Deemed Benefit of a Non – Cyprus Resident Director or Shareholder or Ultimate Beneficial Owner of a Cyprus Company

Deemed Benefit of a Non – Cyprus Resident Director or Shareholder or Ultimate Beneficial Owner of a Cyprus Company

In continuation to the amendment of article 5(2)(ζ) (prior article 39) of the Income Tax Law, the Tax Office issued an explanatory Circular #14 of 2017 to provide additional explanation on the subject. Our PHS Tax department has summarized the circular and provides you with the most important information on the subject.

According with the explanatory Circular #14 the Tax Office clarifies that the deemed benefit charged to a person that is not a Resident of the Republic and acts as a Director or Shareholder or UBO of a Cyprus Company, in respect to a grant/benefit provided by the Company to him/her or his /her spouse or up to second degree relatives, either as a loan or any other financial facility; is calculated for the entire year, irrespective of the period spent by the individual in the Republic.

The deemed benefit equals nine percent (9%) yearly on the balance of the loan or other financial facility at the end of each month, including cash withdrawals made during the month.

The calculated tax on the monthly benefit is collected and paid in accordance with the Withholding tax on Emoluments Regulations and the tax brackets for individual taxpayers.

The above amendment is effective as from January 1, 2012.