Cyprus Plans Property Tax Hike

by Lorys Charalambous, Tax-News.com, Cyprus

17 August 2011

Cyprus plans to increase the taxation of immovable property as part of an austerity package which hikes value-added tax, personal income tax and withholding tax on savings interest.

in a move expected to raise around EUR24m (USD34.5m) in additional revenues, the tax bands on immovable property are to be altered. Based on 1980 property values, immovable property with value of EUR120,000 or over will be subject to tax, down from EUR170,000 previously. According to the plans:

• A 0.4% rate will be imposed on property ranging in value between EUR120,001 and EUR170,000;
• A 0.5% rate will be imposed on property ranging in value between EUR170,001 and EUR300,000;
• A 0.6% rate will be imposed on property ranging in value between EUR300,001 and EUR500,000;
• A 0.7% rate will be imposed on property ranging in value between EUR500,001 and EUR800,000; and,
• A 0.8% rate will be imposed on property ranging in value above EUR800,001.

As detailed by the government last week, other measures in the fiscal consolidation plan include a 2% VAT rate increase to 17%, a hike to withholding tax on savings interest derived by Cypriot residents from 10% to 15%, and the introduction of an additional top rate of personal income tax of 35% on income above EUR60,000 (USD41,750).

In addition, companies formed in Cyprus will soon be required to pay a EUR350 annual fee to the government.

The measures are aimed at achieving an additional 1% reduction in the fiscal deficit expected in 2011, to 5.5% of gross domestic product (GDP), and a European Union-assigned deficit target of below 2.5% of GDP by the end of 2012. However, it is far from certain that the fractious Cypriot parliament will accept these government proposals as they stand.

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