An extremely attractive feature of the Cyprus tax system is the exemption from tax of profits from the sale of securities under the Income Tax Law of 2002.
In December 2008 the Inland Revenue Department issued a long-awaited circular clarifying the definition of "security" qualifying for exemption. The circular defines security much more widely than in the past, to include not only conventional instruments such as shares, bonds, debentures, founder's shares and preference shares, but also options on titles, short positions on titles, futures or forwards on titles, swaps on titles, depositary receipts on titles such as ADRs or GDRs (American depositary receipts or global depositary receipts), index participations where these result in titles, repurchase agreements or repos on titles, participations in companies and units of all kinds in collective investment schemes.
The circular considerably expands the range of financial instruments that can be disposed of without any tax implications in Cyprus, further enhancing the role of Cyprus in international finance and holding structures.
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