The island has adopted a traffic-light system for EU member states and third countries such as Britain, Russia and Israel that are among its main feeder markets.

In an announcement earlier this week, the Ministry of Transport said that the existing category system will be replaced by the same traffic-light system adopted by the European Centre for Disease Control (ECDC), whereby countries are classed as green, orange or red, with an added grey category for arrivals requiring a special permit.

EU member states and countries in the European Economic Area (Iceland, Liechtenstein, Norway) including Switzerland, will be sorted into the green, orange or red categories according to their epidemiological data.

In addition, the Ministry of Health will be evaluating data from third countries (United Kingdom, Russia, Ukraine, Israel, Lebanon, United Arab Emirates, Jordan, Saudi Arabia, Egypt, Belarus) as well as those flagged by the ECDC as third countries to determine the category in which they should be classified.

From 1 April, Serbia, Qatar, Bahrain, United States, Armenia and Georgia will be added to the list.

Countries not included in the above list will be placed in the grey category.

In simple terms, the new system will roughly correspond to the A-B-C system currently in place in Cyprus.

The new categories, which will go into effect on March 1, are as follows:

Green Category

This category will include countries deemed low-risk by the health ministry according to their epidemiological data.

From March 1-31, passengers coming from countries in the Green category will be entitled to a free PCR laboratory test on arrival covered by the government.

From April 1, there will be no restrictions.

Orange Category

Passengers coming from countries in the orange category will be required to have a laboratory test within 72 hours before departure and to have a certificate proving a negative PCR test.

Red Category

Passengers flying from countries in the red category will be required to have a PCR test up to 72 hours prior to their departure for Cyprus, and will need to undergo a second PCR test upon arrival.

No self-isolation will be required for those with negative results.

Grey Category

This category will concern countries not included on ECDC lists and those with unreliable epidemiological data.

Individuals coming from countries in the grey category will need to obtain a special permit to enter Cyprus.

They would also be required to enter compulsory self-isolation in accordance with the ministry of health’s instructions.

Cypriot citizens, persons lawfully residing in the Republic of Cyprus and European citizens will be exempt from having to obtain a permit if flying from a country in this category.

The Ministry of Transport also announced this week that it was extending until March 31 the mandatory seven-day quarantine of arrivals from the United Kingdom at a facility under the supervision of health authorities. That practice has been in place for British arrivals since December due to the new coronavirus variant, which was first detected in the UK.

Country codings would be reviewed regularly.

In particular, during the period of January – December 2020, arrivals of travellers reached 1,161,079 compared to 5,777,029 in the corresponding period of 2019, recording a decrease of 79.9%. The departures of travellers during the same period decreased by 80.1%.

In December 2020, the arrivals of travellers reached 30,099 compared to 273,714 in December 2019, recording a decrease of 89.0%.

The decrease is mainly attributed to the drop in the arrivals of tourists (91.2%) as well as to the decrease in the return of residents of Cyprus (87.6%). Concerning the departures of travellers from the island, a decrease of 88.6% was recorded in December 2020 as compared to the corresponding month of the previous year.

CyStat notes that during the period 15 March and 8 June 2020, an entry ban in the Republic of Cyprus, was imposed on several categories of persons, including tourists, as part of the measures taken to prevent the spread of the coronavirus pandemic (Covid-19).

Meanwhile, according to the World Tourism Organisation (UNWTO), global international tourist arrivals (overnight visitors) declined by 70% in the first eight months of 2020 over the same period of last year, due the Covid-19 travel restrictions.

International arrivals plunged 81% in July and 79% in August, traditionally the two busiest months of the year and the peak of the Northern Hemisphere summer season.

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“This proposal therefore has negative consequences for both the Dutch and Russian businesses,” Raus pointed out, adding that “various Dutch companies – both listed and non-listed – are developing activities in Russia and vice versa. Both Russia and the Netherlands benefit from retaining these economic activities.”

Russia proposed increasing the tax on dividends and interest for Russia-focused companies registered in the Netherlands to 15%, following successful deals with Cyprus, Luxembourg and Malta earlier this year on very similar terms.

The Netherlands is considered one of Cyprus’ main competitors in the International Business Centers arena and a prolonged impasse or failure to reach an agreement can only benefit the island.

Last week, Russia’s Finance Ministry announced that it had begun to develop a bill to denounce the tax agreement with the Netherlands. The department noted that before that, the parties had passed several rounds of negotiations to amend the agreement on the avoidance of double taxation in terms of increasing the withholding tax to 15% in respect of dividends and interest.

The Ministry announcement added that the conditions Russia offered the Dutch side are similar to those that had already been agreed with Cyprus, Luxembourg and Malta, but the negotiations were unsuccessful.

In turn, the Russian side did not support the approach to changing the agreement proposed by the Netherlands, since it provided for the preservation of separate channels for the withdrawal of funds from the country.

According to the Russian Finance Ministry, under the current agreement, significant resources were withdrawn to the Netherlands in the form of interest and dividend payments. The volume of such payments amounted to more than 457 billion rubles ($6.2 bln) in 2017, more than 412 billion rubles ($5.6 bln) in 2018 and more than 339 billion rubles ($4.6 bln) in 2019.

The Dutch side insists that it has made “constructive proposals to preserve the tax treaty for real economic activities whilst preventing access to activities that do not contribute to the economy in line with the Dutch policy to combat tax avoidance,” adding that discussions on the revision of the tax treaty are still ongoing.

The agreement was reached following negotiations between the two countries’ Finance Ministries on 10 August.

15% WHT on Dividend and Interest payments

According to the agreement reached, the existing Withholding Tax (WHT) rates on dividend and interest payments made from Russia to Cyprus will increase to 15% subject to certain exceptions noted below.

Exceptions from the 15% WHT

The two countries have agreed that a 5% WHT should apply, where the recipient/beneficial owner of a dividend is:

• a regulated entity such as a pension fund or insurance undertaking;
• a company the shares of which are listed on a registered stock exchange (subject to conditions);
• the Government or a political subdivision or a local authority;
• the Central Bank.

In addition, the two countries have agreed that no WHT shall apply on interest payments if the beneficial owner is:

• an insurance undertaking or a pension fund;
• the Government or a political subdivision or a local authority;
• the Central Bank;
• a banking institution.

Furthermore, no WHT shall apply in respect of interest earned on the following listed bonds:

• corporate bonds;
• government bonds and
• Eurobonds.

Finally, where the beneficial owner of the interest is a company whose shares are listed on a registered stock exchange (subject to conditions), the WHT shall not exceed 5%.

Nil WHT on Royalty Payments

The nil WHT on royalty payments from Russia to Cyprus will not change.

Cyprus Withholding Tax Rates Remain at 0%

Cyprus will continue to apply no withholding tax on dividend and interest payments to non-residents of Cyprus as per the local domestic legislation.

Effective Date

The intention of both countries is for the revised WHT rates to go into effect from 1 January 2021, through the signing of a protocol amending the existing tax treaty over the next few months.

Malta and Luxembourg have also agreed to amend their respective DTTs with Russia and raise the tax rates on interest and dividends from Russia to 15% while negotiations are now ongoing with The Netherlands with the exact same terms.

As always, the Taxation Department of Costas Tsielepis & Co Ltd is at your disposal should you require any further information or clarifications on this or any other tax issue.

Data published earlier this week by the Central Bank of Cyprus (CBC), show that total deposits in June 2020 recorded a net increase of €106.4 million, compared with a net decrease of €30.8 million in May 2020.

The annual growth rate stood at -0.7%, compared with -0.8% in May 2020. The outstanding amount of deposits reached €47.8 billion in June 2020.

However, the CBC added that total loans in June 2020 exhibited a net increase of €264.7 million, compared with a net increase of €35.2 million in May 2020. Nevertheless, the outstanding amount of loans decreased by €568.1 million in June 2020 and reached €32.2 billion.

The difference between the net change and the change of the outstanding amount of loans is attributed to reclassification, revaluation, exchange rate or other adjustments, the CBC said.

The annual growth rate stood at -4.0%, compared with -4.4% in May 2020.

The CBC also noted that the above changes in loans were positively affected by the suspension of instalments related to loans from MFIs to households and non-financial corporations amounting to €10.5 billion, according to a Covid-19 induced Decree on the suspension of loan instalments by the Minister of Finance.

The website was redesigned, rebranded and rewritten from the ground up. It features an all-new E-Library, making searching and finding information easier, faster and more intuitive. The website is also easier to navigate, it’s more search engine friendly and is fully integrated with the company’s social media.

The all-new website also incorporates the latest website technologies, securities and safeguards and is fully compatible with mobile devices, including mobile phones and tablets.

Come on in!

The Tax Department launched the Portal with an announcement on its website, in which it outlines its purpose, features and access method.

The Tax Portal can be accessed via the link below with the same credentials used for TAXISnet:

https://taxportal.mof.gov.cy/

“Time consuming and bureaucratic procedures that up until now required the physical presence of citizens in district offices of the Tax Department can now be carried out through their computer or mobile, through the tax portal,” the announcement said.

The Tax Portal now serves as a general information and payment venue. Taxable persons are able to see what taxes they owe to the Tax Department, calculate dues and penalties and make the relevant payments via internet banking. The system also features a payment history function. However, for tax payers in a net refundable position, this is not currently visible. It also does not include a VAT statement of account function, as was originally expected.

As of 1 September 2020, taxes can only be paid electronically through the portal as cashiers at all District Offices will terminate their operations.

More features and functionalities are expected to be added to the system in due course.

The President elaborated that the new package of measures, which includes €430 million in direct government assistance and the unlocking of up to €1.7 billion in new credit facilities, includes the following:

1. A liquidity grant amounting to €800 million for the financing of Small and Medium Enterprises, through the Cyprus Entrepreneurship Fund. The beneficiaries will be small and medium enterprises with maximum personnel of 250 per enterprise.

2. For the purpose of providing loans to Cypriot small and medium enterprises and companies of medium capitalization, the Government has decided, in conjunction with the European Investment Bank, to increase the lending scheme by €500 million. The beneficiaries will be enterprises which have been registered and are operating in Cyprus employing up to 3.000 workers per enterprise.

3. The Council of Ministers has approved the participation of the Republic of Cyprus in the Pan-European Guarantee Fund, which has been set up to combat the consequences from the Covid-19 pandemic in the member-states of the EU. Cyprus is expected to draw an amount of €300 to €400 million from this fund for the needs of the Cypriot economy. The beneficiaries will be Small and Medium Size enterprises and companies of Medium Capitalization, which have been hit by the pandemic.

4. An Interest Subsidy Scheme for new business loans to enterprises, including self-employed, who are facing a lack of liquidity as a result of the pandemic. It concerns loans which have been contracted or will be contracted as of 1 March 2020 up until 31 December 2020. The beneficiaries will be all of the enterprises and self-employed, under the basic requirement of not being considered problematic (NPLs). The interest will be partly subsidized by the government for four years.

5. In order to support home ownership, the government will subsidize the interest of house loans for a specified period of time and for a fixed maximum loan amount. It concerns loans contracted or to be contracted as of 1 March 2020 until 31 December 2020 and do not exceed €300.000. The duration of the subsidy will be four years and will amount to 1.5% of the interest.

6. Subsidy Scheme for Small Enterprises and Self-Employed.The total amount of the subsidy exceeds €100 million and concerns 50.000 small companies that occupy up to 50 employees as well as the self-employed. Self-employed and small companies that had fully or partly suspended their activities and had joined the Special Schemes of the Ministry of Labour for the period 13 April – 12 May 2020, will receive a one-time, lump-sum subsidy based on their number of employees as follows:a)  Up to one person: €1.250
   b)  From 2 to 5 persons: €3.000
   c)  From 6 to 9 persons: €4.000
   d)  From 10 to 50 persons: €6.000

7. All relevant authorities (local and national) will invite immediate tenders for all development projects and works that are ripe regardless of the scheduled period of their declaration according to the state budget.

8. In order to strengthen the tourism sector and the connectability of Cyprus, a scheme for incentives amounting to an additional €6.3 million has been decided, which with the existing scheme rises to a total of €15.7 million to be paid until the end of the year.

9. In order to strengthen the sector of tourist accommodation and catering, VAT applied in the specific industry will be reduced from 9% to 5% from 1 July 2020 until 10 January 2021.

10. An amount of €22 million will be made available to the agricultural sector.

The first package of measures that was announced in March, amounted to a total of €1.2 billion. It included the support of salaried employees and the self-employed, as well as small and medium enterprises by covering the greater part of their payroll cost. The government also suspended the repayment of loan instalments and interest for a period of 9 months, suspended VAT payments until the 10 November 2020, suspended the increased contributions to the General Healthcare System (GeSY), subsidised Cypriot students stuck abroad, and much more.

At the beginning of his address, the President made sure to stress that even though Cyprus has managed to control to a great extend the spread of the disease, it has not eradicated it.

“And I say this because while the virus continues to be present in our midst and lies in wait, a minority is still behaving in a way that does not abide either by social responsibility or the collective effort to rid ourselves of the consequences of the disease, forcing us to take harsh measures again.

Unfortunately, certain people, fortunately very few, for profit-making reasons, take advantage of the impetuosity of youth to breach the health protocols of the Ministry of Health,” Anastasiades said.

In a study published on 28 April, the University predicted the lifecycle of the Coronavirus pandemic in many countries, including Cyprus.

According to the findings, the pandemic peaked in Cyprus on 5 April, while the virus is reported to have left the community by a rate of 97% on 29 April.

The University predicts that by 8 May that percentage will reach 99% in Cyprus and will reach 100% on 24 May.

The study reports that the pandemic will disappear from the planet by 9 December 2020.

The study’s predictions methodology is based on the life cycle of past pandemics and the factors that affect it as well as geographical particularities for each country.

“Such a life cycle is the result of the adaptive and countering behaviours of agents including individuals (avoiding physical contact) and governments (locking down cities) as well as the natural limitations of the ecosystem,” the author writes.

The study notes that the pandemic life cycles vary by countries, and different countries might be in different phases of the life cycles at a specific point in time.

The theoretical ends for France, the United States and Italy all fall in August. For Greece the study predicts the virus will leave the community by 99% on 24 May and by 100% on 12 July 2020.

Cyprus one of the safest countries in the world

Meanwhile, French travel insurance company Insurly identified earlier this year the top 10 safest countries in the world for 2020, placing Cyprus in 5^th place.

The study, which was released just before the Coronavirus pandemic, collected data on natural disasters, transport, the quality of healthcare systems and levels of violent crime and terrorist threat.

Switzerland was crowned the safest country on the planet, while Singapore came 2^nd with Norway trailing in 3^rd.

Luxembourg and Cyprus followed in 4^th and 5^th place respectively.

The USA ranked much further down the list, only coming in at 44^th place while Turkey came in 69^th.