The Cyprus House of Representatives (parliament) reportedly approved amendments to the income tax law on 17 July 2020 regarding the tax treatment of intangibles assets. This includes two main changes.
The first change concerns the requirement to prepare a balancing statement when disposing of an intangible asset, which consists of the tax written down value of an asset and the disposal value, in order to identify any balancing addition or balancing deduction in relation to that asset. With effect from 1 January 2020, this requirement is abolished, and as a result, no balancing addition or deduction is included in the taxpayer’s taxable income in the year of disposal.
The second change concerns the carryforward of unclaimed capital allowances. In general, expenses for the acquisition or the development of an intangible asset that is of a capital nature may be claimed as a deduction (allowance) over the useful life of the intangible asset up to a maximum period of 20 years. Although taxpayers may choose not to claim an allowance for a particular year, the law previously lacked provisions regarding if or how unclaimed allowances may be carried forward. With effect from 1 January 2020, it is provided that when a taxpayer chooses not to claim a capital allowance in respect of an intangible asset for a particular year, the allowance may be claimed over the remaining useful life of the asset. For this purpose, the tax written down value of an intangible asset is to be redistributed over the remaining useful life of the asset at the beginning of each year.
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