10 December 2012 VAT rates increase The House of Representatives has voted for an increase of the VAT rates on the 6th of December 2012. In accordance with the law 167(I)/2012 the following changes have been voted: a. Standard VAT rate increases to 18% as from 14 January 2013 to 12 January 2014. b. Standard VAT rate increases to 19% as from 13 January 2014. c. Reduced VAT rate of 8% increases to 9% as from 13 January 2014. The reduced rates of 5% and 0% remain unchanged.

Income Tax amendments

In an effort to reduce the administrative burden of tax compliance, the House of Representatives has voted for the following changes with Law 163(I)/2012:

a. The number of provisional tax instalments during the year is reduced to 2 (two) instead of 3 (three). The first instalment will be due by the 31 July and the second instalment by the 31 December. b. The number of years for safekeeping of books and records has been reduced to 6 (six) years instead of 7 (seven) from the end of the year they relate to. c. The electronic submission of the Employer’s Return (I.R.7 form) is now mandatory and the due date is extended to 31 July following the end of the tax year.

The above come into effect as from 01 January 2013.

Tax treaty with Portugal

A tax treaty has been signed between Cyprus and Portugal on the 19 November 2012. The treaty is based on the OECD Model and should come into force thirty days after the exchange of ratification notifications. It would then take effect on the 1st January following the ratification date. In November 2011 Cyprus was also removed from the Portuguese "black list" of countries with privileged tax systems.

Important provisions: a. Withholding tax rate on dividends, interest and royalties according to the treaty is 10%. b. The sale of shares in companies holding real estate property, may be taxed in the State in which the property is located.

It should be noted that withholding tax rates can be reduced to 0% as a result of the relevant EU directives. Under Cypriot tax legislation there are no withholding taxes on dividends, interest and royalties (for rights used outside Cyprus) paid to non-tax residents.

WTS World Tax Service Cyprus Ltd is an independent member firm of WTS Alliance, a global tax network providing tax, legal and business consulting services. All legal services are provided through registered law firms in Cyprus. This message is informative and does not constitute professional advice. Copyright © 2012 WTS World Tax Service Cyprus, All rights reserved. You are receiving this email due to past correspondence with WTS World Tax Service Cyprus Ltd Our mailing address is: WTS World Tax Service Cyprus 14 Pireos Street, 1st Floor Nicosia CY-2023 Cyprus