A new Income Tax Law Amendment (Law 135(I) of 2016) has taken effect from 1st January 2017 and introduces new tax relief for private investors in qualifying small and medium sized innovative enterprises, including startups. CYBAN played an instrumental role in formulating the tax law amendment, which allows independent investors in such enterprises to deduct the cost of the investment from their taxable income for the year in which the investment is made. The deduction is limited to 50 per cent of taxable income for the year or €150,000, whichever is less. Any cost above the 50 per cent limit may be carried forward for deduction against taxable income of subsequent years, subject to a 50 per cent limit, for a maximum of five years. In order to qualify for relief, the investor must retain the investment for at least three years.
An independent investor in an existing company is one who is not already a shareholder of the company concerned. In a newly-incorporated company all the founding investors are treated as independent. Investments may be made direct or via an investment fund or a venture capital investment platform, and may include loans, subject to specified conditions. In order to be a qualifying investment, the investee company must be a small or medium-sized innovative enterprise doing business in Cyprus, be an unlisted company not operating in any market or, if operational, having operated for less than seven years. Designation as a small or medium-sized innovative enterprise requires the approval of the Ministry of Finance (MoF). In order to obtain approval the company must provide confirmation by an external auditor that research and development costs, as recognized by international accounting standards, account for at least 10 per cent of total operating costs. For start-up companies with no financial history, the assessment will be made on the basis of a business plan.
CYBAN ensures that the companies selected for its Company Presentations Events will have the approval by the MoF as qualifying investments, thus ensuring that all its members will have access not only to great investment opportunities, but also ones that allow for the maximum tax relief.