Isn’t Cyprus planning to increase CIT not "by 2,5%", but actually rather by 20%?

[OffshoreDude]

Hi all,

regarding the recent announcement that Cyprus is thinking of raising the corporate tax rate from 12,5% to 15% (while it isn’t clear yet, if that would only affect businesses with more than 750 million annual turnover), you hear many people say, that this would be just a mere increase "by 2,5%" only, playing it down, pretending to be fine with that, as that would be only a slight increase "of 2,5%".

But isn’t an increase from 12,5% to 15% actually an increase of 20%, if my math is correct?

So actually wouldn’t it be not more precise to say that in reality "Cyprus plans to increase corporate taxes by 20%"?

 

[daniels27]

The whole thing is motivated by the OECD corporate minimum tax of 15% which the US wanted. Hence, the increase to 15% for those companies with 750M turnover. It helps them to have problems elsewhere when distributing dividends, like in Hong Kong, where they would be taxed on dividends again.

But yes, technically speaking, the increase is 20% more revenue. It is like in Germany when they win the football games (or at least the game for third place), they increase the VAT by only 3%, which results in an effective tax inccrease of 18.75%.

 

[OffshoreDude]

The whole thing is motivated by the OECD corporate minimum tax of 15% which the US wanted. Hence, the increase to 15% for those companies with 750M turnover.

So are you confident that Cyprus will only have the increase introduced for such companies with a 750M turnover or more, and that the CIT for companies below that threshold will stay at 12,5%, for now?

 

[WorldCitizen99]

Hi all,

regarding the recent announcement that Cyprus is thinking of raising the corporate tax rate from 12,5% to 15% (while it isn’t clear yet, if that would only affect businesses with more than 750 million annual turnover), you hear many people say, that this would be just a mere increase "by 2,5%" only, playing it down, pretending to be fine with that, as that would be only a slight increase "of 2,5%".

But isn’t an increase from 12,5% to 15% actually an increase of 20%, if my math is correct?

So actually wouldn’t it be not more precise to say that in reality "Cyprus plans to increase corporate taxes by 20%"?

Saying it wil increase by 2.5% or 20% are both correct bc It's the issue of absolute vs relative change and both are valid ways of describing things.

 

[OffshoreDude]

Saying it wil increase by 2.5% or 20% are both correct bc It's the issue of absolute vs relative change and both are valid ways of describing things.

Yes, but to say that "the taxes for companies will increase only by 2,5%" is misleading, because in reality - if that law passes for all companies - their tax burden would be increased by 20%, so that would be not so negligible as some say.

 

[daniels27]

So are you confident that Cyprus will only have the increase introduced for such companies with a 750M turnover or more, and that the CIT for companies below that threshold will stay at 12,5%, for now?

We don't know. But what are the incentives to increase it for all?

 

[OffshoreDude]

We don't know. But what are the incentives to increase it for all?

There are also rumours that at the same time they plan to reduce the SDC from 17% to 5% for the domiciled (Cypriot) citizens, so maybe they try to compensate for the revenue loss resulting from that by increasing CIT to 15%, maybe that's the rationale behind it.

 

[CyprusLaw]

We don't know. But what are the incentives to increase it for all?

The increase will be on all companies, not just for those with over 750m turnover, this was clear from the presentation of the tax reform.

 

[CyprusLaw]

There are also rumours that at the same time they plan to reduce the SDC from 17% to 5% for the domiciled (Cypriot) citizens, so maybe they try to compensate for the revenue loss resulting from that by increasing CIT to 15%, maybe that's the rationale behind it.

These are not rumors. The tax reform was officially presented over 1 month. The proposal is for an increase to 15% corp tax for all companies, and a decrease of the SDC for domiciled individuals. Of course this is just part of the tax reform, a lot of the incentives have remained, there will be clarity on the taxation of cryptos etc

 

[OffshoreDude]

The proposal is for an increase to 15% corp tax for all companies, and a decrease of the SDC for domiciled individuals.

Thats really sad that they plan to increase the CIT tax burden for all companies by 20%, I hope they regain their senses and will make a last minute change to that, by only applying it to 750M+ turnover companies.

And while I always appreciate tax reductions, the decrease of SDC for domiciled individuals makes me wonder, if the non-dom scheme will remain in place, untouched - do you also know if this is the case?

 

[CyprusLaw]

Thats really sad that they plan to increase the CIT tax burden for all companies by 20%, I hope they regain their senses and will make a last minute change to that, by only applying it to 750M+ turnover companies.

And while I always appreciate tax reductions, the decrease of SDC for domiciled individuals makes me wonder, if the non-dom scheme will remain in place, untouched - do you also know if this is the case?

During the presentation they were clear that the tax incentives such as: non-dom regime, IP Box, NID, no CGT on stocks and others, will remain unchanged.