Cyprus VAT Rises To 15 Per Cent

by Lorys Charalambous, Tax-News.com, Cyprus

09 August 2001

The Cypriot chief negotiator with the European Union, George Vassiliou, has announced that Value Added Tax will be increased from its current rate of 10 per cent to 15 per cent. Due to take effect from early next year, the increase is part of a new tax package to be discussed by the House of Representatives in October.

Vassiliou explained that the reforms are part of the harmonisation initiative to bring the Island in line with EU standards: 'We have to reform our tax system. VAT has to go up to 15 per cent, indirect taxation must increase, and the disparity between offshore units and companies operating in Cyprus must be abolished,' he said.

Vassiliou's announcement was made as he briefed the President on Cyprus's progress in its bid to join the EU. To date Cyprus has closed 23 out of 29 chapters of the acquis communautaire and hopes to become an EU member in 2003. Although there was much to do with regard to further taxation measures and, in particular, the issue of agriculture, Vassiliou said: 'Cyprus is progressing very well in its bid to amend its legislation in line with European Union laws and regulations.' According to Vassiliou, 95 per cent of recently tabled legislation is being implemented.

To counter the VAT increase, Vassiliou said income tax must be reduced and the ceiling on tax-free income would be raised. He also confirmed that a three-day meeting comprising foreign experts will take place within the next few weeks, after which members of the Cypriot political parties will be consulted.

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