New Tax Laws - December 2011
1. “The Value Added Tax (Amendment) (No4) Law of 2011” amends section 17 of the basic law, so as to provide for a vat increase by 2%, from 15% to 17%. According to the new provisions, the new VAT rate shall be applied on 1 March 2012.
2. “The Value Added Tax (Amendment) (No5) Law of 2011” and “The Value Added Tax (General) (Amendment) Regulations of 2011”
Under the said Law, all taxable persons are required to issue an official receipt with regard to any transaction governed by the VAT legislation. The VAT Regulations prescribe the minimum list of items to be included in the official receipt. The new provisions shall be applied on 16 January 2012.
3. “The Pension Benefits of Public Employees and Employees of the Broad Public Sector including Local Authorities (Provisions of General Application) (Amendment) Law of 2011”
The new Law provides for a new definition of the term “public service”, so as to also include all air traffic controllers and all judges holding office in any Court of Justice in Cyprus. It is reminded that judges and air traffic controllers were excluded when the basic law had been approved by the Parliament last August. However, the Chairman and the members of the Public Service Commission are not included in the new definition, since the Pension Scheme for Public Employees does not include them.
4. “The Not Granting of Increments and Cost of living Allowance on the Salaries of Officers and Employees and on the Pensions in Public Sector and the Broad Public Sector Law of 2011”
This new Law provides for a two-year freeze of salaries and pensions in the public and broad public sector which includes increments and cost of living allowance.
5. “The Procedure for Appointment of Casual Employees in the Public and Educational Service (Amendment) (No2) Law of 2011” and “The Public Service (Amendment) Law of 2011”
According to the provisions of the first Law, Directors or Heads of the Departments of Ministries are granted the authority, where necessary, to transfer employees, serving on an indefinite duration basis, to another department or service within the same Ministry and to delegate duties to them. The same authority is granted to Directors with regard to interchangeable staff under the Act amending the Public Service Law.
6. “The Special Contribution (Officers, Employees and Pensioners) of the Public and the Broad Public Sector (Amendment) Law of 2011”
Under this amending Act, the scope of the basic law becomes broader, in order (i) to include all members of the judicial service, the Chairman and the members of the Public Service Commission, as well as all the air traffic controllers; and (ii) to provide that hourly-paid workers in the public sector will be treated as equals to all other public employees with regard to the application of the Law. Moreover, according to the new provisions, the contribution to be paid is amended as follows: Gross salary €2501- €3,500 per month: 2,5%, gross salary €3501- €4500: 3%, gross salary over €4501: 3,5%. Also, it is now provided that the said special contribution shall be deducted from the taxable income of all persons.
7. “The Special Contribution (Employees, Pensioners and Self-Employed Workers) of Private Sector Law of 2011”
This new Law provides for a two-year special contribution to be paid by the private sector employees, as well as by self-employed persons, as follows: gross salary €2501- €3,500 per month: 2,5%, gross salary €3501- €4500: 3%, gross salary over €4501: 3,5%.
8. “The Company Law (Amendment) (No5) Law of 2011”
Section 64 of the basic law, Cap.113, is amended, so as to provide that companies may cancel any paid up share capital, in order to create reserves and to cover losses.
9. “The Special Contribution (Defence of the Republic) (Amendment) Law of 2011”
The basic law was amended, in order to raise the special contribution on dividends from 17% to 20%. The raise refers on income from dividends acquired or considered to be acquired or resulting on the day of the publication of the amending law in the Official Gazette, until the 31st of December 2013.
Also, the basic law was amended, in order:
(i) to hinder the postponement or avoidance of the payment of the defence contribution, via the interference of other companies, between the company that makes the profit and the shareholder; and
(ii) to impose tax on dividends from drawings, withdrawals, loans or other assets being withdrawn from the company by the shareholder or his/her family members - up to the second degree of kinship - or the spouse of the shareholder, when such withdrawals, loans or other assets are considered balance due at the end of each year.
10. “The Income Tax (Amendment) (No2) Law of 2011”It is also provided that any loan granted by a company to a director or a shareholder or their spouse or to members of their family up to the second degree of kinship shall be considered as a taxable benefit.
The new law has amended the Income Tax Law and as a result, the salaries of a person deriving from hired services offered within the tax year, are not exempted from the income tax due, and on that ground contributions to the Social Security Fund, the Redundancy Fund, the Pensions Fund and the Providence Fund shall not be paid for the year for which they are due.