Cypriot Tax Amnesty Highly Successful, Says Tax Office

by Lorys Charalambous, Tax-News.com, Cyprus

31 January 2005

The Cypriot tax amnesty under which undeclared bank deposits could be revealed at a tax charge of only 5% has generated CYP90m for the government, says the tax office.

As the end of January deadline for the amnesty drew near, a Tax Declarations Office official said that the office had been overwhelmed by a flood of last-minute declarations. A total of thousands of submissions have been made, totalling near to CYP1.8bn (US$3.6bn) in terms of capital.

The amnesty was put in place alongside new rules which will make it easier for tax officials to breach banking secrecy rules. Originally the amnesty was to have ended in November, 2004, with a further month allowed at a higher tax rate of 6.5%, but the scheme's unexpected success encouraged the government to extend it by two months. The 6.5% period will now end on 28th February, 2005.

Submissions started off slowly, with only CYP3m raised in taxes from £60m declared by October 21. Officials correctly predicted a last-minute rush, but expected a total 'take' of only CYP50m.

The introduction of the EU Savings Tax Directive on 1st July, 2005, is one factor that has encouraged people to declare their hidden wealth, since from July banks will be obliged to send information on interest payments to the tax authorities of their depositors home countries. One figure that won't be revealed, however, is that for the total of deposits which have simply fled the EU altogether in anticipation of the Directive.

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