TAX RELIEF FRAMEWORK FOR CREDIT FACILITIES RESTRUCTURING

On 22nd July 2020, the Tax Department published Circular No.45 which contains clarifications regarding the transfer of immovable property by a related person, in the context of tax relief for credit facilities restructuring.

In accordance with the relevant provisions of the framework under reference, any borrower’s related person is also considered a borrower, as the term “related person” is interpreted in accordance with the provisions of article 33 of the Income Tax Law provided that the disposal and transfer of immovable property, as well as the transfer of rights under a sales contract deposited with the Department of Lands and Surveys is for the benefit of the lender.

The above provision is interpreted to include the transfer of immovable property by a related person directly to the lender, as well as the transfer of immovable property by the related person to a third party, which aims to reduce or repay credit facilities or loans or debts granted to borrowers.

Consequently, the tax relief framework for credit facilities restructuring also applies in cases where the related person of the borrower possesses and transfers immovable property to a third party to reduce or repay credit facilities or loans or debts granted to borrowers.

It should be noted that the case of the guarantor’s related person that transfers immovable property either to the lender or to a third party, is not applicable.

Amendment of the Treaty for the Avoidance of Double Taxation between the Republic of Cyprus and the Russian Federation

Cyprus’ Finance Ministry has expressed satisfaction over the conclusion on 10th August 2020, after extensive negotiations, of the updating of the Treaty for the Avoidance of Double Taxation between the Republic of Cyprus and the Russian Federation.

The Russian side demanded the amendment of two fundamental articles of the Treaty, namely, the tax increase on incomes from dividends and interests to 15% respectively.

The Cypriot side secured, among others, the exemption from the withholding tax of regulated entities, such as pension funds and insurance entities as well as listed entities with specific share rating. Additionally, exemption from the said withholding tax applies on payments of interests from corporate bonds, government bonds and Eurobonds. The Cypriot side also secured the maintaining of the tax withheld for rights at 0%.

The aim of both sides is for the Treaty to be signed in Autumn 2020 so that it will be implemented on 1st January 2021. 

The Russian side assured that it will withdraw the processes for terminating the Treaty. At the same time, it confirmed that the same provisions will also apply to treaties that Russia has concluded with other countries and with effective date also being  1st January 2021, since it is a single budget and tax policy with the aim of raising public income.

It should be emphasised that maintaining the current network of Double Taxation Avoidance Treaties constitutes a priority for the government, and therefore updating them taking into consideration the changing international conditions is indispensable.

Temporary Tax – 2020

English

We would like to remind you that the date of payment of the first installment of your temporary tax for 2020 is 31 July 2020.

Tax provisions on temporary taxation

Every Cyprus company and a physical person with taxable income is required to calculate the estimated profits of the same year and pay the corresponding tax in two equal installments on July 31 and December 31.

If the expected taxable profit declared in the temporary tax return is less than 75% of the company’s final tax profit, then an additional tax of 10% is added to the final tax to be paid.

Profits of 2020

You should have already calculated your profits for 2020 and already paid the first installment of the temporary tax on 31 July 2020.

Assuming the calculation of your profit remains the same, then you need to pay by 31 December 2020 the second temporary tax installment. The amount payable is equal to the amount of temporary tax you paid in July 2020. The relevant tax can be paid online via JCC Smart here (click).

It is noted that late payment of the second installment results in interest at the rate of 3.5% on the amount payable and a 5% extra charge.

Revision of temporary tax return

If you do not pay the first provisional tax installment and/or wish to revise the calculation of your profit upwards (and therefore the corresponding tax), you can do so until 31 December 2020.

Our view

We generally propose the payment of all taxes including temporary taxation within the time limits provided by the Department of Taxation. As you can appreciate, if you have taxable profits but you do not pay the corresponding temporary tax in the same year, there is an extra tax of 10% plus interest and charges.

Contact us

We are at your disposal to assist you with the relevant calculations as well as by completing and submitting the relevant tax returns.

Ελληνικα 

Σας υπενθυμίζουμε πως η ημερομηνία πληρωμής της δεύτερης δόσης της προσωρινής σας φορολογίας για το 2020 είναι τις 31 Δεκεμβρίου 2020.

Φορολογικές πρόνοιες περί προσωρινής φορολογίας

Κάθε Κυπριακή εταιρεία και φυσικό πρόσωπο (εκτός μισθωτών) με φορολογητέα εισοδήματα, υποχρεούται να υπολογίσει τα προσδοκόμενα κέρδη του ιδίου έτους και να προπληρώσει τον ανάλογο φόρο σε δύο ισόποσες δόσεις στις 31 Ιουλίου και 31 Δεκεμβρίου.

Εάν το αναμενόμενο κέρδος που δηλώθηκε στην προσωρινή φορολογία είναι χαμηλότερο από το 75% του τελικού φορολογικού κέρδους της εταιρείας, τότε επιβάλλεται ένας πρόσθετος φόρος σε συντελεστή 10% ο οποίος προστίθεται στο φόρο που πρέπει να καταβληθεί.

Κέρδη 2020

Θεωρητικά έχετε ήδη υπολογίσει τα κέρδη σας για το 2020 και έχετε ήδη πληρώσει την πρώτη δόση της προσωρινής φορολογίας στις 31 Ιουλίου 2020.

Νοουμένου ο υπολογισμός των κερδών που έχετε κάνει παραμένει ο ίδιος, τότε χρειάζεται να πληρώσετέ μέχρι τις 31 Δεκεμβρίου 2020 και την δεύτερη δόση προσωρινής φορολογίας. Το ποσό που θα πληρώσετε είναι το ίδιο με το ποσό φόρου που πληρώσατε τον Ιούλιο 2020. Ο ανάλογος φόρος μπορεί να πληρωθεί ηλεκτρονικά μέσω JCC Smart στον εξής σύνδεσμο

Σημειώνεται πως η μη έγκαιρη εξόφληση της δεύτερης δόσης συνεπάγεται με την επιβολή τόκου προς 3,5% επί του πληρωτέου ποσού και 5% επιπρόσθετη επιβάρυνση.

Αναθεώρηση προσωρινής φορολογίας

Σε περίπτωση που δεν πληρώσατε την πρώτη δόση προσωρινής φορολογίας ή/και επιθυμείτε να αναθεωρήσετε προς τα πάνω τον υπολογισμό των κερδών σας (άρα και τον ανάλογο φόρο), μπορείτε να το πράξετε μέχρι τις 31 Δεκέμβριου 2020.

Η άποψη μας

Γενικά προτείνουμε την πληρωμή όλων των φόρων συμπεριλαμβανομένου και της προσωρινής φορολογίας μέσα στα χρονικά περιθώρια που προβλέπονται από το Τμήμα Φορολογίας.

Όπως αντιλαμβάνεστε, σε περίπτωση που έχετε φορολογητέα κέρδη αλλά δεν πληρώσετε την ανάλογη προσωρινή φορολογία εντός του ιδίου έτους, προκύπτει σημαντικός έξτρα φόρος 10% και επιπλέον σημαντικοί τόκοι και επιβαρύνσεις.

Επικοινωνήστε μαζί μας

Είμαστε στη διάθεσή σας να σας βοηθήσουμε με τους σχετικούς υπολογισμούς καθώς και με τη συμπλήρωση και υποβολή των σχετικών φορολογικών δηλώσεων.