Stamp Duty Diverts Business From Cyprus |
Does stamp duty constitute an obstacle for international business to grow in Cyprus?
According to latest records business is being diverted from Cyprus due to cumbersome rules on stamp duty and, in this case in particular large international business contracts are not being concluded through Cyprus companies, because of the high amounts of stamp duties involved. Stamp duty is applied to all kinds of documents in Cyprus such as receipts, cheques, letters of credit and bills of exchange. Although the amounts on these are small, a big deal would amount to a large increase in transaction costs.
There is also a stamp duty on the issue of share capital and a stamp duty on contracts of 0.15% - 0.2%. CIBA (Cyprus International Business Association) is therefore calling for the abolition of stamp duty on the issue of share capital and a ceiling on stamp duty liabilities in the case of contracts. As for in the case of contracts, until recently, it was obligatory that contracts with a consideration of up to CYP 100,000 (€ 170.860) were subject to a stamp duty of 0.15%, while any amount in excess of CYP 100,000 was subject to a stamp duty of 0.2%. However, on 14 August, 2007, the legislation concerning stamp duty on contracts was amended and now contracts concluded in Cyprus with a consideration of over CYP 5 million (€ 8.543.007) shall be subject to special treatment. Accordingly, such contracts will be subject to a maximum flat stamp duty of CYP 10.000 (€ 17.086). The above mentioned move will significantly reduce the amount of stamp duty payable on large transactions and enhance Cyprus’s attractiveness as a financial centre. It can consequently be concluded that Cyprus can now offer even more additional economic and tax advantages to foreign investors when concluding high-value contracts through Cyprus, in order to capture the vast benefits of its tax regime and its wide double tax treaty network.
Marina Philippou
Democritos Aristidou & Co.Law Firm@2008
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29-05-2009 |
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