Tax treatment of non-refundable capital contributions to companies who are not Cyprus tax residents
On 3 September 2018, the Cyprus Tax Department issued the circular EE-25 in order to provide guidance regarding the tax treatment of non-refundable capital contributions (NRCC) to companies who are not Cyprus tax residents.
The circular states that NRCC will not trigger Article 33 of the Income Tax Law, provided that the following conditions are met:
- The contributor does not have the legal right, at anytime, to request the repayment of the contribution
- The repayment of the contribution can be made only by capital reduction or liquidation of the receiver
- The repayment of the contribution is made 2 years after the end of the year in which the contribution was made
- The contributor has an active participation in the capital of the receiver
- The receiver does not claim Notional Interest Deduction (NID) relating to the NRCC
The circular is applicable from 1 January 2017
