Approved charities

Cypriot tax law foresees tax incentives for donations to public-benefit foundations/organisations. According to Cypriot Income Tax Law the donors can deduct the amount of the donation in their tax declaration (tax deduction) in the following way: The whole amount of the donation to charitable or educational purposes can be deducted if the recipient organisation has been approved by the Council of Ministers [§9(1) of Income Tax Law] subject to the provision of relevant receipts by the taxpayer. This is however subject to certain conditions, which are examined on a case-by-case basis.

Following a recent reform, Cyprus tax law no longer makes a distinction according to whether the recipient public-benefit foundation is resident in Cyprus or in another EU or EEA country. However, donations to foundations based in other countries are excluded. The foreign EU or EEA based public-benefit foundation must fulfil all legal requirements that a resident foundation has to fulfil. Thus the Cyprus law corresponds with the Persche decision of the ECJ by requiring a comparability test [ref. “Stauffer” (ECJ C-386/04) and “Persche” (ECJ C-381/07)].

Note: Since 23/11/2018 no circulars have been issued.

In order to get the tax incentive, donors must state in their tax declaration that the EU or EEA based public-benefit foundation, which received their donation, fulfils the Cyprus tax law requirements and has been accepted by the Council of Ministers as charitable organisation/eligible recipient for tax-deductible gifts. The donor has the burden of proof and must show receipts of the approved recipient organisation stating that a donation has been made. There is no need to provide evidence that the donation was actually spent in a specific way. The responsible Cyprus tax authority (in the region where the donor is registered) refers to a decision on the public-benefit status of the foreign based public-benefit foundation issued by the Council of Ministers. The Council of Ministers issue a public-benefit status, which is valid until revoked (if ever). The foreign based public-benefit organisation must ask for the status as an eligible recipient of tax exempt donations and must fulfil all requirements that the Council of Ministers may wish to impose. The foreign organisation has the burden of proof and the authority may require translated documents to prove the status of the recipient organisation, such as the statutes of the foundation and the financial report of the recipient organisation.

The tax authority checks during the comparability test, whether the EU or EEA based public-benefit foundation fulfils the requirements of Cyprus tax law, the core elements of which can be summarised as follows:
 The foundation pursues a public benefit. This includes that the interest of the public at large (and not just the interest of a small circle of beneficiaries) is promoted.
 The pursuance of the public-benefit purpose has to be exclusive. That means, there exists a non-distribution constrain. In case of dissolution the remaining assets have to be used for the public-benefit, and the remuneration of board members and the administration costs must not be excessive.

Cyprus tax law foresees (partial) tax incentives for public-benefit foundations in the following cases:
 Income from economic activity is tax exempt.
 Income from asset administration (fixed-rate bonds) and leasing a property if considered asset management is also tax exempt.

Only foundations registered in Cyprus can apply for the status as a charitable organisation and hence receive tax exemption.