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 "Cyprus︀ 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]

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]

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

 

[OffshoreDude]

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]

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

 

[OffshoreDude]

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]

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]

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]

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]

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