations.
Cost Advantage: A comparatively lower cost of establishing and maintaining business presence versus other prime EU jurisdictions.
Beyond Tax Benefits: A Balanced Lifestyle
Cyprus isn’t just about favorable tax rates. The island offers an excellent quality of life characterized by:
Ideal Geographical Location: Located at the crossroads of Europe, Asia, and Africa, Cyprus provides easy access to major markets.
Mediterranean Climate and Natural Beauty: The island is known for its warm weather, blue-flag beaches, and scenic landscapes.
Safety and Stability: Cyprus maintains a low crime rate, making it a secure environment for families.
Modern Infrastructure: High-quality housing, international schools, advanced healthcare, and a cosmopolitan lifestyle add to its appeal.
A Prime Business Hub
Cyprus offers more than just personal tax benefits; it’s a strategic hub for international business operations. Companies can benefit from:
Relocation Incentives: Provisions for businesses and key management to easily relocate to Cyprus.
Professional Services: A robust network of local service providers, including legal, financial, and administrative services, enhances ease of doing business.
How Asterisk Corporate Services Can Assist
Navigating a transition to Cyprus can be seamless with the right support. Asterisk Corporate Services offers comprehensive assistance with:
- Company Incorporation: Assistance in setting up and managing a Cyprus company, including redomiciliation services.
Immigration Processes: Guidance through all necessary immigration and residency requirements.
Tax Registration and Compliance: Ensuring tax registrations and ongoing personal income tax obligations are met.
Fiduciary Services: Establishing Cyprus International Trusts with professional trustee services.
Banking Solutions: Opening and managing local and international bank accounts.
Accounting and Bookkeeping: Full range of financial management services to ensure compliance and efficiency.
Conclusion
With the impending end of the UK non-dom tax regime, Cyprus presents an unmatched opportunity for high-net-worth individuals seeking a favorable tax environment coupled with an exceptional quality of life. Asterisk Corporate Services is here to guide you through every step of the process, ensuring a smooth transition and successful establishment in Cyprus.
For more details and tailored advice, contact us today at Asterisk Corporate Services and begin your journey to benefiting from the Cyprus non-dom regime.
For comprehensive solutions that align with your tax and business needs, visit asterisk.cy.
Information provided above is for information purposes and does not constitute any form of advise. For formal advise please contact us or any other tax professional.
As part of ongoing regulatory requirements, the Cyprus Registrar of Companies has recently announced a critical update concerning the confirmation of Ultimate Beneficial Owners (UBO) for all Cyprus registered entities. This announcement impacts companies incorporated or registered under the Cyprus Companies Law, Cap. 113, as well as European Public Limited Liability Companies (SE) and Partnerships.
The key requirement is that all companies and organizations must enter the Beneficial Owners Registry system to confirm or update their UBO details. The confirmation period begins on October 1, 2024, and ends on December 31, 2024, from which date thereafter penalties will start to apply.
Here’s what you need to know:
Who Does This Affect?
- Companies incorporated/registered under the Cyprus Companies Law, Cap. 113
- European Public Limited Liability Companies (SE)
- Partnerships and their respective officers or partners
What Action Is Required?
Entities must enter the Beneficial Owners Registry system during the designated period and confirm the details of their Ultimate Beneficial Owners (UBO) or Senior Management Officials, as applicable. This confirmation applies to entities that have already registered their beneficial owner details, as well as those that need to make any necessary updates.
If any changes or updates to the UBOs, Senior Management Officials, or Due Diligence processes have occurred between October 1, 2024, and December 31, 2024, these must be completed before proceeding with the confirmation of the UBO details.
Consequences of Non-Compliance
Failure to confirm the UBO details by December 31, 2024, will result in financial penalties. The penalties include a fine of €200 for the first day of non-compliance and €100 for each subsequent day of violation, up to a maximum of €20,000 per officer and the Company. These penalties are imposed regardless of any potential criminal liability or prosecution.
Steps for Compliance
To comply with the UBO confirmation process, companies and partnerships must:
- Access the Beneficial Owners Registry system.
- Confirm or update their UBO, Senior Management, or Due Diligence details.
- Submit the required information no later than December 31, 2024.
How Asterisk Corporate Services Can Assist You
At Asterisk Corporate Services, we understand the importance of staying compliant with all regulatory requirements. Our experienced team is ready to assist you in submitting and confirming your UBO details with the Registrar of Companies for companies which we administer.
If you require further information or need assistance with the process, please don’t hesitate to contact us at contact@asterisk.cy. We are here to ensure your business remains compliant with all regulatory obligations.
Stay Informed and Compliant
With the regulatory landscape continuously evolving, it is essential for companies in Cyprus to stay ahead of compliance requirements. The mandatory confirmation of UBO details is a crucial part of these obligations, and timely action will help avoid unnecessary penalties.
For more detailed guidance, feel free to reach out to our team at Asterisk Corporate Services. We are committed to providing the support your business needs.
Which Cyprus Private Limited Companies are now Exempt from Statutory Audits?
On 9 June 2022, the Cyprus Companies Law Cap 113 was updated to introduce a statutory audit exemption for private limited companies and instead these companies will be subjected to an assurance review under much less demanding standards than an audit. Companies which meet both of the following criteria are exempt from statutory audit:
– Annual turnover of less than €200.000
– Total assets worth less than €500.000
The above criteria should not be exceeded or ceased to be exceeded for two consecutive years.
The above thresholds mean that the vast majority of companies in Cyprus are not required to have a statutory audit but can opt to have their financial statements undergo a review engagement.
Conducting a review engagement instead of a statutory audit applies to the financial statements for reporting periods ending on or after 31 December 2022.
The companies that meet the criteria and choose a review engagement rather than an audit, are still subject to the same filing requirements to the Registrar of Companies and tax filing requirements to the tax department.
What is an assurance review engagement and who undertakes it?
The aim of a review engagement of financial statements under ISRE 2400 (revised) is to provide limited assurance by conducting inquiry and analytical procedures, ensuring that the financial statements are free from material misstatement.
This standard ensures a consistent level of limited assurance while allowing efficient delivery of the service, based on the complexity of the financial statements under review.
An assurance review is an adaptable service, focusing on specific areas of the financial statements to meet a company’s needs. Auditors collaborate with the company to identify high-risk areas, conduct specific tests, and provide recommendations for improvement and informed decision-making.
The Companies Law Cap. 113 (Article 152A (1)(d)) specifies that a review engagement can only be performed by a licensed statutory auditor or a statutory audit firm.
Scope
The auditor will determine materiality and acquire a sufficient understanding of the entity to identify potential areas of material misstatements in the financial statements.
Procedures will be tailored to cover all significant items and target areas susceptible to material misstatements. They will include both planned analytical procedures and any supplementary procedures deemed necessary.
Review procedures may include but are not limited to:
– An analytical review of the year-on-year figures.
– Review of all Financial Statement areas that exceed materiality
– Areas where material misstatements are likely to arise.
– Review of specifically targeted areas within the Statement of Financial Position and the Income Statement.
– Assessment of significant accounting estimates
– Related party balances and transactions
– Going concern uncertainties
Auditor’s Review Report
The final step in performing a review engagement is to form an appropriate conclusion based on the evidence obtained. The conclusion of a review engagement does not provide the same level of assurance as an audit opinion. Instead, it typically includes a conclusion of what came to the auditor’s attention. Typically, an unmodified conclusion would read that nothing has come to the attention of the auditor causing the auditor to believe that the financial statements do not give a true and fair view. Similarly to the audit opinion, the auditor can express a qualified, adverse or a disclaimer of conclusion of the financial statements.
Benefits of a Review Engagement
– Cost-effective and time efficient
– Provides confidence and accountability to the users of the reviewed financial statements.
– Offers reassurance regarding the reliability and credibility of financial statements.
– Identifies issues and areas of concern and offers recommendations for enhancing systems and processes accordingly.
– Focuses on areas where Directors or Owners seek assurance, thus tailoring testing and avoiding unnecessary expenditure of time and fees on processes already deemed satisfactory.
Let Nikita & Partners manage your audit & assurance needs with expertise and proficiency.
Conclusion
Although a review engagement is different from an audit of financial statements, it’s crucial to acknowledge that the inherent risks identified during an audit will still be present. During a review engagement, material misstatements within the financial statements may not be detected, regardless of the thoroughness of the auditor. Nevertheless, a review engagement instills confidence in the users of the Financial Statements regarding critical areas of the accounts. A review engagement offers a practical alternative for those companies that meet the criteria and are not required to undergo a full audit.
Above is a guest article from our associated audit firm Nikita & Partners. It is drafted only for information purposes. You can contact us for more information you may need.
This is a guest article by our associated specialized accounting firm Asterisk BVI operating bviannualreturn.com. BVIAnnualReturn.com is a specialized BVI website solely focused around the BVI Annual Return requirement and how to assist BVI Companies to comply with this new requirement fast and without overpaying.
BVI Annual Returns are here to stay. Firstly introduced via an order from the BVI Financial Services Commission (FSC) on the 1st of January 2023 requiring all BVI Companies (limited exceptions apply) to prepare and submit an Annual Financial Return with a deadline up to 9 months after the end of the financial year of the BVI Company.
The BVI Annual Return template as released by the authorities consists basically of a simple income statement and balance sheet. Nothing to stress you about, but basic accounting knowledge is required to correctly complete it. The Annual Return does not need to be audited and it can be prepared under any recognised reporting currency your company uses for its operations (not crypto), and in any of the recognised accounting principles (IFRS, UK GAAP, US GAAP etc).
In addition, penalties will apply for late or no submission. Firstly the Company will be deemed as non-compliant therefore you will not be able to obtain a certificate of good standing, as well as penalties will apply.
To continue with, a hot topic of discussion and one we receive many questions for is whether dormant companies are exempted? The answer is No, and this is because even if dormant the FSC still requires the submission of the Return.
Exempted are only listed companies in recognised stock exchanges worldwide, companies which entered liquidation prior to the end of their financial year end, regulated companies which submit financial statements to the FSC (i.e. Approved Manager entities that are not exempted), as well as companies which file their annual tax return to the BVI Inland Revenue Department accompanied by the company’s financial statements.
Another hot question is whether nil submissions are accepted. The answer in most instances is no (depends on the Registered Agent though), because most companies have share capital and at least Registered Agent and Annual Government fees expenses per year. These will need to be disclosed on the Annual Return.
In terms of Financial Year Ends and deadlines the most commonly used is 31 December in which case the deadline for submission is 30 September 2024. This is the most frequently used financial year end and the most recommended. If however for example the financial year end of your BVI Company is 30 June, then the first financial year runs from 1 July 2023 to 30 June 2024 and the Company has 9 months thereafter to make the submission. Its better to inform the BVI Registered Agent of the Company for any different financial year ends.
Finally, for your ease of reference you can see a copy of the return below. This is the official template as released by the BVI Authorities, only with Asterisk branding:
Summary of important things to know by Asterisk BVI:
- You will need to submit an Annual Return (income statement and balance sheet) to your BVI Registered Agent;
- There will be exemptions to this requirement but limited (see above);
- If your company’s financial year is the calendar year, then your first submission will need to be done until 30 September 2024;
- No audit is required;
- You can use the currency in which your company prepares its financial statements;
- There will be penalties for late submission.
On February 21, 2024, the President of the Republic of Cyprus announced that the Council of Ministers has resolved to abolish the annual levy of €350, which was payable to the Department of Registrar of Companies and Intellectual Property of Cyprus by all Cyprus registered companies.
This was further confirmed by the Registrar of Companies through their announcement on 22 March 2024. You can find the official announcement here which is however only issued in Greek.
The annual levy was payable by all Cyprus-registered companies since 2011. Annual Levy for the years 2011 – 2023 is still payable for companies which did not pay yet. What is abolished is the levy for 2024 onwards.
According to the legislation refunds will be given to companies which already paid their 2024 Levy. Information on how to receive the refund can be found in the official announcement link here.
UBO Register – Important Announcement
All companies incorporated or registered under the Cyprus Companies’ Law, Cap 113 must either submit/update Ultimate Beneficial Owner information by 31 March 2024 or declare their exemption based on paragraph 3(1)(a)(b) of Directive AML/CFT112/2021.
Noncompliance will result in financial penalties from 1 April 2024.
From 1 April 2024, all the following actions will be available via the platform, and non-compliance will result in the imposition of penalties as follows:
UBO Update
- Any change to the UBOs must be updated within 45 days from the date the change comes to the attention of the company or its officers/partners.
- Newly incorporated companies must submit UBO information within 90 days from the date of establishment.
UBO Confirmation
- From 1 October to 31 December of each year, all organizations or their officers/partners must confirm the information existing in the UBO Register.
Mismatch
- Any mismatch notifications sent by the Registrar of Companies must be replied to and corresponding action be taken by the companies or their officers/partners in the UBO electronic system within 30 days from the date of receipt of such notification.
Please refer to the department’s announcement by clicking on the link. Please note that this is only issued in Greek.
Feel free to contact us for any further information you may need.
Please see below important update from the Institute of Certified Public Accountants of Cyprus in relation to the announcement of the Cyprus Registrar of Companies for the UBO Register Final Solution of the Electronic System.
With regards to the above issue, please see below a link of Announcements of the Department of the Registrar of Companies and Intellectual Property (Companies Secton) in relation to the commencement of the implementation of the final solution of the electronic system of the Beneficial Ownership Register as of November 14, 2023. The implementation is divided into three phases:
- The first phase covers the period 14/11/2023-31/12/2023 where all companies and partnerships are required to inform/re-register their Beneficial Owners in the ‘Final Solution’, even if they have already done so in the interim solution system. Please note that no financial penalties will be imposed during this period.
- The second phase covers the period 1/1/2024-29/2/2024 and requires those companies and partnerships that did not inform/re-register their Beneficial Owners in the “Final Solution” during the previous phase to do so. It is noted that at this stage financial charges will be imposed.
- During the third phase, which covers a period of 1/4/2024 and thereafter, the provisions of Directive Κ.Δ.Π. 112/2021 as amended enter into force.
It is reminded that, notwithstanding the criminal liability or prosecution of any person, in the event of failure to comply, the corporate or other legal entity and each of its officers shall be subject to a fine of two hundred Euros (€200) and a further fine of one hundred Euros (€100) for each day of continuation of the violation with a maximum charge of twenty thousand Euros (€20,000).
For any clarifications or enquiries related to the Register of Beneficial Owners, you can visit the Register of Beneficial Owners section which contains detailed information on the process of creating and authenticating profiles, submitting BO details, imposition of fines, FAQ’s, guidance, legislation
Please do not hesitate to contact our Asterisk Corporate Services Team for any assistance / guidance you may need on the matter.
