Cyprus is an island country located in the Eastern Mediterranean, situated south of Turkey, west of Syria and Lebanon, northwest of Israel, north of Egypt, and southeast of Greece.
It is the third-largest and third-most populous island in the Mediterranean, with a population of approximately 1.2 million people as of 2022. The island has a rich history, having been inhabited for thousands of years by various civilizations, including the Greeks, Romans, Byzantines, and Ottomans.
Cyprus has seen significant economic growth in recent years, driven by various factors including tourism, real estate, and services sectors. The tourism revenue in 2023 notably surpassed the record set in 2019, indicating a robust recovery in this sector. However, the country faced economic challenges due to the COVID-19 pandemic, particularly in its tourism and hospitality sectors. To mitigate these impacts, Cyprus implemented financial support packages for businesses and individuals and introduced incentives to stimulate recovery in affected sectors. These measures aimed to stabilize the economy, protect jobs, and promote growth.
The most recent significant changes to Cyprus's tax legislation involve amendments to the country's corporate tax laws. In particular, Cyprus introduced a series of amendments to its tax laws in alignment with international tax standards and to enhance transparency and compliance.
One notable change is the amendment to the Cyprus tax residency rules, which now require companies registered in Cyprus to demonstrate substantial economic activities within the country to qualify for tax residency. This change aims to prevent the inappropriate use of Cyprus entities for tax avoidance purposes and ensure that companies benefiting from Cyprus's low tax rates have a genuine connection to the country.
Another significant amendment relates to the introduction of the EU Anti-Tax Avoidance Directive (ATAD) into Cyprus's tax legislation. The ATAD aims to combat tax avoidance practices within the EU by introducing measures to neutralize the effects of hybrid mismatches, limit interest deductions, and prevent tax treaty abuse.
These changes are part of Cyprus's broader efforts to strengthen its tax system, enhance transparency, and comply with international tax standards, particularly in response to EU and OECD initiatives aimed at combating tax evasion and aggressive tax planning.
