Our UAE and UA partners

 
Ask a question 

Cyprus. Tax treatment of non-returnable capital contributions

The Cyprus Tax Department published an Information Circular (Circular), which clarifies the procedure for taxing non-refundable capital contributions by Cyprus tax payers to companies that are not tax residents of Cyprus.
 
The Circular confirms that Article 33 of the Income Tax Law N.118 (I) / 2002 (as amended) (the Law) will not apply to debit or credit balances obtained from non-refundable contributions to companies that are not residents of Cyprus, provided that a number of conditions are satisfied with full documentary evidence.

The conditions to be satisfied are as follows:
  • The contributor does not have the legal right to demand the return of the amount paid for the non-refundable capital contribution at any time.
  • The return of the non-returnable capital contribution is valid only by reducing the capital or dissolving / liquidating the company. This requirement does not apply in cases where the legislation in the jurisdiction of the receiving company does not require a reduction in capital for the return of capital, provided that the taxpayer collects relevant documentary evidence.
  • Repayment of the non-refundable capital contribution occurs no earlier than two years after the end of the tax year in which the capital contribution was made.
  • The contributor has a direct interest in the capital of the recipient.
  • The recipient is not entitled to tax benefits in the relevant jurisdiction for the estimated costs arising from non-refundable capital contributions.
If all of the above conditions are satisfied, the amount made as a non-refundable capital contribution is considered part of the assets of the company that are not eligible for benefits in accordance with Article 9 and 11 of the Law, and therefore the non-returnable capital must be interpreted in accordance with these provisions.
 
The Circular applies to all non-refundable capital contributions  of companies that are not tax residents of Cyprus, which were registered from January 1, 2017, and replaces any existing tax decisions on this matter.
 
(c) 2007 waltonconsultants.co.uk | Privacy Policy
2nd Floor Office Suite 4 Chartfield House, Castle Street, Taunton, Somerset, England, TA1 4AS

tel.: +44 (0) 1823 423407
Ask a question