On April 2013, The House of Representatives has voted new amendments to various tax laws in order to comply with the requirements of the Memorandum of Understanding between the Republic of Cyprus and Troika, in an effort to correct public finances.
The changes introduced relate to:
1. the increase of the corporation tax rate from 10% to 12.5% on any resulting taxable net profits from 1st of January, 2013;
o Taxable net profits consist of any taxable income less any tax allowable expense incurred wholly and exclusively for the production of taxable income.
2. the increase of Special Contribution for the Defense Tax on passive interest income from 15% to 30% which tax is applicable on Cyprus tax resident persons only.
o Passive interest income includes interest received from term deposits in a bank either in Cyprus or abroad, but it does not include interest on current accounts or the interest income received by a financing company engaged in the activity of receiving and granting of loans, since such income is considered as active income and is taxable under Income Tax Law at the prevailing tax rates.