Cyprus: Tax incentives for investors in small and medium sized innovative enterprises

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The Cyprus parliament has recently approved an amendment law in relation to the tax relief for investors in qualifying small and medium-sized innovative enterprises which is entered into force on 1 January 2017.

According to approved law which adds a new section 9A, a qualifying investor that makes a risk-finance investment in an innovative small and medium-sized enterprise (SME) may deduct the costs of the investment from taxable income. But the deduction can be a maximum amount of 50% of the taxable income or €150,000, whichever is lower. Any cost above the 50% limit may be carried forward for deduction against the taxable income of subsequent years, for a maximum of five years.

In order to be a qualifying investment, investors are required to meets the conditions set out in article 21(5) of Commission Regulation (EU) 651/ 2014 of 17 June 2014. To be considered innovative, the company must submit an application to the authorities along with a statement from an independent auditor confirming that 10% of its operating capital spent on research and development in at least one of the last three years.

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