|
Eylem Philippou, Eurofast Global |
Law 112 (I)/2012, has been published in the Official Gazette of Cyprus, amending various provisions of the Income Tax Law of Cyprus.
Deductibility of interest income
The main principle is that for an expense to be deductible from profits/income, it must have been incurred wholly and exclusively for the production of income. Accordingly, expenses that are not wholly and exclusively incurred for the production of income are classified as non-deductible.
Before the amendments, interest incurred for the acquisition of shares in other companies was not treated as tax deductible expense. After the amendments, it is now established that interest expense incurred by a Cyprus parent company in the acquisition of shares (whether directly or indirectly) of a company that is a 100% subsidiary of the parent company is tax deductible if the subsidiary does not own any assets that are not used in the business. In a case where the subsidiary owns aforementioned assets, the deduction will apply proportionally and the interest expense corresponding to those assets will not be tax deductible.
Capital allowances
The annual capital allowance (allowable deduction for depreciation) for the purchase of plant machinery in the tax years 2012, 2013 and 2014 has been increased from 10% to 20% and for industrial and hotel promises acquired in these years, from 4% to 7%.
Group loss relief
The new amendments state that if a parent company incorporates a new company during the year of assessment, the new company will be considered as part of the group. This effectively allows the groups to use the loss relief from the year of incorporation.
The new amendments have retroactive effect from January 1 2012 and aim at further enhancing the competitiveness and status of Cyprus as a financial centre.
Eylem Philippou (eylem.philippou@eurofast.eu)
Eurofast Taxand, Cyprus
Tel: +357 22 699 222
Website: www.eurofast.eu
