Tax And Red Tape Hinder Investment In Cyprus, Says CIBA

by Lorys Charalambous, Tax-News.com, Cyprus

25 August 2005

Complex and unhelpful rules on stamp duty, taxation, regulation, residency and work permits are just some of the factors which are deterring international business from investing in Cyprus, according to the Cyprus International Business Association.

“Large international business contracts are not being concluded through Cyprus companies, precisely because of the high amounts of stamp duties involved,” CIBA said in its regular ‘Intercom’ report for members, the Financial Mirror reported.

In Cyprus, stamp duty is applied to a variety of documents, such as receipts, letters of credit, cheques and bills of exchange. While the individual amounts are small, the transaction costs can soon mount up in particularly large and complex business deals, and CIBA is calling on the government to abolish stamp duty on the issue of share capital and apply a ceiling on the amount of stamp duty paid on contracts.

CIBA is also calling for: a review of withholding tax on dividends whereby a firm pays a 15% tax on a deemed 70% profit distribution if it has not distributed within two years; a reduction in the top rate of income tax to 25%; motor costs to be tax deductible; and a revision of the '90-day' rule on residency, which the organisation believes has become too complex.

Other obstacles that CIBA believes deter foreign investment are rules on company reorganisations; CyTA's restrictive deposit requirements for telecoms connections; the Central Bank's "burdensome" reporting requirements; and "unacceptable" delays in the processing of work permit applications for skilled workers since Cyprus' accession to the European Union.

"The International Business Sector has swallowed the increase in corporate taxes, the obligations to contribute to social insurance and the abolition of almost all financial advantages for expatriate staff because in spite of these, the involved companies were able to continue to carry out their daily business. The present complications however could be the legendary final straw for a number of companies," CIBA warned.

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