On 26 August 2011 the House of Representatives of Cyprus voted a number of amending laws which were presented by the Government as a first package of austerity measures toward the increase of State revenue and reduction of State expenditure.
The Income Tax Law
— A new tax band has been introduced at the rate of 35% for income above €60.000, effective from tax year 2011.
— 50% exemption will apply to income of a non resident person taking up residence in Cyprus to work for an employer in Cyprus, effective from 1 January 2012. This exemption applies for a period of 5 years staring from the first year of employment provided that the annual income of the employee exceeds €100.000 per annum.
The Special Contribution for the Defence of the Republic Law
The changes in the Law solely relate to the rates of contribution. Other than these rates increases, the basis of taxation remains unchanged. More specifically, the following changes have been voted.
— An increase in the rate of special defence contribution from 10% to 15% for interest income taxable under this Law which will be effective on all interest arising, accruing or deemed to arise or accrue from the date the law is published in the Cyprus Government Gazette.
— An increase in the rate of special defence contribution from 15% to 17% for dividend income received by Cypriot resident persons which will apply to all dividends arising, accruing or deemed to arise or accrue from the date the law is published in the Gazette irrespective of which year such dividends relate to.
The Immovable Property Tax Law
— The existing bands are replaced and the rates increased from a maximum of 0.4% to a maximum 0.8% paid by owners of immovable property situated in Cyprus based on the property values as at 1 January 1980.
— The new bands and rates are as per the below table.
Value of property as at 1 January 1980,
0 – 120.000
120.001 – 170.000
170.001 – 300.000
300.001 – 500.000
500.001 – 800.000
800.001 and over
— These bands and rates are applicable from 1 January 2012.
The Companies Law
A fixed annual levy of €350 is imposed on each company, capped at €20.000 for companies of a group (as defined in the Companies Law).
The above-mentioned levy will not apply to dormant companies, companies that do not own any assets or companies which own property in the territory not controlled by the Republic.
The levy is payable by 31 December 2011 in relation to this year and by 30 June in respect of each subsequent year. Late payment of the levy will give rise to the following penalties:
— in case of up to a 2-month delay – a 10% penalty;
— in case of a delay between 2 and 5 months – a 30% penalty.
Non-payment of the levy may result in a deregistration (strike-off) of a company by the Cyprus Registrar of Companies.
If a company is re-instated within a 2-year period from its strike-off a fixed penalty of €500 (in addition to the outstanding amount of the levy) is imposed. The fixed fee will be increased up to €750 where a company is re-instated after the 2-year period.
The Value Added Tax Law
— For purchase or construction of a person’s first residence of up to 300 sq.m. the VAT on the first 200 sq.m. will be subject to the reduced rate of 5%.
— The special subsidy currently payable on such first residence is abolished.
— The above amendments will apply from 1 November 2011.
The Special Contribution by Government and Semi-Government Employees and Pensioners
A special contribution is payable by all Government and semi-Government employees and pensioners depending on the level of their salary (pension) according to the scale described below.
Monthly gross salary/pension of employees (excluding hourly paid workers),
Monthly gross emoluments of employees (being hourly paid workers),
0 – 1.500
0 – 1.500
1.501 – 2.500
1.501 and over
2.501 – 3.500
3.501 – 4.500
4.501 and over
The special contribution applies from 1 September 2011 for a period of 24 months.
Contributions by Government and Semi-Government Employees to the Government Pension Scheme
— A 3% contribution has been introduced on salaries, payable to the Government Pension Fund.
— Furthermore, a contribution of 2% will be made to the Widows’ Fund.
* The above amendments apply from the first day of the second month following the publication of the Law in the Gazette.