Taxes to rise in Cyprus?

Thursday, November 01, 2012

Taxes to rise in Cyprus?

Expats living in Cyprus may well be hit with higher taxes if the island is granted an EU bailout, according to tax specialists.

Following in the footsteps of Portugal, Ireland and Greece, Cyprus is currently negotiating for a package which will help lessen its debts, and will almost certainly have to sign up to harsh austerity measures as part of the deal. Financial advisors believe that these will come in the form of tax rises rather than spending cuts, especially as Cyprus currently has a relatively welcoming tax regime.

Income tax in Cyprus is charged at 35 per cent at the top rate, compared with 46.5 per cent in Portugal, 52 per cent in Spain and the new rate of 45 per cent being introduced in France. There is a relatively high tax-free threshold of €19,500 (£15,660), which can be earned before tax is payable. Cyprus also charges no wealth tax and offers favourable conditions for expats receiving their pensions.

As well as possibly introducing medical fees in state run hospitals, the Cypriot government is also considering raising VAT to 18 per cent on alcohol and tobacco, and increasing property tax on homes worth more than €500,000 (£401,580).

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