Cypriot Ministry of Finance has decided to extend until 2026 the amendments previously made to the law "On Corporate Income Tax".
As a reminder, they provide for an additional exemption from tax in the form of a deduction of capital for specific capital expenditures. The main objective pursued by the authority is to encourage Cypriot businesses to undertake measures to improve the energy efficiency of buildings and to utilize energy from renewable sources.
The amendments include an increase in three existing tax exemptions:
- Companies are entitled to an increased depreciation deduction of 7% (previously 3%) on building modernization costs.
- Capital expenditures incurred to connect machinery and equipment to renewable energy sources or technical energy efficiency systems are allowed to be written off using an increased depreciation factor of 20% (instead of 10%).
- Capital expenditures for the purchase of new commercial electric cars, cabs and buses are allowed to be written off using an increased depreciation factor of 25% (instead of 20%). This also includes the installation of charging stations for electric vehicles.
It is worth noting that all tax credits will apply to capital expenditures made in tax years 2023, 2024, and 2025.
In addition to the above deductions, other tax incentives apply in Cyprus. In particular, fiscal advantages can be claimed by:
- companies related to the field of research and development;
- foreign specialists;
- investment funds.
The Ministry of Finance of Cyprus noted that the costs of conducting research for business and obtaining energy saving certificates can be deducted from taxable income, provided that the document is issued by an expert who is listed in the register of the Department of Energy.
The decision to extend the incentives is expected to encourage more investment in energy efficiency systems, as it will reduce the operating costs of electricity, heating, and air conditioning in the long term.