Cyprus Parliament Passes Compromise Shares Tax Package

Tax-news.com

05 January 2000

In a shock about face, the Cyprus Parliament has passed a bill that includes a controversial 5% capital gains tax on share trading profits for 1999. Although the tax has been on the agenda for some time now, local experts were convinced that it was doomed following the recent consensus on the introduction of a share trading transactions tax.

The capital gains tax has been watered down significantly from the original 10% proposed. In addition to being reduced to only 5%, the tax will only apply to 1999 stock market profits that exceed £35,000. Companies, however, did not get any such breaks and will be taxed at the full 20-25 per cent corporate rate with share profits below £35,000 being exempt. With huge gains having been made by even the smallest investors on the Cyprus Stock Exchange (CSE) in 1999, the new tax could land many investors with an unexpectedly large tax bill.

From 2000 until the end of 2001 the capital gains tax will be replaced by a share transactions tax of 0.6% for individuals and 1% for companies. The future direction of taxation on CSE trading after 2001 is still uncertain and will be the subject of further discussions.

CSE chairman Dinos Papadopoulos said he was satisfied with the decision. "I'm glad to see that the issue of the levy is being seen as a temporary measure," he said. Despite a nervous start to the week, investors at the CSE welcomed the fact that the uncertainty on the market had been brought to an end and share prices rallied late in the week as investors flooded back to the market pushing the index up by more than five per cent.

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