Post by Strouzas on Feb 26, 2009 5:21:43 GMT 4
Cyprus: Deduction of losses and distribution of expenses for taxable income
In order to clarify the tax treatment in cases where losses are claimed or an allocation or apportionment of expenses and discounts is required, the commissioner of income tax has issued a circular which gives analysis of article 13 of the Income Tax Law as well as the case law of the Supreme Court of the Republic of Cyprus.
Losses may be offset against income from other sources for the same tax year or they may be carried forward during subsequent years. Offsetting of the losses is only allowed where had the said loss been a profit, it would have been taxed in accordance with the provisions of the law.
If the taxpayer has income which is either exempted or excluded from income tax either under the provisions of the Income Tax Law or under any other law, (or is subject to a special tax rate under the provisions of the law,) a deduction of allocated expenses or discounts relating directly or indirectly to the income is made from the said income. A deduction of a proportion of overheads and the taxable income is also determined accordingly.
Any losses deriving from a business activity, the income or profits of which are exempted or excluded from income tax may not be offset against income or carried forward in subsequent years.
The abovementioned developments are not enforceable to cases already examined and settled unless an objection has been raised within the provided timelines. This development may be seen as adverse for companies whose income mainly consists of tax-exempt income. Companies that do not have any income subject to tax at the Cyprus level are not anticipated to be affected by the abovementioned provisions. Exempted income from a Cyprus perspective includes gains from the sale of securities and dividend income.
Stavros Strouzas (stavros.strouzas@eurofastglobal.eu)
In order to clarify the tax treatment in cases where losses are claimed or an allocation or apportionment of expenses and discounts is required, the commissioner of income tax has issued a circular which gives analysis of article 13 of the Income Tax Law as well as the case law of the Supreme Court of the Republic of Cyprus.
Losses may be offset against income from other sources for the same tax year or they may be carried forward during subsequent years. Offsetting of the losses is only allowed where had the said loss been a profit, it would have been taxed in accordance with the provisions of the law.
If the taxpayer has income which is either exempted or excluded from income tax either under the provisions of the Income Tax Law or under any other law, (or is subject to a special tax rate under the provisions of the law,) a deduction of allocated expenses or discounts relating directly or indirectly to the income is made from the said income. A deduction of a proportion of overheads and the taxable income is also determined accordingly.
Any losses deriving from a business activity, the income or profits of which are exempted or excluded from income tax may not be offset against income or carried forward in subsequent years.
The abovementioned developments are not enforceable to cases already examined and settled unless an objection has been raised within the provided timelines. This development may be seen as adverse for companies whose income mainly consists of tax-exempt income. Companies that do not have any income subject to tax at the Cyprus level are not anticipated to be affected by the abovementioned provisions. Exempted income from a Cyprus perspective includes gains from the sale of securities and dividend income.
Stavros Strouzas (stavros.strouzas@eurofastglobal.eu)