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The Income Tax Law, 2002, No.118(I)/2002
Free translation not legally vetted


THE INCOME TAX LAW OF 2002
No.118(I)/2002, 15.7.2002
ARRANGEMENT OF SECTIONS
Section

PART I

INTRODUCTORY PROVISIONS

1 Short title

2 Interpretation

PART II

ADMINISTRATIVE
APPLICATION OF THE LAW

3 Commissioner of Income Tax

4 Official Secrecy

PART III

IMPOSITION OF TAX

5 Charge of tax

6 Basis of assessment

7 Special periods of assessment

8 Exemptions

9 Deductions allowed

10 Deductions and additions on account

of property used in trade etc.

11 Deductions not allowed

12 Valuation of trading stock on discontinuance of a
business

13 Allowance of losses

14 Deduction in respect of life insurance and


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ARRANGEMENT OF SECTIONS

Section
contributions to pensions and other funds

PART IV
SPECIAL MODES OF TAXATION OF CERTAIN
KINDS OF INCOME
15 Special modes of taxation
16 Insurance undertakings engaged in insurance
business in general class
17 Insurance undertakings engaged in insurance business in
life class
18 Shipping and aircraft businesses
19 Taxation of income of a person from the
rendering of ship management services
20 Pensions from services rendered outside the
Republic
21 Tax on the gross amount of royalties,
premiums, compensation, etc
22 Film rentals, etc.
23 Profits of professional men, artists, etc.
24 Deduction of tax before payment is effected
and remittance of the tax deducted to the
Commissioner
PART V
RATES OF TAX
25 Rates as per the Second Schedule
PART VI
COMPANY REORGANIZATIONS
26 Carry over of balance sheet values in case of
reorganizations
27 Carry over of losses
28 Existing holding in transferring company
29 No taxation of shareholders in case of exchange of
shares


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ARRANGEMENT OF SECTIONS

Section
30 Meaning of the term ˜reorganization™
PART VII
TRUSTEES, AGENTS, ETC.
31 Chargeability of trustees, etc.
32 Chargeability of agent of person residing out of the
Republic
33 Arm™s length principles
PART VIII
RELIEF IN CASE OF DOUBLE TAXATION
34 Double taxation conventions
35 Tax credits
36 Unilateral relief
PART IX
GENERAL POWERS OF COMMISSIONER
37 Power of Commissioner to require particulars to be
furnished
38 Accounts prepared and certified by professional
accountants
39 Loans to directors
PART X
ASSESSMENT AND CHARGE OF TAX IN
RESPECT OF EMOLUMENTS
40 Interpretation
41 Assessment, charge, etc., on emoluments

42 Other provisions of the Law to apply

PART XI

MISCELLANEOUS PROVISIONS

43 Liability to tax of members of United Kingdom

Forces, of Greek and Turkish Forces in the Republic



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ARRANGEMENT OF SECTIONS

Section

and others

44 Regulations

45 Administrative instructions for allowances etc. shall be
published

46 Foreign companies having income from
sources outside the Republic

47 Repeal and savings

48 Date of commencement of the Law
2 FIRST SCHEDULE
List of companies referred to in the definition of
«company» (section 2)

25 SECOND SCHEDULE

Scale of rates of tax payable




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The Income Tax Law, 2002, No.118(I)/2002
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THE INCOME TAX LAW OF 2002,
No. 118(I) of 2002, 15.7.2002


THE INCOME TAX LAW
For the purposes of harmonization with the acts of the European
Union under the title-
(a) «Council Directive 90/434/EEC of 23 July 1990 on the common
system of taxation applicable to mergers, divisions, transfers of
assets and exchanges of shares concerning companies of different
Member States», (‚‚ L 225 of 20/8/1990, p. 1-5),
(b) «Council Directive 90/435/EEC of 23 July 1990 on the common
system of taxation applicable in the case of parent companies and
subsidiaries of different Member States», (‚‚ L 225 of 20/8/1990,
p.6-9), and
(c) «Convention on the elimination of double taxation in connection
with the adjustment of profits of associated enterprises», (‚‚ L 225
of 20/8/1990, p.10-24),
The House of Representatives enacts as follows:


PART I

INTRODUCTORY PROVISIONS
Short title 1. This Law may be cited as the Income Tax Law of 2002.

2. (1) In this Law unless the contrary intention appears -
Interpretaion
«Business» means commercial or manufacturing business,
profession or vocation and includes any other business of a trading
nature;

«chargeable income» means the aggregate amount of that income of
any person from the sources specified in section 5 remaining after
deducting such sums as are permitted by or under this Law;

«Commissioner» means the Commissioner of Income Tax charged
with the administration of this Law as provided in sub-section (1) of
section 3 and includes any officer of the Department of Inland
Revenue authorized by him in this respect;



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«company» has the meaning given to this term by the Companies
Cap.113
9 of 1968 Law and includes any body with or without legal personality, or
76 of 1977 public corporate body, as well as every company, fraternity or
17 of 1979
society of persons, with or without legal personality, including any
105 of 1985
comparable company incorporated or registered outside the
198 of 1986
19 of 1990 Republic and a company listed in the First Schedule; but it does not
41(I) of 1994 include a partnership;
15(I) of 1995
21(π) of 1997
82(I) of 1999
149(I) of 1999
2(I) of 2000
135(I) of 2000
151(I) of 2000
76(I) of 2001.
First Schedule.
«Constitution» means the Constitution of the Republic of Cyprus;

«Corporation tax» means the tax imposed on the income of a
company pursuant to the provisions of this Law;
«Director» means the Director of the Department of Inland
Revenue;
«guardian» when used in relation to an infant person includes the
parent of the infant;

«investment income» means any income which is not derived or
arising from any business, employment, pensions or annuities which
are paid by reason or in connection with a past employment;

«private motor vehicle» means a vehicle falling within sub-
86 of 1972
37 of 1974 paragraph (vi) of paragraph (7) of Regulation 8 of the Motor
58 of 1976
Vehicles and Road Traffic Regulations of 1984 to 2001;
20 of 1978
64 of 1978
72 of 1981
83 of 1983
75 of 1984
72 of 1985
134 of 1989
152 of 1991
241 of 1991
44(π) of 1992
5(π) of 1993


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28(π) of 1993
49(π) of 1994
5(π)of 1996
45(π) of 1996
95(π) of 1996
56(π) of 1998
1(π) of 1999
18(π) of 1999
66(π) of 1999
117(π) of 1999
61(π) of 2000
80(π) of 2000
81(π) of 2000
110(π) of 2000
38(π) of 2001
98(π) of 2001.

«Permanent establishment» means-

(a) A fixed place of business through which the business of an
enterprise is wholly or partly carried on.

(b) The term «permanent establishment» includes especially:

(i) a place of management;

(ii) a branch;

(iii) an office;

(iv) a factory;

(v) a workshop,

(vi) a mine, an oil or gas well, a quarry or any other place
of extraction of natural resources.

(c) A building site or construction or installation project or
supervisory activities constitute a permanent establishment
only if they last more than three months.

(d) Notwithstanding the provisions of paragraphs (a), (b) and (c) of
this definition, the term «permanent establishment» shall be
deemed not to include:


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(i) the use of facilities solely for the purpose of storage,
display or delivery of goods or merchandise belonging to
the enterprise;
(ii) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of
storage, display or delivery;
(iii) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of
processing by another enterprise;
(iv) the maintenance of a fixed place of business solely for the
purpose of purchasing goods or merchandise or of
collecting information, for the enterprise;
(v) the maintenance of a fixed place of business solely for the
purpose of carrying on, for the enterprise, any other
activity of a preparatory or auxiliary character;
(vi) the maintenance of a fixed place of business solely for any
combination of activities mentioned in sub-paragraphs (i)
to (v), provided that the overall activity of the fixed place
of business resulting from this combination has a
preparatory or auxiliary character.
(e) Notwithstanding the provisions of paragraphs (a) and (b),
where a person-other than an agent of an independent status to
whom paragraph (f) applies- is acting on behalf of an enterprise
and has, and habitually exercises, in the Republic an authority
to conclude contracts in the name of the enterprise, that
enterprise shall be deemed to have a permanent establishment
in the Republic in respect of any activities which that person
undertakes for the enterprise, unless the activities of such
person are limited to those mentioned in paragraph (d) which,
if exercised through a fixed place of business, would not make
this fixed place of business a permanent establishment under
the provisions of that paragraph.
(f) An enterprise shall not be deemed to have a permanent
establishment in the Republic merely because it carries business
in the Republic through a broker, general commission agent or



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any other agent of an independent status, provided that such
persons are acting in the ordinary course of their business.
(g) The fact that a company which is a resident in the Republic
controls or is controlled by a company which is not a resident
in the Republic, or which carries on business outside the
Republic (whether through a permanent establishment or
otherwise), shall not of itself constitute either company a
permanent establishment of the other;

«person» includes an individual and a company;

«public corporate body» means a legal person of public law or any
other public corporate body established by law for the public interest
notwithstanding that such body is deemed to be agent, servant of the
state or in consimili casu to servant of the state;

«Republic» means the Republic of Cyprus;

«resident in the Republic», when applied to an individual, means an
individual who stays in the Republic for a period or periods
exceeding in aggregate 183 days in the year of assessment and when
applied to a company, means a company whose management and

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