Tax Reform: Experts suggest existing privileges for businesses are maintained, corporate tax raised to 15%

Experts presenting the University of Cyprus' Economics Research Centre (CypERC) recommendations on Cyprus' planned tax reform suggested that existing privileges for businesses be maintained.

The recommendations were presented by Costas Markides and Marios Andreou (pictured above) and Elena Andreou during an event at the Presidential Palace which was also addressed by President Nikos Christodoulides and Finance Minister Makis Keravnos. Other experts also weighed in on the planned tax reform during the event.

The recommendations presented by the experts include the taxation of global income with exemptions/deductions where they exist for tax residents of Cyprus, the deduction of expenses for the production of taxable income, the strengthening of criteria for tax residency for companies (control and management), the deduction for notional interest (NID), the framework for intangible assets (IP Box), the shipping regime, and the 50% deduction for first employment in the Republic, have been recommended, among other things, by the proposed tax reform for businesses.

At the same time, it was proposed to completely abolish deemed residence of dividends, increase corporate tax from 12.5% ​​to 15% and maintain the non-dom regime in combination with its expansion by imposing an annual fee.

In more detail, among the suggestions are also the complete abolition of deemed dividend distribution, the imposition of a 5% withholding tax on actual dividend distribution for tax residents of Cyprus who are also domiciled in Cyprus, and the anti-abuse clause, with the imposition of a withholding tax at a higher tax rate than 5% on disguised dividend distribution based on the Estonian model.

At the same time, an increase in corporate tax from 12.5% ​​to 15% is proposed, as well as anti-abusive measures for "close-structured companies", such as the possibility of lifting the corporate veil and taxing a shareholder as a natural person carrying on a business and the possibility of adjusting salaries to free market prices.

Regarding the green transition and digital transformation, a suggestion is made to choose a combination of super-deductions for expenses/depreciation, accelerated depreciation, discounts for upgrading skills and retraining of personnel, as well as losses created by the above measures to be transferred without restrictions.

Based on the recommendations, the non-dom status is maintained and expanded with the imposition of an annual fee.

(Source: InBusinessNews)