Cyprus Tax On Boats Will Empty Marinas, Say Owners

by Lorys Charalambous, Tax-News.com, Nicosia

06 February 2003

Shock horror has set in among Cyprus boat owners as it became clear that the Finance Ministry is serious about plans to put a 38% tax on the value of pleasure craft. According to the plans announced by the Ministry, owners of duty free yachts and those wishing to import yachts or buy one locally will now be subject to a 20 per cent luxury tax, plus 15 per cent VAT on the total cost, including the duty, making 38% in all. The tax affects all owners who are in the country for more than 185 days a year and are therefore considered resident. And 'owner' apparently includes companies if even one shareholder is resident in Cyprus.

Haris Kyriakides, president of the Cyprus Marine Commerce and Industry Association (CMCIA), told the Cyprus Mail that the new tax has already wiped out local demand for boats, and is threatening to drive away owners of duty free craft who have so far enjoyed annual tax exemption.

"Many of these people own offshore companies which have decided to stay on after European Union accession. But most boat owners, some of whom own boats worth millions, will leave rather than pay such tax," said Kyriakides. "We are telling people to go spend their money elsewhere. Every other country in the EU charges VAT only on pleasure craft. We are the only ones adding excise duty to that."

Said one foreign boat owner (and local employer): "This is a fantastic country. It has done a great job in harmonising with the EU and is streets ahead of its fellow candidates. But they have got to view taxation rationally. Tax has to be constructive for the country, for the marina industry and to the concept of yachting development. This tax is destructive."

Tourism Minister Nicos Rolandis is himself aghast at the Finance Ministry's plans, and has promised to work to have them revised. His ministry has strongly supported the development of marinas around the country's coastline.

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