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Новости PPB INC LTD об изменениях в налоговом законодательстве

APPENDIX A

COMPARATIVE TABLES

LEGISLATION IN FORCE – TAX REFORM
DIRECT TAXATION

TABLE 1: INCOME TAX PROVISIONS 2002, 2003 & 2004

No.PROVISIONIN FORCEREFORM
1Charge of taxSection 5
The income of any person «accruing in, derived from, or received in the Republic” and in certain cases the income deemed to be derived in the Republic is taxed in Cyprus.

From the year of assessment 2003

Section 5

Resident persons (individuals and companies) are taxed in Cyprus on their world–wide income whereas non-residents are taxed on Cyprus source income only.

2Definition of “resident in the Republic”Not included.

From the year of assessment 2003

Section 2

“Resident in the Republic” when applied to an individual, means an individual who stays in the Republic for periods exceeding in the aggregate 183 days in the year of assessment and when applied to a company, means a company whose management and control is exercised in the Republic.

3Rates of tax for individuals

Second schedule

Chargeable incomeRates of tax
Up to £6.000Nil
£6.001-£9.00020%
£9.001-£12.00030%
£12.001 + 40%

Second schedule

For the year of assessment 2002
Chargeable incomeRates of tax
Up to £9.000Nil
£9.001-£12.00030%
£12.000+40%
For the year of assessment 2003
Chargeable incomeRates of tax
Up to £9.000Nil
£9.001-£12.00020%
£12.001-£15.00025%
£15.000+30%
For the year of assessment 2004
Chargeable incomeRates of tax
Up to £10.000Nil
£10.001-£15.00020%
£15.001-£20.00025%
£20.000+30%

 

4.

 

Corporation tax rates

 

Second schedule

Normal Corporation tax rates

Chargeable income         Rates of tax

Up to £40.000                    20%

£40.001 +                          25%

 

Reduced Corporation tax rates

Applicable to regional bus companies and companies whose shares are listed on the Cyprus Stock Exchange for the first time, for a period of 4 years.

 

 

 

 

 

 

 

Section 34(2)

Companies are taxed with an additional rate of 10% on the reduction of their chargeable income due to losses brought forward, investment allowances and depletion allowances for mines.

 

Section 28A

Special corporation tax rate 4,25% for international business entities either incorporated in the Republic, irrespective of management and control, or registered in the Republic under Section 347 of the Companies Law and having their management and control in the Republic.

 

Section 8(y)

The profits of international business entities registered in the Republic under Section 347 of the Companies Law and not having their management and control in the Republic, are completely exempt from tax.

 

 

Second schedule

For the year of assessment 2002

A 10% windfall tax is introduced for semi-government organizations.

 

From the year of assessment 2003

All companies, including international business entities without restrictions regarding their activities, are subject to a uniform tax rate of 10% except for semi-government organizations, which are taxed at 25%. A windfall tax of 5% is introduced for chargeable income in excess of £1 million for the years of assessment 2003 and 2004.

 

 

 

 

10% additional tax is abolished as from 2003.

 

 

 

 

Section 46-Grandfather clause

The existing international business entities can exercise the option to continue to be taxed at the rate of 4,25% till the year of assessment 2005.

 

 

 

 

Abolished.

 

5.

 

Taxation of Dividends

a) Withholding of tax

 

 

 

 

 

 

 

 

 

 

b) Final tax

 

 

 

 

 

 

 

 

 

 

 

 

 

c) Deemed distribution of dividends

 

Section 35

On distribution of dividends, tax is withheld at the rate of 20%(with some exceptions) or in accordance with tax treaties in force. No tax is withheld when dividends are paid to foreign companies.

 

Section 28A(3)

In the case of international business entities there is no withholding of tax on dividends and no additional tax on shareholders.

 

 

Section 33A

Individuals may opt to be taxed separately on their dividends at the rate of 20%, thus the tax withheld becomes final tax.

 

Section 8(l)

Individuals who choose to be assessed at the normal tax rates, are entitled to an exemption of £1.200 in respect of dividends from shares listed on the Cyprus Stock Exchange (CSE).

 

Second Schedule

No corporation tax is imposed on dividends.

 

Section 47

The Commissioner has the power, under certain conditions, to consider that 65% of the profits of a company controlled by not more than 5 persons, is distributed.

 

From the year of assessment 2003    

 

Section 8(20)

Dividends are exempt from income tax.

Dividends are subject to special contribution for the defence.

(Refer to No. 1.8 of Table 2)

 

 

 

 

 

    

 

     

 

 

 

 

 

 

 

 

 

 

 

Abolished

(Refer to No. 1.8 of Table 2)

 

 

 

 

6.

 

Taxation of interest

 

Section 5(1) (d) and Section 8(j) & (k)

The income of individuals and companies from interest is taxed at the normal tax rates, except for:

8(j)  the income of individuals and their dependants from                        Cyprus Government Securities which is completely exempt from tax, and

8(k) the interest derived by individuals from debentures listed on the CSE or deposits or savings accounts with, any bank or co-operative savings bank operating in the Republic which is exempt up to £600.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Section 5(2) and 28C(3)

Special mode of taxation for investment income remittances to Cyprus: amounts exceeding £2000 taxed at 5%.

 

For the year of assessment 2002

Section 8 (k) replaced

In the case of corporate bodies, 20% of the interest earned, and in the case of individuals and their dependants £600, as well as 50% of the amount of interest in excess of £600, is exempt from tax.

 

Interest is subject to special contribution for defence. (Refer to No. 1.9 of Table 2)

 

From the year of assessment 2003

Section 8 (19)

The total income of an individual from interest and 50% of the income of a company from interest is exempt from tax.  The interest derived by a person from the usual carrying out of his business including interest closely connected with the ordinary carrying out of the business is not considered interest but profit.

 

Interest is subject to special contribution for the defence. (Refer to No. 1.9 in Table 2)

 

 

Abolished

 

7

 

Tax Treatment of Losses

 

a) Losses carried forward

 

 

 

 

b) Group Relief

 

 

 

Section 15

The losses that cannot be set off against other income of the same year with some exemptions are carried forward and set off against the income of the next 5 years.

 

Section 15(5)

 Though provided for in the Law, in the absence of Regulations and in accordance with a decision of the Supreme Court, no group relief is allowed.

 

 

 

 

From the year of assessment 2003

Section 13

The 5 year restriction for the carry forward of losses is abolished.

 

 

 

Section 13(4)-(8)

Group relief granted.

 

8.

 

Reorganizations

 

No provision for tax relief in the case of mergers and acquisitions.

 

From the year of assessment 2003

PART VI

Sections 26-30

Introduced provisions to comply with EU directive 90/434/EEC for mergers and acquisitions

 

 

9.

 

Entertainment expenses

 

Section 13(id)

Entertainment expenses, except those incurred by public companies, are deductible subject to conditions set out in Regulations. In the absence of Regulations, IRD applies the “wholly and exclusively” criterion. Time consuming and ineffective process.

  

 

From the year of assessment 2003

Section 11(12)

No such expenditure over 0,50% of the business turnover or £5.000, whichever is the lower, is allowed.

 

10.

 

Private saloon cars expenses

 

Section 13(e)

“Wholly and exclusively” criterion applied. Time consuming and ineffective process.

 

 

From the year of assessment 2003

Section 11(13)

Such expenses are not allowed.

 

11.

 

Taxation of profits or dividends of any business carried outside the Republic by Cypriots residents in the Republic

 

 

Section 8(w)

90% of the profits or dividends imported into the Republic is exempt from tax.

 

From the year of assessment 2003

Section 36(3)

Profits of a Permanent Establishment outside the Republic are exempt from tax, subject to conditions.

 

12.

 

Professional services abroad

 

Section 8(v)

60% of the profits remitted to the Republic are exempt form tax.

 

From the year of assessment 2003

Abolished due to negative decision of Commissioner for Public Aid.

 

13.

 

Exemption for investment in the first issue of shares listed on the Cyprus Stock Exchange (CSE)

 

Section 8 (z)

Exemption granted under certain conditions

 

From the year of assessment 2003

Abolished

 

14.

 

Reduced tax rates for profits from exports.

 

Section 28£

50% of the normal rates applicable to such profits for locally produced goods

 

 

 

From the year of assessment 2003

Abolished. Negative decision of Commissioner for Public Aid.

 

 

15.

 

Investment allowances and special tax incentives.

 

Section 12(2)(b)- (h)

Section 8 (ab) & (ac)

Investment allowances and special tax incentives are granted for certain businesses & industries e.g. hotel, mining, farming and auxiliary tourist projects.

 

 

 

From the year of assessment 2003

 

These incentives are not compatible with EU State Aid Rules and are abolished.

 

 

16.

 

Exemption to encourage the importation of foreign money capital

 

Section 10

(1) Interest on foreign money capital imported into the Republic and deposited with a local bank is exempt from tax.

(2) The interest on foreign money capital borrowed by a person and invested in fixed assets contributing to the economic development of the Republic is exempt from tax with the approval of the Minister of Finance.

 

 

From the year of assessment 2003

Abolished

 

 

Abolished. Negative decision of Commissioner for Public Aid.

 

 

 

 

 

 

17.

 

Reduced tax rates for Foreign employees of international business entities and of companies situated in the Larnaca Industrial Free Zone.

 

Total exemption for salaried services abroad

 

Section 28£(1)&(2)

These employees are taxed at 50% of the normal rates for services rendered in the Republic and at 10% for services outside the Republic, if not paid through the Republic, otherwise they are exempt from tax completely

 

 

Section 8(x)

The whole amount of foreign exchange imported into the Republic for salaried services outside the Republic is exempt from tax.

From the year of assessment 2003

Section 8 (21)

20% exemption of emoluments or £5000, whichever is the lowest, granted in the case of non – residents starting employment in the Republic.  Applicable for 3 years.

 

 

Section 36(5)

Emoluments for services rendered outside the Republic for a total period exceeding 90 days in the year of assessment, to a non-resident employer or a PE abroad are exempt from tax.

 

18.

 

Allowances for spouse, children, old age and displaced individuals.

 

Sections 16, 17, 18 & 22

£       £500 for every child up to 18 years old or serving in the National Guard

£       £1500 for every child receiving third level education in the Republic, the tax saving not exceeding £300

£       £500 for spouse

£       £1500 for individuals over 65 years old, the tax saving not exceeding £300

£       £300 for displaced individuals with annual income up to £10.000

 

Note: The allowances for children and spouse are apportioned between husband and wife.   

 

 

For the year of assessment 2002

Sections 17, 18 &22 deleted

Allowances granted only for children.

 

From the year of assessment 2003

All allowances are abolished and replaced with a scheme of grants.

The allowances in respect of contributions to the social insurance fund, to provident funds, pension schemes, medical schemes, the general medical scheme, as well as premiums paid for life insurance policies, are still granted.

Contributions to Unions and professional subscriptions are deductible.  

 

 TABLE 2: SPECIAL CONTRIBUTION FOR THE DEFENCE

 PROVISIONS 2002, 2003

 

NO

PROVISION

CURRENT REGIME

TAX REFORM

 

1.

 

 

 

Liability to pay special contribution

 

Section 3

 

 

Section 3

 

 

1.1

 

Employees

 

(2)(a) at 2% of their emoluments

 

 

Abolished as from 1.7.2002.

 

1.2

 

Employers

 

(2)(b) at  2% on their employees£   total emoluments

 

Abolished, as from 1.1.2003 introducing an identical contribution to the Social Cohesion Fund.

 

 

1.3

 

Self-employed persons

 

(2)(c) at  2% on their emoluments

 

Abolished as from 1.7.2002.

 

 

1.4

 

Pensioners

 

(2)(d) at 2% on their  pensions and / or annuities over £3000 annually.

 

 

Abolished as from 1.7.2002.

 

1.5

 

Persons holding or exercising an office in the Republic

 

 

(2)(e) at 2% on their emoluments

 

Abolished as from 1.7.2002.

 

1.6

 

Companies

 

(2)(i) at 3% on profits from  any commercial, industrial agricultural business in the Republic

 

 

Abolished as from 1.1.2003.

 

1.7

 

Other corporate bodies including semi-government organizations

 

 

(2)(j) at 3%  on their income

 

Abolished as from 1.1.2003, retained only for semi-government organizations at 3%.

 

 

1.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

1.9

 

 

Persons receiving Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Persons receiving or credited with interest

 

 

 

 

 

 

 

 

 

 

 

 

(2)(f) at 3% on dividends received from companies registered in the Republic.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)(g) from any source in the Republic at 3%

As from 1.1.2003

(2)(a) The rate increases to 15% and only persons resident in the Republic are liable.  Companies resident in Cyprus are exempt in respect of dividends received from other Cyprus resident companies.  The exemption is extended, subject to conditions to dividends form non – resident companies.

 

(3)   A company resident in the Republic is deemed to have distributed 70% of its profits arising in the year of assessment, except for the profits attributable to non – resident shareholders, after the reduction of such profits by the corporation tax paid or payable thereon, in the form of dividends to its shareholders as at the end of two years from the end of the relevant year of assessment.

 

(4)  The amount of deemed dividends is reduced by any actual dividends declared during the two year period and for actual distributions after the two years, the dividends are reduced by the deemed dividends.

 

(8)   In the case of reduction of capital of a company, any amounts paid or payable to the shareholder, to the extent of undistributed chargeable income of any year before the deduction of losses from previous years, shall be deemed to be dividends distributed liable to special contribution, after deduction of already deemed distributed dividends as per sub – section (3).

 

As from 1.7.2002

(2)(c) The rate is increased to 10%, except for interest falling under paragraph (d), and only persons resident in the Republic are liable.     

          It is provided that an individual whose annual total income does not exceed  £7000 is entitled to a refund  of 7%.

 

 (2)(d) Interest of individuals from saving bonds or development bonds or from deposits with the  Housing Finance Organization as well as interest earned by provident funds is liable to special contribution at 3%.

 

As from 1.1.2003

Two new provisions inserted in (2)(b), previously (2)(c):

 

 

 (i) Interest of a person from the ordinary carrying out of his business, including interest  closely connected with the ordinary carrying out of the business  is not considered as interest for the purpose of this paragraph but profit

 

 (ii) interest deemed to be derived by a company under section 39 of the Income Tax Law is liable to special contribution.

 

 

2

 

Relief in respect of foreign tax paid on income liable to special contribution

 

No specific provision, tax relief is granted in accordance with tax treaties in force.

 

Section 3 (10)

To comply with EU Directive 90/435/EEC for parent and subsidiary companies, tax relief in respect of foreign tax paid is introduced.

 

 

NOTE: The regime currently in force continues to apply to rents.

 

TABLE 3: CAPITAL GAINS TAX (AMENDMENT) LAW OF 2002

 

WITH EFFECT AS FROM 1.1.2003

 

NO

PROVISION

CURRENT REGIME

TAX REFORM

 

1

 

Reorganizations -

Exemption of profit from the disposal of property or the transfer of shares

 

No provision

 

Section 10 (h) and (i)

With the addition of new paragraphs (h) and (i) in Section 10, an exemption from  tax is provided for gains from the disposal of property or the transfer of shares due to reorganizations, to accomplish harmonization with EU Directive 90/434/EEC for mergers and acquisitions.

 

 

 

2

 

Definition of Terms

 

“reorganization”

 

 

«property»

 

 

 

 

 

Section  2

 

Not Defined

 

 

Also includes immovable property outside the Republic in the case of persons residing or ordinarily residing in the Republic

 

Section 2

Defined in accordance with Income Tax Law

Confined to immovable property in the Republic for all persons.

 

 

 

 

 

«company»

 

«persons»

 

 

 

Definitions amended to comply with the definitions under the Income Tax Law.

 

 

 

 

3

 

Exemptions

 

Section  5(3)

No tax on gains of Cypriot expatriates and international business entities on gains from the disposal of property outside the Republic

 

Section 5(4)

As per Council of Ministers£ decision no tax on gains from the disposal of shares listed on the CSE

 

 

 

Against State Aid Rules, could either be abolished or extended to all persons.  Second option adopted.

 

Section 5(3)

The exemption extends to shares listed on any recognized Stock Exchange.

 

TABLE 4: STAMP DUTY (AMENDMENT) LAW OF 2002

 

WITH EFFECT AS FROM 1.1.2003

 

 

NO

PROVISION

CURRENT REGIME

TAX REFORM

 

1

 

Documents chargeable with stamp duty

 

Section 4(1) para. (iii) of provision

Transactions entered into by international business entities in the ordinary course of their business are not chargeable with stamp duty.

 

 

 

Against EU State Aid Rules. Abolished.

 

2.

 

 

 

 

 

Documents chargeable with stamp duty

 

 

 

 

 

Section 4

No exemption for documents relating to reorganizations.

 

New Section 4£

New Section introduced to exempt from duty the transactions relating to reorganizations to comply with EU Directive 90/434/EEC for mergers and acquisitions.

 

3.

 

 

Power of the Council of Ministers to exempt, compound or freeze stamp duty

 

Section 10

Power may be exercised in cases of issue of bonds, debentures, or other marketable securities by companies or other legal persons, and in cases of transfer of such bonds, debentures, or other marketable equities 

 

 

 

Abolished due to negative decision by the Commissioner for Public Aid.

 

  

TABLE 5: ASSESSMENT AND COLLECTION OF TAXES (AMENDMENT) LAW OF 2002

 

 

WITH EFFECT AS FROM 1.1.2003

 

 

NO

PROVISION

CURRENT REGIME

TAX REFORM

 

1

 

Official Secrecy

 

Section 4(4)

Official secrecy does not prevent the disclosure of information to the Competent Authorities of other States if such information is required in accordance with tax treaties in force.

 

Section 4(4)

Extended to allow disclosure of tax information to Member States for harmonization with EU Directive 77/799/EEC for mutual assistance in the field of direct taxes.

   

ED/SV COMPARATIVE TABLES