Do I need to pay stamp duties when I enter a contract in Cyprus?
- Scope of the Stamp Duty Law
1.1. The Stamp Duty Law (19/1963) provides that the documents that are specifically named in its first schedule, and only such documents, are subject to stamp duty provided these documents relate, to (i) assets situated within the Republic of Cyprus; or (ii) matters or things to be performed or done in Cyprus of the place of execution of such documents.
1.2. Contracts are named in the first schedule of the Law, as one of those kinds of documents which are subject to stamp duty (provided they relate to assets situated within the Republic of Cyprus; or to matters or things to be done in Cyprus. Therefore, in case of an agreement (unless such an agreement is specifically exempted from stamp duty) the key for determining whether stamp duty should be paid, is to decide whether the said agreement relate either (i) to any assets situated within the Republic or (ii) to any matter or thing to executed or to be done in Cyprus.
1.3. The following instruments / agreements are, among others, explicitly exempted from stamp duty:
i. Sale of Goods
ii. Transfers of Securities listed on recognised stock exchange
iii. Receipt of money deposited with banks
iv. Transfers of a ship or an interest in a ship or ship mortgage
v. Hiring of employees
- Failure to stamp a Document
2.1. Documents that are subject to stamp duty cannot be accepted as admissible evidence in Court, unless these documents are duly stamped (article 36). In case such document needs to be submitted as evidence in Court proceedings, the document can be stamped even after the initiation of the Court proceedings. However, if the deadline for the payment of the stamp duty has lapsed, the applicable fine will have to be paid together with the stamp duty. - Stamp duty rates
i. Agreements with value €1- €5.000 à the stamp value is zero (0)
ii. Agreements with value €5.000 - €170.000 for each € 1.000 or part of € 1.000 the stamp value is € 1.50
iii. Contract value over €170,000, for each amount of € 1,000 or part of € 1,000, the stamp value is € 2 with a maximum stamp amount of € 20,000. - Time Limits
According to article 19, documents drafted in Cyprus that are subject to stamp duty shall be stamped at or prior to their signing or according to article 20, within 30 days from signing. If one wishes to pay the stamp duty after such a deadline he will be required to pay the applicable penalty in accordance with article 20 (b) and (c).
Also according to article 21, in case where a document was drafted outside Cyprus and is subject to stamp duty, under the provisions of the Law, it will be considered to be signed on the date that it was received in Cyprus and it should be stamped within 30 days from such date. Regarding any delay after the 30 days, penalties shall be imposed in accordance with article 20 (b) or (c), depending on the duration of the delay. - Specific Agreements/Documents
5.1. As mentioned above, in case of an agreement the key for determining whether stamp duty should be paid, is to decide whether the said agreement(s) relate (i) to any assets situated within the Republic or (ii) to any matter to be executed or to be done in Cyprus. This is something that it is determined on the basis of the facts of each case as well as the terms of the agreement at issue. To exemplify this, a number of common agreements are mentioned below together with a conclusion on whether a stamp duty shall be expected to be paid in each case.
5.1.1. An agreement for the purchase of shares in a Cypriot company, which is executed in Cyprus
The document is subject to stamp duly. A share purchase agreement falls under the category “Agreements” included in the first schedule of the Law. Under such a share purchase agreement there are things to be performed in Cyprus (e.g. revision of members and issuance of the respective share certificate). Therefore, such a share purchase agreement is expected to be subject to stamp duty.
5.1.2. An instrument of Transfer of shares in a Cypriot company, which is executed in Cyprus
The aforesaid document is expected to be subject to stamp duty as above.
5.1.3. An agreement for the purchase of the shares in a foreign company, when it is executed in Cyprus
In such a share purchase agreement, there no things or matters to be done in Cyprus and the property to which the agreement relates concern property which is situated abroad. Therefore, such a share purchases agreement, unlike the example of point 5.1.1. above is not subject to stamp duty.
5.1.4. An instrument for the transfer of shares in a foreign company, which is executed in Cyprus
Similar reasoning to the one provided for the share purchase agreement under point
5.1.3. above applies in this case. The document is not subject to stamp duty.
5.1.5. Loan Agreements executed in or outside Cyprus
A loan agreement falls under the category “agreements” included in the first schedule of the Law. Therefore, irrespective of the place of execution of the loan agreement, the crucial question is whether there are things or matters to be performed in Cyprus. Each case is decided on the basis of its own facts (e.g. the money to be advanced under the loan agreement will be utilized in Cyprus; the loan is repaid from funds which come to Cyprus etc)
5.1.6. Pledge over the shares of a Cyprus Company
Such a document is expected to be subject to stamp duty. The pledge is over assets situated in Cyprus (shares of a Cyprus Company) while there are things to be done in Cyprus.
5.1.7. Pledges or Charges over the Property of a Cyprus Company
This document is expected to be subject to stamp duty. Even if the charged property is not situated in Cyprus, there are things to be done in Cyprus (e.g. registration of the pledge with the register of charges of the Cyprus Company)