With the demise of Greece, the interwoven Cyprus economy has taken a beating. Following the footsteps of other Euro members, the Cypriot government has asked the EU for a bailout. Of course it would be foolish for them not to try, since the European Commission seems so keen in handing out billions of Euro's.

At the same time the Cyprus government has amended some tax laws, not to raise revenue, but to make the EU member state with the lowest tax rates even more business friendly.

The most important change is the 80% tax exemption on capital gains arising from the sale of intellectual property after all relevant costs have been deducted. Acquisition of IP rights can be amortized over a period of 5 years. The amendment reaffirms Cyprus' positions as top holding jurisdiction for intellectual property. Where else can you find such a highly respected nation that effectively taxes IP rights at 2%, has a vast tax treaty network, and can access the entire European Union on the basis of the EU royalty and interest directive?

Other tax incentives include an increased depreciation allowance for capital goods including real estate. This change will apply  for the years 2012, 2013 and 2014 as follows:
Â" For all machinery and plant: 20% per annum (previously being 10%)
Â" For industrial and hotel buildings: 7% per annum (previously being 4%)

Interest expense relating to the direct or indirect acquisition of shares in a 100% subsidiary (irrespective of its tax residency) shall be tax deductible for the Cyprus parent company which suffers the expense. This tax deduction is proportionally not available on the cost of assets owned by the subsidiary which are not used in the business.

And finally, the reduced VAT rate of 5% on the sale or construction of residential real estate shall now apply to non-residents as well.

Although Cyprus is going through some rough times, Cypriot politicians still have their countries best interests in mind, and understand what it takes to attract business.