Fund Taxation:
- 12,5% corporate tax rate which is one of the lowest in EU;
- Gains from trading securities are exempted from tax;
- Notional Interest Deduction (NID) for new equity may reduce taxable base for interests received by up to 80% (for company type funds) reducing the effective tax on interest to 2,5%;
- Excluded from tax are dividends received, capital gains arising from sale of property abroad, capital gain from sale of shares of foreign property companies;
- No subscription tax on the net assets of the fund;
- Fund management services are not subject to VAT;
- Each compartment of an AIF, although legally is not treated as a separate entity, for tax purposes is treated as a separate tax payer;
- AIFs having the form of an investment company, can take advantage of the wide double tax treaty network of Cyprus;
- Based on the current Cyprus tax legislation, no permanent establishment is deemed to arise in Cyprus in the following cases:
- Non-Cyprus resident investors investing into Cyprus tax-transparent investment funds; or
- Non-Cyprus investment funds managed from Cyprus.
Non-tax resident investors taxation:
- No withholding tax on dividends distributions;
- The subscription, redemption, conversion or trader of fund’s units exempt from Cyprus stamp duty;
- No capital gains tax on the disposal or redemption of units.*
Tax resident investors taxation:
- Withholding tax of 17% on dividends- if the investor is physical person (nil (0) if legal entity or a non-domiciled physical person);
- The subscription, redemption, conversion or transfer of a fund’s units is exempt from Cyprus stamp duty;
- No capital gains tax on the disposal or redemption of units.*
*Provided that the fund does not hold, either directly or indirectly, immovable property located in Cyprus. However, even it owns immovable property in Cyprus, no capital gains tax arises if the fund is listed on a recognised stock exchange.
This Article provides general information and should not be considered as a legal or tax advice. If you require any further information/clarification please do not hesitate to contact us at info@ctalaw.net
