New Austerity Measures Approved In Cyprus

By Editorial 12 December, 2012

Cypriot MPs have voted into law new austerity measures, including further increases in value-added tax (VAT) and a controversial updating of the country's Immovable Property Tax regime.

The Immovable Property Tax has until now been based on property values from January 1980, but these valuations will now be multiplied by about 3.5, representing growth in the Consumer Price Index from 1980 to 2012. Taxation at the new rates will be set at 0.6% from EUR150,001 to EUR500,000, at 0.8% from EUR500,001 to EUR1m, and at 1% thereafter. Further, property owners will be taxed on the total amount of property registered in their names.

The government insists that most citizens will not be affected by the revised valuations, and that businesses will see only small increases in tax payable. However, hotel owners and developers claim that the hike will be substantial, and Haris Loizides, chairman of the Cyprus Hotels Association, has suggested some high-end hotels could see ten-fold increases.

Meanwhile, VAT will rise by 1% to 18% from January 1, 2013, and by a further 1% a year later. Items which are currently taxed at a reduced rate of 8% will also see a rise by 1% from January 1, 2014. There are also extra tax hikes on tobacco and alcohol, with the tax on rolling tobacco increasing by 150%, from EUR60 per kilogram to EUR150, and the tax on pure alcohol rising from EUR598.01 per 100 liters to EUR956.82. There are also tax increases for beer and cigarettes, but not for wine or cigars.

The new austerity measures follow talks with the troika of the International Monetary Fund, the European Central Bank and the European Commission. Last year, VAT was raised from 15%, and there were increases in income tax, investment taxes and property tax.

In June, Cyprus became the fifth euro-zone country to request a bailout, when it was forced to recapitalize its banking system.

Tags: Individuals | Expatriates | Tax | Investment | Real-estate Investment | Value Added Tax (VAT) | Property Tax | Law | Real-estate | Offshore | Tax Rates | Cyprus |


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