Tax Incentives for the Filming industry, Cyprus

Cyprus has an exceptional natural advantage. Being a small island with relevantly short distances, easily accessible, can enjoy a dramatic change of scenery from beautiful sandy beaches to captivating high mountains from ancient ruins to modern cities. The country also enjoys the Mediterranean climate with year-round sunshine.

The Cyprus Government in its effort to promote Cyprus as a filming destination offers to production Companies to opt between a cash rebate or tax credit and can also benefit from tax discounts on investments made on equipment and infrastructure as well as refund of the VAT. If applying for a cash rebate, an applicant may also apply for a tax allowance and return of VAT. Similarly, an applicant that selects to apply for a tax credit under the scheme may also apply for a tax allowance and return of VAT.

Qualifying production Companies include, amongst others, feature Films, (including animation), television Series or miniseries, documentaries for Theatrical or Television release, animation (digital or analogue), television research programmes and natural history documentaries. Eligible entities must be registered in Cyprus or another EU Member State, if they carry on business in Cyprus following approval of their application to the Film Scheme. There are no restrictions on foreign ownership for the eligible entity.
Although the total aid cannot exceed 50% of the total production budget (or 60% in the case of a co-production), this limit can be lifted if the production can be deemed to be beneficial for the economy, culture, or the development of the Cypriot film industry.
Cash Rebate

A rebate of up to 25%-35% on eligible expenditures incurred in Cyprus. The amount granted will depend on the score
of the production at the cultural test. The rebate will be given once filming is completed, on receipt of the audit report and its review by the committee. The rebate is paid within 90 business days after the issuance of the approval by the committee.

The cash rebate incentive has the following key features:
* maximum aid is 35% of eligible expenditure made in Cyprus
* minimum expenditure in Cyprus of at least:
* €200, 000 in the case of feature films
* €100, 000 for television drama series or self-contained drama films
* €50, 000 for documentaries
* €30, 000 for other television programmes
* the production must satisfy the authority's cultural assessment
* maximum aid for each production is €650, 000.

Tax Credit

The maximum aid, as a reduction of applicable corporate tax for the Applicant, shall represent 35% of the eligible expenditure made in the Republic of Cyprus.

The sum of the tax credit against the taxable income shall not exceed 50% of the Applicants’ taxable income for the tax year within which the production is made.

The tax credit, to the extent that it is not granted due to the above percentage restriction, shall be carried forward and be given within the next five years, subject to the above percentage restriction.

Tax Allowance for investment in infrastructure and equipment

Any Company subject to a tax liability in Cyprus investing in film production infrastructure and technological equipment shall be entitled to deduct the amount of its investment from its taxable income.

Return of VAT on expenditure

For qualifying production expenditure incurred in Cyprus which are related to the implementation of productions, is entitled to a refund of VAT.

Corporation Tax

If the Company that will own the rights of the film production is managed and controlled in Cyprus, then the taxable gains before taking into consideration any tax credit is subject to 12.5% Corporation tax.

Dividends

Any dividends paid out from the Cyprus Company to its shareholders carry 0% tax unless if the shareholder is a Cypriot tax resident and “domiciled/Cypriot by ethnicity”.

Corporate Tax