Tax incentives for investments in innovative businesses.

On January 8, 2020, within the framework of actions to boost entrepreneurship and innovation, the Council of Ministers approved a bill amending the Income Tax Law.  The amendment extends – until June 30, 2021 – the tax incentives given to individuals who invest in innovative businesses.  The investment may be either direct, or, through an investment fund.

The original legislation entered into force on 1 January 2017 and expired on 1 January 2020.  It was one of the elements of the ‘Action Plan for the Policy Statement on Strengthening the Business System in Cyprus’ which was drawn up in 2016.

To date, 39 companies have been approved as qualifying businesses within the existing incentive framework.  The investors in these companies can benefit from the tax incentives.

In order to be eligible to benefit from the scheme, investors must be physical persons who are independent investors who invest, either directly, or through an investment fund, or through an alternative trading platform, in innovative small and medium-sized enterprises (SMEs).

Tax exemptions are subject to the following provisions:

(a) The amount of deductible taxable income may not exceed 50% of that person’s taxable income in the tax year in which the investment is made.

(b) The deduction, to the extent not granted due to the above limitation, may be carried forward and granted for the next five (5) years, subject to the above percentage limitation.  Additionally, the amount deductible may not exceed the amount of one hundred fifty thousand euros (€ 150,000) per year.

For information and useful links on the “Tax Incentives for Innovative Business” Project, please follow the link and contact Constantinos Christofi.