For the purpose of ascertaining the chargeable income, there shall be deducted all outgoings and expenses wholly and exclusively incurred by the company, including:
- Repair of premises, plant, machinery and means of transport
- Ordinary annual contributions paid by an employer to social insurance and approved funds on employees' salaries
- Employer’s contributions to:
Medical fund for employees - 1 % on employee’s remuneration
Provident/Pension fund for employees -10% on employee’s remuneration
- Interest expense incurred to acquire the 100% of the share capital of a subsidiary company, provided that the subsidiary does not have either (directly or indirectly) any assets that are not used in the business. If the subsidiary has either (directly or indirectly) assets that are not used in the business then the interest deduction is restricted to the amount which relates to assets used in the business. This applies for acquisitions of subsidiaries from 1 January 2012.
- New equity introduced into a company as from 1 January 2015 in the form of paid up share capital or share premium is eligible for an annual notional interest deduction (NID). The annual NID deduction is calculated using a reference interest rate on the new equity. The reference interest rate is the yield of the 10 year government bonds (as at December 31 of the prior tax year) of the country in which the new equity is invested in the business of the company plus a 3% premium. The interest rate cannot be lower than the yield of the 10 year Cyprus government bond as at the same date plus a 3% premium. For 2016 the minimum relevant interest rate is 6,685%. A taxpayer may elect not to claim all or part of the NID for a particular tax year. Specific anti-avoidance provisions also apply. The NID deduction cannot exceed 80% of the taxable profit as calculated before applying the NID. In case there are losses, the NID will not be available and this means that the NID cannot create or increase a tax loss.
- Royalty income, embedded income and other qualifying income derived from qualifying intangible assets as provided in the ‘new’ Cyprus intellectual property (IP) box (this provision applies with effect from 1 July 2016)(1): 80% of the net profit as calculated using the modified nexus fraction.
- Royalty income, embedded income and other qualifying income derived from qualifying intangible assets in the ‘old’ Cyprus IP box: 80% of the net profit
- Bad debts of any business
- Expenditure for scientific research
- Donations or contributions made for educational, cultural or other charitable purposes without a limit
- Expenditure for the maintenance of a building in respect of which there is a Preservation Order. Up to €700, €1.100 or €1.200 per square meter (depending on the size of the building)
- Interest in relation to the acquisition of business assets used in the business
- Entertainment expenses for business purposes: Lower of €17.086 or 1% of the gross income of the business
- Contributions to a fund approved under regulations, for educational purposes and maintenance of an individual attending any university, college, school or other educational institution
- Expenses in relation to rents receivable
- Interest relating to a rented property
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