In accordance to the Interpretative Circular 14, the Cyprus Tax Department clarifies that as per Article 5(2)(f) when a company grants a loan or financial facility to:

• its shareholder physical person
• its director physical person
• the spouse or relative of up to second degree of its director or

shareholder is deemed as obtaining a benefit equal to 9% on the average balance of the loan or financial facility at the end of each month.

This monthly benefit is also deemed to arise for non-Cyprus tax resident shareholders or directors and as from 1/1/2018 is calculated for the whole year irrespective of the actual days exercising physical duties in Cyprus.

The benefit is considered as income arising in Cyprus and increases a person’s taxable income.

If the benefit is more than the tax free amount of €19.500, then the company must calculate the income tax payable by this person and pay it through the Pay-As-You-Earn (PAYE) system.

1. American Samoa,
2. Bahrain
3. Barbados
4. Grenada
5. Guam
6. South Korea
7. Macau
8. Marshall Islands
9. Mongolia
10. Namibia
11. Palau
12. Panama
13. Saint Lucia
14. Samoa
15. Trinidad and Tobago
16. Tunisia
17. United Arab Emirates

The countries on the blacklist face restrictions on EU funding or potential investments from the European Investment Bank. EU governments, meanwhile, can choose to impose their own sanctions against the blacklisted countries.