The tax incentives for investing in innovative businesses in Cyprus, which have been in effect since January 2017, expire on 30th June 2021.

It is being reminded that the aim for these incentives is to boost entrepreneurship and innovation as well as the Cyprus business ecosystem. These incentives are in line with EU rules on State Aid.

The said tax incentives are given to eligible individuals who invest (by making a ‘risk finance investment’) in qualifying innovative small and medium sized enterprises (SMEs), either direct or through an investment fund or through an alternative trading platform. There are at least 39 companies that have been approved as qualifying enterprises within the existing incentive framework.

An eligible individual is a physical person who is independent from the enterprise (i.e. not being an existing shareholder of the enterprise, unless he/she was one of the founders upon its establishment).

A risk finance investment is equity and quasi-equity investments, loans including leases, guarantees or a mix thereof; including follow-on investments.

The related tax incentive, that investors can benefit from, is that they may deduct the cost of the investment from their own taxable income, subject to the following limitations:

  • Tax deduction is limited to 50% of the investor’s taxable income in the year in which the investment is made.
  • The total deductible amount per year may not exceed EUR 150,000.
  • Any remaining investment cost that is not claimed as tax deductible may be carried forward for tax deduction for five years, subject to the aforesaid restrictions.

For more information or assistance you may contact us at [email protected]