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Cyprus Parliament Raises Taxes

By Lorys Charalambous, Tax-News.com, Cyprus

22 April 2013


The Cyprus Parliament has voted to raise corporation tax by 2.5%, to 12.5%, to increase the bank levy on transactions by credit institutions by 0.04%, creating a new rate of 0.15%, and to double the tax rate collected via the Special Defence Contribution on bank deposit interest and dividends to 30%.

The head of Cyprus's Economic Policy Council, Christopher Pissarides, indicated last month that Cyprus would be willing to accept the rise in corporation tax, so long as it did not rise any further for at least a decade. President Nicos Anastasiades also recently raised the possibility of corporate tax breaks for businesses that reinvest in the island's economy.

Parliament is also expected to vote in favor of a revised tax on immovable property next week, based on a revision of property values last assessed in 1980.

The new measures form part of Cyprus's effort to secure a bailout. However, although the tax hikes received the support of Cyprus' main opposition party, the opposition has indicated that it will not support the bailout deal itself.

On April 17, the European Commission issued a statement about Cyprus, identifying "poor practices of risk management" in the banking sector as being at the root of the crisis. It also explained that a new Support Group for Cyprus was being established as part of the implementation of the adjustment process.

The statement also stressed the need for "absolute clarity about secured deposits," explaining that the Eurogroup and Cyprus had underlined "that secured deposits indeed are secured in Europe." It further expressed the need for a Single Supervisory Mechanism to prevent the emergence of unsustainable banking sectors.

TAGS: capital gains tax (CGT) | tax | European Commission | property tax | corporation tax | tax rates | Cyprus | Europe

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