Cyprus Cabinet Approves VAT Hike

by Lorys Charalambous, Tax-News.com, Cyprus

03 June 2002

Following closed-door negotiations between Cypriot Finance Minister, Takis Klerides and representatives of the political parties, it emerged last week that the Cabinet has approved several tax changes crucial to the jurisdiction's accession to the EU, and has sent them to the House of Representatives to be ratified.

Speaking to reporters following Thursday's cabinet meeting, the Finance Minister announced that: 'The bills will be submitted to the House which can begin its examination.' He went on to reveal that: 'The other bills being drawn up by the various ministries...will be submitted in the House in the next two weeks.'

The three measures approved by the Cabinet last week were:

- An increase in VAT to 13% on July 1, and to 15% by January 2002.

- The imposition of a 20% additional consumer tax on cigarettes, effective immediately.

- The imposition of a uniform 10% corporate tax on local and new offshore companies. (Although already established offshore companies will be taxed at a lower 4.25% rate until 2005, following negotiations with the EU).

It is hoped that the tax reform package will be approved by parliament before the end of this month, in order to allow the government to close the competition chapter of EU accession talks under the current Spanish presidency, according to a report in last week's Cyprus Weekly.

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