New Tax Incentives that aim to boost further Cyprus status as a preferred jurisdiction for start – up and innovative companies, are expected to be presented to the Parliament soon.
The package of tax incentives which takes into account practices that have been successfully implemented by other countries and is specifically targeting the promotion of entrepreneurship and innovation in Cyprus, was approved by the cabinet of Ministers on the 27th of July 2016.
The package approved by the Cabinet of Ministers includes the following:
- Exemption of the investment from the investor’s taxable income, up to a maximum amount of 50% of the taxable income
- Deduction of € 150,000 per year as well as the right of allocation and distribution of the discount up to five years later. In other words, the beneficiary investor has the right to allocate the above proportionally in his/her tax returns
The investment can be made to an investment fund or directly to a business, regardless of whether the business is managed by a legal entity or a natural person.
Most importantly, the Government amended the definition of “innovative business” acknowledging the criticism on the “limiting” nature of the existing definition as it only concerned specific research and development activities. As per an announcement made by Mr. Petrides, the Undersecretary to the president, the new innovative business definition “…is less limiting, allowing more substantive use by young businessmen who have innovative ideas which they can translate into entrepreneurship and commercial products”.
Upon enactment by the House of Parliaments, the above-mentioned tax measures in conjunction with other existing tax and non –tax advantages will create a tax friendly environment for start – up and innovative businesses paving the way for Cyprus to become a hub for start – up businesses.